Federal carbon-price rebates will rise more than expected in Ontario and Manitoba

The value of carbon-price rebate cheques from the federal government will jump more than 66 per cent in Ontario and Manitoba this year, to make up for too-small rebates the last two years.

And for the first time the payments will come quarterly, rather than hidden as a lump sum in annual tax-return deposits.

Carbon-price backers say that will make the money more visible to Canadians.

"I think it's surprising that more Canadians aren't aware of the climate rebates," said Stewart Elgie, director of the Environment Institute at the University of Ottawa.

"But as people start getting actual payments every three months, I think it will be much more visible and people will become much more aware that they're getting money back and they're getting more back than they're paying in most cases."

The second annual report on federal carbon pricing, which was tabled in the House of Commons this week, shows Canada collected more than $4.2 billion in carbon levies on consumers and small businesses in 2020-21.

That was on a carbon price of $40 per tonne of emissions. It amounted to an additional 8.8 cents per litre of gasoline, 10.7 cents per litre of diesel and 7.8 cents per cubic metre of natural gas.

Almost $500 million in revenues were handed out in grants to smaller businesses and non-profits to invest in energy efficiencies.

Nearly $4.1 billion was returned in what the federal government officially calls "climate action incentive payments" to families.

For the second year in a row, the cheques in Ontario and Manitoba fell shy of the requirement that 90 per cent of revenues collected be returned to the province where they were paid.

In Alberta and Saskatchewan, the only other provinces in the federal carbon-pricing system, rebates exceeded that target. The Alberta payments in 2020-21 covered two years of the levy because Alberta joined the program nine months after it began and wasn't included in the first round of incentive payments.

All other provinces have their own carbon-pricing systems that meet federal minimum standards.

So this year, as the carbon price rises 25 per cent, the payments in Ontario and Manitoba are going up 66 per cent and 71 per cent respectively.

In Alberta, the payments will go up just 21 per cent. They are increasing by 36 per cent in Saskatchewan.

For a family of four, the payments will hit $745 in Ontario, $832 in Manitoba, $1,101 in Saskatchewan and $1,079 in Alberta. The first payment in 2022 will be a double payment for two quarters in July, followed by quarterly payments in September and January 2023.

Environment Minister Steven Guilbeault says eight in 10 families get more than they pay.

Carbon levy revenues are higher in provinces that rely more on coal and natural gas for electricity, so in turn the incentive payments to those provinces are higher.

The carbon price is intended to encourage people to save money by reducing their fossil-fuel use. The rebates are in place so families aren't harmed by the carbon price, but could save even more money if they also drive less, or install more efficient furnaces, better windows and so on.

On April 1, the levy will rise to $50 per tonne of emissions produced, which is the last time the increase will be limited to $10. For the next eight years it will increase by $15 a tonne every April.

The next increase will add another 2.2 cents to the price of a litre of gasoline. Many Conservative MPs and several premiers have said Canadians can ill afford that increase when gas prices have already skyrocketed because of Russia's war in Ukraine.

Ken Boessenkool, a strategist at Sidicus Consulting and a former policy adviser to several federal and provincial conservative leaders, said the gas price hikes in recent weeks are not due to the carbon price and he expects most Canadians are very aware of that.

But like Elgie, he does think the federal government needs to do a lot more to promote the rebate payments so Canadians know what they're getting and why.

"It's inexcusable, that the government that brought this in, doesn't spend more time (promoting it)," he said.

This report by The Canadian Press was first published March 23, 2022.