Canada Passes Federal Carbon Tax
On Oct. 23, Justin Trudeau, Prime Minister of Canada, announced a nationwide carbon tax to be implemented at the start of 2019. The federal carbon tax will be a backstop tax to affect provinces which haven’t yet enacted carbon tax laws.
The legislation will tax carbon dioxide emissions by ton, and will start at 20 CAD, or US$15 per metric ton in 2019. The tax will rise by 10 CAD each year until it reaches 50 CAD per metric ton in 2022. Individual provinces can tax emissions at a higher rate, so British Columbia’s tax of 35 CAD per metric ton will stay in place until 2021.
Canada will issue rebates to taxpayers to offset the cost of carbon tax faced by consumers. The Canadian Government said that 70% of taxpayers subject to the federal tax will receive more in rebates than they will spend on carbon taxes. Further, farmers will be exempt from the carbon tax for purely agricultural activities.
Although this will be the first time the carbon tax will affect the whole country, some Canadian provinces have been implementing carbon taxes for a decade. In 2008, British Columbia became the first jurisdiction to pass a carbon tax, which started at 10 CAD per metric ton. Currently, three provinces have carbon taxes that meet the federal requirements.
This month, ExxonMobil announced that it will spend $1 million over two years to lobby for a carbon tax in the United States. The oil giant’s plan would tax carbon dioxide at $40 per ton, but would protect the corporation from future climate lawsuits. Nine cities and counties in the United States have already filed lawsuits against fossil fuel companies, in an effort to make them liable for the greenhouse gasses they produce.
However, climate change activists have argued that carbon tax rates are too low. A study from Global Commission on the Economy and Climate put a social cost on carbon to estimate the long-term economic damage caused by one ton of carbon dioxide. Although the United States alone has a social cost of $48 per ton, the global social cost of carbon rises up to $417 per ton as the climate change affects every country.
Along with ETS, an initiative similar to a carbon tax which puts a cap on carbon emissions, most developed countries are considering or have implemented carbon pricing. For now, the United States shows no signs of implementing any carbon pricing.