Backgrounder: Ensuring Transparency

Backgrounder

The Federal Carbon Pollution Pricing System

The federal carbon pollution pricing system has two components:

  1. A charge on fossil fuels ("fuel charge"), which will be administered by the Canada Revenue Agency (CRA), and
  2. An output-based pricing system (OBPS) for emission-intense industrial facilities, which will be administered by Environment and Climate Change Canada.

Any fuel charge owing in applicable provinces and territories would generally be paid by fuel producers and distributors to the CRA on a monthly basis. The Government of Canada would only start to receive any proceeds that may arise from the OBPS in November 2020 for the 2019 compliance year.

Returning Proceeds to Jurisdictions of Origin

The Government of Canada has committed to returning direct proceeds from the federal carbon pollution pricing system to the province or territory of origin. The Government of Canada will return those proceeds:

  • Directly to the governments of those jurisdictions that choose to adopt the federal system; and
  • Directly to individuals and families, through proposed Climate Action Incentive payments, as well as to particularly affected sectors in those other jurisdictions that do not meet the Canada-wide federal standard for reducing carbon pollution – Ontario, New Brunswick, Manitoba, and Saskatchewan – in order to ensure that the carbon pollution price signal is preserved.
  • Proceeds from the OBPS in Ontario, New Brunswick, Manitoba, and Saskatchewan will also be returned to the province of origin. Given that these proceeds would only be realized in 2020, the Government will decide in due course how best to return these proceeds in these provinces.

The Government of Canada will not keep any direct proceeds from carbon pollution pricing, and will provide an update each year on exactly how those proceeds were used.

Projected Proceeds for Provinces that Do Not Meet the Canada-wide Federal Standard for Reducing Carbon Pollution

For Ontario, New Brunswick, Manitoba and Saskatchewan, the tables below show the estimated direct proceeds from the federal fuel charge for fiscal years 2019-20 to 2023-24. The tables also indicate how much of the direct proceeds will be provided to support particularly affected sectors including small and medium-sized enterprises (SMEs) and the municipalities, universities, colleges, schools and hospitals, non-profit organizations, and Indigenous communities. An estimate for total Climate Action Incentive payments to individuals and families is also included in the tables.

As the tables show, all net fuel charge proceeds will be returned in each of these provinces.

Transparency and Annual Reporting

To ensure accountability, the Government of Canada will provide annual updates on the direct proceeds and disbursements realized from the federal carbon pollution pricing system in respect of each province and territory where it applies. Any actual variance between the proceeds originating in a given jurisdiction and the amount of proceeds returned to that jurisdiction would be addressed through changes in future payment amounts to that jurisdiction. This transparent process will ensure that direct proceeds are fully returned to the jurisdiction of origin over time.

For those jurisdictions that do not meet the Canada-wide federal standard for pricing carbon pollution, the amounts being returned to individuals and families under Climate Action Incentive payments would be based on estimated proceeds. As actual proceeds and the total amount of proceeds returned in a specific jurisdiction through Climate Action Incentive payments (where applicable) may differ from estimates, adjustments would be made through changes in future Climate Action Incentive payment amounts to individuals and families (and possibly also through changes in amounts of support for affected sectors).



Table 1: Projected Proceeds and Proceeds Return in Ontario, 2019-20 to 2023-24
(in Million $)
  2019-20 2020-21 2021-22 2022-23 2023-24
Projected Fuel Charge Proceeds – before Proposed Additional Targeted Relief 1,770 2,625 3,455 4,270 4,270
Less: Additional Targeted Relief for Greenhouses and Generation of Electricity in Remote Communities 30 45 65 80 80
Net Fuel Charge Proceeds 1,740 2,580 3,395 4,190 4,190
Less: Proceeds Return          
Projected Total Climate Action Incentive Payments 1,585 2,345 3,085 3,810 3,810
Support for SMEs 105 155 205 255 255
Support for the Municipalities, Universities, Schools, Colleges, Hospitals, Non-Profit Organizations, and Indigenous Communities 50 75 100 125 125
Total Net Fuel Charge Proceeds Returned 1,740 2,580 3,395 4,190 4,190
Projected Fuel Charge Proceeds less Total Proceeds Returned 0 0 0 0 0
Notes: Totals may not add due to rounding. Numbers under $5 million are rounded to the nearest million; those over $5 million are rounded to the nearest $5 million; and "S" indicates a value of less than $500,000. This table excludes the costs of administering the fuel charge and OBPS in jurisdictions subject to the federal carbon pollution pricing system, and the costs of delivering Climate Action Incentive payments and relief to certain sectors, which will be borne by the Government of Canada. Estimates beyond 2019-20, in particular of Climate Action Incentive Payments, are illustrative and subject to adjustments as more information becomes available.
Table 2: Projected Proceeds and Proceeds Return in New Brunswick, 2019-20 to 2023-24
(in Million $)
  2019-20 2020-21 2021-22 2022-23 2023-24
Projected Fuel Charge Proceeds – before Proposed Additional Targeted Relief 90 130 170 210 210
Less: Additional Targeted Relief for Greenhouses and Generation of Electricity in Remote Communities  S  S  S  S  S
Net Fuel Charge Proceeds 90 130 170 210 210
Less: Proceeds Return          
Projected Total Climate Action Incentive Payments 80 120 155 190 190
Support for SMEs 5 10 10 15 15
Support for the Municipalities, Universities, Schools, Colleges, Hospitals, Non-Profit Organizations, and Indigenous Communities 3 4 5 5 5
Total Net Fuel Charge Proceeds Returned 90 130 170 210 210
Projected Fuel Charge Proceeds less Total Proceeds Returned 0 0 0 0 0
Notes: Totals may not add due to rounding. Numbers under $5 million are rounded to the nearest million; those over $5 million are rounded to the nearest $5 million; and "S" indicates a value of less than $500,000. This table excludes the costs of administering the fuel charge and OBPS in jurisdictions subject to the federal carbon pollution pricing system, and the costs of delivering Climate Action Incentive payments and relief to certain sectors, which will be borne by the Government of Canada. Estimates beyond 2019-20, in particular of Climate Action Incentive payments, are illustrative and subject to adjustments as more information becomes available.
Table 3: Projected Proceeds and Proceeds Return in Manitoba, 2019-20 to 2023-24
(in Million $)
  2019-20 2020-21 2021-22 2022-23 2023-24
Projected Fuel Charge Proceeds – before Proposed Additional Targeted Relief 190 280 370 460 460
Less: Additional Targeted Relief for Greenhouses and Generation of Electricity in Remote Communities S 1 1 1 1
Net Fuel Charge Proceeds 190 280 370 460 460
Less: Proceeds Return          
Projected Total Climate Action Incentive Payments 170 250 330 410 410
Support for SMEs 15 20 25 35 35
Support for the Municipalities, Universities, Schools, Colleges, Hospitals, Non-Profit Organizations, and Indigenous Communities 5 10 15 15 15
Total Net Fuel Charge Proceeds Returned 190 280 370 460 460
Projected Fuel Charge Proceeds less Total Proceeds Returned 0 0 0 0 0
Notes: Totals may not add due to rounding. Numbers under $5 million are rounded to the nearest million; those over $5 million are rounded to the nearest $5 million; and "S" indicates a value of less than $500,000.  This table excludes the costs of administering the fuel charge and OBPS in jurisdictions subject to the federal carbon pollution pricing system, and the costs of delivering Climate Action Incentive payments and relief to certain sectors, which will be borne by the Government of Canada. Estimates beyond 2019-20, in particular of Climate Action Incentive payments, are illustrative and subject to adjustments as more information becomes available.
Table 4: Projected Proceeds and Proceeds Return in Saskatchewan, 2019-20 to 2023-24
(in Million $)
  2019-20 2020-21 2021-22 2022-23 2023-24
Projected Fuel Charge Proceeds – before Proposed Additional Targeted Relief 310 465 615 770 770
Less: Additional Targeted Relief for Greenhouses and Generation of Electricity in Remote Communities 1 2 2 3 3
Net Fuel Charge Proceeds 310 465 615 765 765
Less: Proceeds Return          
Projected Total Climate Action Incentive Payments 265 395 525 650 650
Support for SMEs 30 45 60 80 80
Support for the Municipalities, Universities, Schools, Colleges, Hospitals, Non-Profit Organizations, and Indigenous Communities 15 25 30 40 40
Total Net Fuel Charge Proceeds Returned 310 465 615 765 765
Projected Fuel Charge Proceeds less Total Proceeds Returned 0 0 0 0 0
Notes: Totals may not add due to rounding. Numbers under $5 million are rounded to the nearest million; those over $5 million are rounded to the nearest $5 million; and "S" indicates a value of less than $500,000. This table excludes the costs of administering the fuel charge and OBPS in jurisdictions subject to the federal carbon pollution pricing system, and the costs of delivering Climate Action Incentive payments and relief to certain sectors, which will be borne by the Government of Canada. Estimates beyond 2019-20, in particular of Climate Action Incentive payments, are illustrative and subject to adjustments as more information becomes available.

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