Carbon levies are about to become a major source of revenue for provinces, according to a new report from RBC Economics.
The report, released Monday, says this fiscal year marks a “major inflection point for carbon levies in Canada.” It says revenues from carbon levies are expected to hit $4.8 billion in 2017-18 and total revenues are likely to double over the next year as more jurisdictions put a price on carbon emissions.
Four provinces – Alberta, Ontario, Quebec, and British Columbia — currently have a price on carbon emissions. Alberta is expecting to gain $1.0 billion from its carbon tax, plus an additional $196 million in compliance payments from big emitters. Ontario on track to earn $1.8 billion for its cap-and-trade system. Quebec and British Columbia expect to make $545 million and $1.2 billion respectively.
The remaining provinces are expected to follow suit in 2018 under the federal government’s national plan, which is intended to help Canada meet its Paris Agreement commitment of reducing greenhouse gas emissions 30 per cent by 2030.
To help achieve this goal, Ottawa has devised a plan for the price on carbon to rise from $10 per tonne to $50 between 2018 and 2022. These levies are expected to become a major source of revenue, especially for high-emitting provinces.
“For emission-intensive provinces, such as Alberta and Saskatchewan, carbon levies potentially could become a major source of revenues by 2022,” according to the report. “It wouldn’t be far-fetched to think that, by then, carbon levies might rival oil and gas royalties as a source of revenues in these two provinces.”
Provinces also differ in how they will use the proceeds of the carbon levy.
The report points out, for example, Alberta plans to invest $5.4 billion over five years on both tax rebates and more spending on green initiatives.
Ontario, meanwhile, will use its expected cap-and trade proceeds this year in different priority areas, including the adoption of low-carbon technologies by households and businesses, low-carbon transportation initiatives, and initiating energy saving programs.