Backgrounder: Targeted Relief for Farmers and Fishers, and Residents of Rural and Remote Communities

Background

The Government of Canada has a plan to build a cleaner environment and a stronger economy for today and tomorrow. A key part of this plan, the Greenhouse Gas Pollution Pricing Act (GGPPA), which was enacted on June 21, 2018, establishes a federal Canada-wide standard for reducing carbonpollution. The federal standard gives provinces and territories the flexibility to choose a system that meets this standard and works best for them.

Provinces or territories that meet this standard with their own carbon pollution pricing systems will continue to reduce carbon pollution using their own systems.

For all other provinces and territories, beginning in 2019, the federal "backstop" carbon pollution pricing system will apply to ensure that all jurisdictions in Canada meet the federal standard.

The federal carbon pollution pricing backstop system is composed of two components:

• A charge on fossil fuels ("fuel charge"), which will be administered by the Canada Revenue Agency (CRA) starting in April 2019; and
• An output-based pricing system (OBPS), which will be administered by Environment and Climate Change Canada (ECCC) starting in January 2019.

The purpose of the GGPPA is to reduce greenhouse gas emissions by ensuring that carbon pollution pricing applies broadly throughout Canada.

At the same time, the Government recognizes that particular groups or sectors require targeted relief from the fuel charge – in particular because of the small number of alternative options they may have in the face of carbon pollution pricing.

Relief for Farmers

The GGPPA will provide farmers with relief from the fuel charge for fuels used in tractors, trucks and other farm machinery. The relief is provided upfront through the use of exemption certificates, when certain conditions are met. Specifically, the GGPPA provides that a registered distributor can generally deliver, without the fuel charge applying, gasoline or light fuel oil (e.g., diesel) to a farmer at a farm, if the fuel is for use exclusively in the operation of eligible farming machinery and all or substantially all of the fuel is for use in the course of eligible farming activities. Farmers do not need to be registered for the purposes of this relief.

Under the GGPPA, eligible farming machinery means property that is primarily used for the purposes of farming and that is a farm truck or tractor, a vehicle not licensed to be operated on a public road, or an industrial machine or stationary or portable engine.

The GGPPA also includes diversion rules to ensure that the fuel charge applies if gasoline or light fuel oil is used in a manner contrary to the intended relief.

Relief for Fishers

The GGPPA also provides relief of the fuel charge for gasoline and light fuel oil (e.g., diesel) that is generally delivered to a fisher, if the fuel is for use exclusively in an eligible fishing vessel and all or substantially all of the fuel is for use in the course of eligible fishing activities. The relief is provided upfront through the use of exemption certificates, when certain conditions are met, one of them being that the province or territory subject to the fuel charge (i.e., "listed") be prescribed for the purposed of the relief. Fishers do not need to be registered for the purposes of this relief.

The GGPPA also includes diversion rules to ensure that the fuel charge applies if gasoline or light fuel oil is used in a manner contrary to the intended relief.

There are currently no listed provinces that are prescribed. It is proposed that all listed provinces and territories for the purpose of the fuel charge be prescribed for the purpose of the relief.

It is proposed that this relief apply as of April 2019, for the purpose of the fuel charge.

Providing Additional, Targeted Relief Under the GGPPA

In addition to the relief from the fuel charge that is already provided under the GGPPA, the Government is proposing that additional, targeted relief be provided to certain groups or sectors, including:

• Residents of rural and small communities;
• Users of aviation fuels in the territories;
• Greenhouse operators;
• Power plants that generate electricity for remote communities; and
• Indigenous Peoples.

The following sections provide further details on proposed relief measures.

Supplement for Residents of Rural and Small Communities

For provinces that have not taken adequate action to meet the federal standard for pricing carbon pollution — Ontario, New Brunswick, Manitoba, and Saskatchewan – the Government proposes to provide a supplementary amount to the baseline Climate Action Incentive payments for residents of rural and small communities, in recognition of their increased energy needs and reduced access to alternative transportation options. This supplement would increase the amount that people living in these provinces would receive by 10 per cent. For more information, see the accompanying backgrounders regarding return of direct proceeds to the respective provinces.

Users of Aviation Fuels in the Territories

Generally, the fuel charge under the GGPPA applies to aviation gasoline and aviation turbo fuel that is used in intra-jurisdictional flights (i.e., between two points in the same province or territory), but not in inter-jurisdictional flights (e.g., between two different Canadian provinces or territories, or international flights).

As part of the Pan-Canadian Framework on Clean Growth and Climate Change, the federal government committed to work with the territories to address their unique circumstances, including the high cost of living, challenges with food security and emerging territorial economies.

Consequently, the federal government is proposing to apply the fuel charge at a rate of $0 per litre to aviation gasoline and aviation turbo fuel for listed territories (Yukon and Nunavut), as noted in the backgrounder entitled Fuel Charge Rates in Listed Provinces and Territories. This will also be in keeping with the treatment of aviation fuels under the proposed carbon pollution pricing system of the Northwest Territories. This ensures that, while carbonpollution pricing applies broadly in Canada, it also reflects the high-reliance on air transportation in the territories.

Air carriers in the listed territories will continue to be subject to the GGPPA (e.g., reporting and filing requirements), as required, but ultimately the fuel charge will not be paid on any flights in the territories.

The proposed rate of $0 per litre will be effective as of July 2019 (the implementation date of the fuel charge in the listed territories) and will apply for all years.

Greenhouse Operators

Partial relief of the fuel charge (i.e., 80 per cent) is proposed to apply to natural gas and propane that is exclusively for use in the operation of a commercial greenhouse for growing any plants, including vegetables, fruits, bedding plants, cut flowers, ornamental plants, tree seedlings and medicinal plants. It is also proposed that, in order for relief to be available, all or substantially all of the greenhouse building must be used for the growing of plants.

The relief is proposed to be provided upfront through the use of exemption certificates, similar to other exemption certificates under the GGPPA, such that only 20 per cent of the fuel charge applies to natural gas and propane that is delivered by a registered distributor to an eligible greenhouse operator if the fuel is exclusively for use in the heating of, or for the production of carbon dioxide for use in the operation of, a commercial greenhouse.

• An eligible greenhouse operator is proposed to be a person that carries on a greenhouse operation with a reasonable expectation of profit.

It is also proposed that diversion rules be included, in line with existing provisions of the GGPPA, to ensure that the fuel charge applies if natural gas or propane is used in a manner contrary to the intended relief.

This relief is proposed to generally apply as of April 2019 in all listed provinces and as of July 2019 in all listed territories, for the purpose of the fuel charge.

Power Plant Operators that Generate Electricity for Remote Communities

Full relief of the fuel charge is proposed to apply to light fuel oil (e.g., diesel) that is used exclusively to generate electricity for remote communities.

The relief is proposed to be provided upfront through the use of exemption certificates, similar to other exemption certificates under the GGPPA, such that the fuel charge does not apply to light fuel oil that is delivered by a registered distributor to a person that operates a remote power plant if that fuel is exclusively for use in the generation of electricity for distribution to the general public in remote communities.

• A remote community will be defined to mean a geographic area that is neither serviced by an electrical distribution network that is under the jurisdiction of the North American Electric Reliability Corporation nor a natural gas distribution system.

It is also proposed that diversion rules be included, in line with existing provisions of the GGPPA, to ensure that the fuel charge applies if light fuel oil is used in a manner contrary to the intended relief.

This relief is proposed to generally apply as of April 2019 in all listed provinces and as of July 2019 in all listed territories, for the purpose of the fuel charge.

Indigenous Peoples

Indigenous peoples could benefit from a number of the proposed relief measures announced by the Government – the supplement for residents of rural and small communities, the fuel charge relief for aviation fuels in the territories, the fuel charge relief for diesel-fired generation of electricity for remote communities, the fuel charge relief for greenhouse operators, and other targeted support for affected sectors. More information is found in the backgrounder entitled Support for Indigenous Peoples.

Have Your Say

Canadians are invited to provide comments on the proposed relief for greenhouse operators and power plant operators that generate electricity for remote communities.

Please send your comments to fin.tarification-pollution-pricing.fin@canada.ca by November 23, 2018. Written correspondence related to these consultations can also be mailed to:

Carbon Pollution Pricing 
Department of Finance Canada 
90 Elgin Street 
Ottawa, Ontario 
K1A 0G5