Connect with us

Business

Federal carbon tax a hot issue today

Published

2 months ago

6 minute read

From Resource Works

When it comes to Canada and carbon taxes, times have certainly changed in very little time.

We had wondered how long Ottawa’s national carbon-tax system would last when, after implementing it as a mandatory national scheme, the feds suddenly announced an exemption for home heating oil in Newfoundland and Labrador.

Pressed by NL Premier Andrew Furey, a Liberal, and Liberal MP Ken McDonald, Prime Minister Justin Trudeau announced the exemption last October, saying it would help Atlantic Canadians with the cost of living.

The exemption would last until March 31, 2027. And for NL households that burn oil, the feds said it would mean an average $250 annual savings.

Alberta and Saskatchewan saw the exemption as unmitigated vote-buying politics, and they weren’t alone.

On Jan. 1, 2024, Saskatchewan stopped collecting the federal carbon tax on natural gas used for home heating in that province. Premier Scott Moe declared that this was in response to Ottawa’s “unfair” exemption for Newfoundland and Labrador.

“Trudeau has provided a carbon tax exemption on home heating for families in one part of the country, but not here. It’s unfair, it’s unacceptable.”

Saskatchewan went on to challenge the exemption, in federal court, on constitutional grounds, and won a temporary injunction. Later, pending a final court decision, Saskatchewan and Ottawa agreed that the province would be responsible for “50 percent of the outstanding tax amounts.”

But Ottawa’s carbon tax (oops, sorry, Ottawa likes to call it “carbon pricing” and “carbon pollution pricing”) has now run into new political trouble.

First, national NDP leader Jagmeet Singh, who had voted for the carbon tax, pulled out of a deal supporting Trudeau’s Liberal Party in government.

Singh then went on to slam Trudeau’s approach of exempting fuels in favored geography. And he said the NDP would come up with a system that doesn’t “put the burden on the backs of working people.”

Then, British Columbia Premier David Eby, long a strong supporter of the carbon tax — but facing an election on Oct. 19 — suddenly declared: “I think it’s critical to also recognize that the context and the challenge for British Columbians have changed. A lot of British Columbians are struggling with affordability.

“If the federal government decides to remove the legal backstop requiring us to have a consumer carbon tax in British Columbia, we will end the consumer carbon tax in British Columbia.”

Would Prime Minister Trudeau remove the backstop requirement?

Apparently not. Instead, Environment and Climate Change Canada is looking to run a $7-million “climate literacy and action” advertising campaign to promote the carbon tax and the quarterly rebates that many Canadians receive under it.

And the prime minister, earlier this year, declined to meet the premiers of Alberta, Ontario, Saskatchewan, New Brunswick, and Newfoundland and Labrador on the issue.

“The carbon tax has contributed to increasing stress and financial pain for millions of Canadians,” Alberta Premier Danielle Smith wrote to the prime minister.

Ontario Premier Doug Ford wrote: “While we all have a role in protecting the environment, it cannot be done on the backs of hardworking people.”

But Trudeau turned down the call for a meeting: “We had a meeting on carbon pricing and every single premier came together to work on establishing a pan-Canadian framework on climate change years ago.

“And part of it was that there would be a federal backstop to make sure that pollution wasn’t free anywhere across the country.”

Whether the carbon tax has “worked” or not to reduce pollution is an open question. Supporters say yes. Opponents say no.

A poll late last year found that Canadians were feeling slightly more confident in the carbon tax’s effectiveness at combating climate change — but uncertainty was still high.

But the Liberal government is already getting a message from voters — having lost in two recent by-elections in Manitoba and Quebec, and in an earlier one in a “safe seat” in Ontario (Toronto-St. Paul’s).

In the Quebec one on Monday, the Liberals lost their longtime safe seat of LaSalle—Émard—Verdun to the NDP, by just over 200 votes. It had been a Liberal stronghold for years, won by more than 20 percent of the vote in previous campaigns.

The next federal election will take place on or before October 2025, and Trudeau’s opponents have already been loudly cranking up “Axe the Tax” campaigns.

And that means the carbon tax.

Related Topics:

Todayville is a digital media and technology company. We profile unique stories and events in our community. Register and promote your community event for free.

Follow Author

More from this author
Addictions / 2 hours ago

Ontario to restrict Canadian government’s supervised drug sites, shift focus to helping addicts

Alberta / 5 hours ago

Alberta’s fiscal update projects budget surplus, but fiscal fortunes could quickly turn

Business / 8 hours ago

Trump’s government efficiency department plans to cut $500 Billion in unauthorized expenditures, including funding for Planned Parenthood

Alberta

Alberta’s fiscal update projects budget surplus, but fiscal fortunes could quickly turn

Published on November 21, 2024

By

From the Fraser Institute

By Tegan Hill

According to the recent mid-year update tabled Thursday, the Smith government projects a $4.6 billion surplus in 2024/25, up from the $2.9 billion surplus projected just a few months ago. Despite the good news, Premier Smith must reduce spending to avoid budget deficits.

The fiscal update projects resource revenue of $20.3 billion in 2024/25. Today’s relatively high—but very volatile—resource revenue (including oil and gas royalties) is helping finance today’s spending and maintain a balanced budget. But it will not last forever.

For perspective, in just the last decade the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and as high as $25.2 billion (2022/23).

And while the resource revenue rollercoaster is currently in Alberta’s favor, Finance Minister Nate Horner acknowledges that “risks are on the rise” as oil prices have dropped considerably and forecasters are projecting downward pressure on prices—all of which impacts resource revenue.

In fact, the government’s own estimates show a $1 change in oil prices results in an estimated $630 million revenue swing. So while the Smith government plans to maintain a surplus in 2024/25, a small change in oil prices could quickly plunge Alberta back into deficit. Premier Smith has warned that her government may fall into a budget deficit this fiscal year.

This should come as no surprise. Alberta’s been on the resource revenue rollercoaster for decades. Successive governments have increased spending during the good times of high resource revenue, but failed to rein in spending when resource revenues fell.

Previous research has shown that, in Alberta, a $1 increase in resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year (on a per-person, inflation-adjusted basis). However, a decline in resource revenue is not similarly associated with a reduction in program spending. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.

Consider this: If this fiscal year the Smith government received an average level of resource revenue (based on levels over the last 10 years), it would receive approximately $13,000 per Albertan. Yet the government plans to spend nearly $15,000 per Albertan this fiscal year (after adjusting for inflation). That’s a huge gap of roughly $2,000—and it means the government is continuing to take big risks with the provincial budget.

Of course, if the government falls back into deficit there are implications for everyday Albertans.

When the government runs a deficit, it accumulates debt, which Albertans must pay to service. In 2024/25, the government’s debt interest payments will cost each Albertan nearly $650. That’s largely because, despite running surpluses over the last few years, Albertans are still paying for debt accumulated during the most recent string of deficits from 2008/09 to 2020/21 (excluding 2014/15), which only ended when the government enjoyed an unexpected windfall in resource revenue in 2021/22.

According to Thursday’s mid-year fiscal update, Alberta’s finances continue to be at risk. To avoid deficits, the Smith government should meaningfully reduce spending so that it’s aligned with more reliable, stable levels of revenue.

Author:

Tegan Hill
Continue Reading

Alberta

Alberta fiscal update: second quarter is outstanding, challenges ahead

Published on November 21, 2024

By

Alberta maintains a balanced budget while ensuring pressures from population growth are being addressed.

Alberta faces rising risks, including ongoing resource volatility, geopolitical instability and rising pressures at home. With more than 450,000 people moving to Alberta in the last three years, the province has allocated hundreds of millions of dollars to address these pressures and ensure Albertans continue to be supported. Alberta’s government is determined to make every dollar go further with targeted and responsible spending on the priorities of Albertans.

The province is forecasting a $4.6 billion surplus at the end of 2024-25, up from the $2.9 billion first quarter forecast and $355 million from budget, due mainly to higher revenue from personal income taxes and non-renewable resources.

Given the current significant uncertainty in global geopolitics and energy markets, Alberta’s government must continue to make prudent choices to meet its responsibilities, including ongoing bargaining for thousands of public sector workers, fast-tracking school construction, cutting personal income taxes and ensuring Alberta’s surging population has access to high-quality health care, education and other public services.

“These are challenging times, but I believe Alberta is up to the challenge. By being intentional with every dollar, we can boost our prosperity and quality of life now and in the future.”

Nate Horner, President of Treasury Board and Minister of Finance

Midway through 2024-25, the province has stepped up to boost support to Albertans this fiscal year through key investments, including:

  • $716 million to Health for physician compensation incentives and to help Alberta Health Services provide services to a growing and aging population.
  • $125 million to address enrollment growth pressures in Alberta schools.
  • $847 million for disaster and emergency assistance, including:
    • $647 million to fight the Jasper wildfires
    • $163 million for the Wildfire Disaster Recovery Program
    • $5 million to support the municipality of Jasper (half to help with tourism recovery)
    • $12 million to match donations to the Canadian Red Cross
    • $20 million for emergency evacuation payments to evacuees in communities impacted by wildfires
  • $240 million more for Seniors, Community and Social Services to support social support programs.

Looking forward, the province has adjusted its forecast for the price of oil to US$74 per barrel of West Texas Intermediate. It expects to earn more for its crude oil, with a narrowing of the light-heavy differential around US$14 per barrel, higher demand for heavier crude grades and a growing export capacity through the Trans Mountain pipeline. Despite these changes, Alberta still risks running a deficit in the coming fiscal year should oil prices continue to drop below $70 per barrel.

After a 4.4 per cent surge in the 2024 census year, Alberta’s population growth is expected to slow to 2.5 per cent in 2025, lower than the first quarter forecast of 3.2 per cent growth because of reduced immigration and non-permanent residents targets by the federal government.

Revenue

Revenue for 2024-25 is forecast at $77.9 billion, an increase of $4.4 billion from Budget 2024, including:

  • $16.6 billion forecast from personal income taxes, up from $15.6 billion at budget.
  • $20.3 billion forecast from non-renewable resource revenue, up from $17.3 billion at budget.

Expense

Expense for 2024-25 is forecast at $73.3 billion, an increase of $143 million from Budget 2024.

Surplus cash

After calculations and adjustments, $2.9 billion in surplus cash is forecast.

  • $1.4 billion or half will pay debt coming due.
  • The other half, or $1.4 billion, will be put into the Alberta Fund, which can be spent on further debt repayment, deposited into the Alberta Heritage Savings Trust Fund and/or spent on one-time initiatives.

Contingency

Of the $2 billion contingency included in Budget 2024, a preliminary allocation of $1.7 billion is forecast.

Alberta Heritage Savings Trust Fund

The Alberta Heritage Savings Trust Fund grew in the second quarter to a market value of $24.3 billion as of Sept. 30, 2024, up from $23.4 billion at the end of the first quarter.

  • The fund earned a 3.7 per cent return from July to September with a net investment income of $616 million, up from the 2.1 per cent return during the first quarter.

Debt

Taxpayer-supported debt is forecast at $84 billion as of March 31, 2025, $3.8 billion less than estimated in the budget because the higher surplus has lowered borrowing requirements.

  • Debt servicing costs are forecast at $3.2 billion, down $216 million from budget.

Related information

Continue Reading

Trending

X