The federal carbon tax is set to increase on April 1. How will this affect gasoline prices?
Gasoline prices in some provinces are expected to rise on Friday as the federal carbon tax increases.
The federal carbon tax will increase by 25% on April 1, to a total of $50 per tonne of emissions. At the pump, the federal government estimate this equates to an additional 2.2 cents per liter of gasoline, reaching a total of 11 cents per litre.
The increased costs will affect motorists in Ontario, Alberta, Saskatchewan and Manitoba – provinces that do not have their own carbon pricing system in place.
The impending increases come after lower oil prices provided some relief to some Canadians at the pumps mid-week.
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Prices fell nearly nine cents per liter on Wednesday in the Greater Toronto Area and are expected to drop another penny on Thursday, according to the fuel price forecasting site gaswizard.ca. The site shows similar declines in markets like Vancouver and Montreal, while prices in Calgary and Edmonton generally hold steady.
Dan McTeague, who runs Gas Wizard and is also president of Canadians for Affordable Energy, attributes the relative decline in gasoline prices to the latest round of COVID-19 lockdowns in China, hampering forecasts of future demand.
Gasoline prices across most of Ontario will drop 9 cents per liter on Wednesday, analyst says
The relief may be short-lived, however, as he predicts the carbon tax hike will contribute to an overall price hike this weekend in Ontario.
“It looks like gas prices will probably go back up as soon as Friday, maybe two, three, maybe even four cents a liter up and into the $1.70 range,” McTeague said.
“My best advice to people today, Wednesday and Thursday, take advantage. We are back at higher prices. Now is the spring season. Demand continues to increase and no one has spare oil to give.
The carbon tax isn’t the only factor influencing gas prices
Although the carbon tax adds pennies more to the cost of gasoline, Randy Robinson, Ontario director of the Canadian Center for Policy Alternatives, says the recent price spike is far more significant.
The war in Ukraine, first and foremost, has limited global oil and gas supplies, given the impact of sanctions on Russian fuel exports.
While carbon prices are expected to rise on Friday, they have remained static during the war, which is expected to enter its sixth week.
“(The carbon tax) has nothing to do with the recent price spike, nothing at all,” Robinson told Global News.
“This change is caused by world events. The Russian invasion of Ukraine changed everything.
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Even though Canadians are noticing a spike in prices at the pump this weekend, Robinson says they can’t really say if it’s the fault of carbon pricing or other global economic factors driving up the cost of fuel. fuel.
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Motorists might feel the pinch directly, but McTeague notes that putting a price on carbon also contributes to additional costs for other household budget items.
The Canadian trucking industry affects the prices of food and other goods shipped as the cost of filling a tractor-trailer tank increases, for example.
“These prices need to be passed on as higher costs for everything,” McTeague says. “Most notably, the one no one disagrees with – ever-increasing food price inflation.”
The value of the refund questioned
The federal government has claimed that eight out of 10 Canadian families will gain a net benefit from the carbon pricing plan thanks to the Climate Action Incentive.
Reimbursement can be claimed through federal taxes. It is moving to a quarterly payment this year, starting with a double payment in July.
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But the longevity of that claim was recently questioned by the Parliamentary Budget Officer (PBO), the government’s financial watchdog.
In one report published last weekthe PBO officer said the bulk of households affected by the federal carbon tax would see an “overall negative economic impact” from the plan by 2030-31.
“Most households in Alberta, Saskatchewan, Manitoba and Ontario will experience a net loss from federal carbon pricing. That is, the costs they will face, including the federal carbon tax, higher GST and lower revenues, will exceed the repayment of the climate action incentive they receive,” said Parliamentary Budget Officer Yves Giroux in a statement accompanying the report.
The overall impact of the tax, however, depends on where you live and what you earn.
The Parliamentary Budget Officer said Albertans in the top income quintile would pay the highest net cost of the carbon tax – the report notes that Alberta’s economy is more carbon-intensive than others included in the plan – while households in the lowest income quintile in Saskatchewan are expected to see the largest net gain via the rebate.
“If you’re hit harder, it’s because you have a higher income and you use more gas,” says Robinson.
McTeague, a former Liberal MP, recently appeared before a parliamentary committee as part of pre-budget consultations and called on the federal government to delay the planned April 1 carbon tax hike until oil prices energy stabilize.
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He tells Global News that while Canada’s energy economy is, and should be, ‘evolving’, now is not the time to push its carbon-cutting agenda, pointing to the plan released Tuesday to cut emissions by 40% by 2030 to achieve climate goals.
Although Canada has made progress in developing nuclear and more sustainable fuel sources, the country’s economy is still dependent on oil and gas, he said, saying the current energy crisis is not the time to accelerate this transition.
“To use an analogy, the wheels fall off. The last thing you need to do is step on the accelerator to find out what’s going to happen,” he says.
Others have argued that the war in Ukraine demonstrates Canada’s overreliance on fossil fuels and has pushed for a faster global transition away from oil and gas.
Robinson asserts that the policy objective of the carbon tax is exactly this: to incentivize Canadians and industry to find more fuel-efficient options and reduce our collective dependence on an industry that is under – tends so much of the national economy.
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The climate emergency is not going to wait for an ideal economic moment to implement these policies, he says.
“I don’t really buy that argument that now is not the time, because now is the time actually, 20 years ago it was the time,” Robinson says.
“We have tied ourselves to a commodity that will always experience wild price swings. There really is no other solution to these two problems than to simply say, we have to find a way to wean ourselves off fossil fuels. So it’s really the number one job for Canada.
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