It’s a way to price pollution, specifically carbon dioxide – the leading contributor to climate change. In Ontario, the carbon tax puts a price on carbon-based fuels such as gasoline and natural gas. Large companies also have to pay a carbon tax when they burn fossil fuels.
Every person and business in Ontario that uses carbon-based fuels pays the carbon tax, except farmers who buy fuel for farming.
Pricing pollution is important because it uses the market to help change behaviour. In January 2019 over 3,500 economists from the US and from all political stripes -including 27 Nobel prize winners- wrote an open letter showing their support for the carbon tax as the “most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.”
It depends on how much carbon-based fuel you use. If you drive a fuel efficient car, you’ll pay less than if you drive an old clunker. If you have a high efficiency gas furnace, you’ll pay less than if you have an old furnace.
If you drive an electric car, use transit or bike, you’re not paying the carbon tax for moving around.
And if you buy things from companies that use less carbon, you’ll pay less than if you buy things from companies that use more fossil fuels (which means buying local is better).
The Federal Parliamentary Budget Office (a non-partisan office that is part of the House of Commons) estimates the average Ontario household will likely pay about $256 this year.
Bottom line: the more fuel you use, the more carbon tax you pay. The less fuel you use, the less carbon tax you pay.
You already got your first rebate if you sent off your income tax return in April. Every year you submit your income tax return, you get the rebate for the next year.
That’s right, you got the refund at about the same time you started paying the carbon tax. Which means the refund is paying for the carbon tax. In other words, it’s not costing you anything.
If you live in rural Ontario you get 10% more to cover the extra costs of living in the country. And if you’re a farmer, the fuel you use to farm is exempt from the carbon tax.
Yes, unless you are very wealthy. The Federal Parliamentary Budget Office released a study in April 2019 that shows 80% of Ontarians will get more money back than they spent on the carbon tax.
Interestingly, the carbon tax refund transfers money from rich people -who typically use more fuel- to the rest of us, benefiting those in need the most.
Bottom line: 80% of Ontarians will get a refund which is larger than what they pay in carbon taxes.
It helps fight the climate crisis in two ways. First, the carbon tax and refund system is designed to reward people who use less carbon. Since the carbon refund is a fixed amount, a person can “make money” by reducing how much carbon they use.
For example, if you switch from a gasoline powered car to an electric car, you are no longer buying gasoline so you are not paying a carbon tax. But your carbon refund stays the same.
Which means more money stays in your pocket and less carbon goes into the atmosphere.
But the carbon tax and refund system helps in another way. Of all the money collected through the carbon tax in Ontario, 90% goes back to Ontarians as refunds. The remaining 10% will be used to fund programs that reduce carbon emissions. In June, the Federal Government announced it will invest $41 million from the carbon tax in energy retrofits in Ontario schools.
In real numbers, in Ontario the carbon tax will generate about $2 billion in revenues in 2019-20. About $1.8 billion goes back in refunds and $200 million gets invested in projects that reduce carbon emissions.
Yes. Every time the carbon tax goes up, the refund goes up. In fact, the higher the carbon tax, the more money ends up in the pocket of the average Ontarian.
You’re not alone in being confused. There is a lot of misinformation and incomplete information out there about the carbon tax. That’s why this FAQ exists. All of the above information is based on transparent, non-partisan information that comes from the following sources:
The bottom line is that the carbon tax is a useful tool that will actually help Ontarians deal with the climate crisis. It’s time we stop playing politics with this tool and start focusing on using it to ensure our children have a future on this planet.
No. To start with, people from across the political spectrum support the carbon tax. In January 2019 over 3,500 economists from the US and from all political stripes -including 27 Nobel prize winners- wrote an open letter showing their support. They said:
“A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.” (https://www.clcouncil.org/economists-statement/)
It’s this reliance on the market and the built in refund system that has attracted prominent Canadian Conservatives, such as Preston Manning, to the carbon tax. And up until March 2018 all major political parties in Ontario supported putting a price on pollution. In fact, the Ontario PCs, prior to the March 2018 leadership change, called for a carbon tax and rebate system very much like the one now in effect.