YELLOWKNIFE -- The Northwest Territories announced plans Wednesday to implement a carbon tax that follows federal price guidelines.
But Finance Minister Robert C. McLeod said rebates built into the plan could actually reduce the overall cost of living for many northern families.
"We did a lot of work trying to mitigate the impact it's going to have on folks across the Northwest Territories," he said as he outlined the plan.
Starting July 1, 2019, the N.W.T. will impose a carbon tax of $20 per tonne, rising to $50 a tonne by 2022. Those levels are in line with federal requirements.
But McLeod said all the tax on heating fuel will be rebated at the point of purchase for most residents, businesses and governments. Most homes in the N.W.T. are heated with oil.
"We live in a northern climate with prices for heating that are already much higher than elsewhere in Canada," said McLeod. "Northerners already have considerable incentive to manage their heating costs, so adding additional costs does not make sense."
Similarly, northerners depend much more heavily on air transport for both people and essential goods. Aviation fuel purchased in the N.W.T. will be exempt from the tax.
As well, a cost of living adjustment will be incorporated into the tax code to ease the carbon tax burden on people.
A federal study said a $50-a-tonne tax would increase the cost of living for an average family of four by $950 a year. After the heating fuel rebate and the cost of living adjustment, McLeod said that family could actually save $400 a year.
"There is some skepticism out there," McLeod conceded. "Once we're past the first year, I think we'll have a better indication how this is going to affect (people.)"
Gasoline costs will not be rebated.
The territory's large emitters -- mostly diamond mines -- will get rebates of 75 per cent on fuel used for heating and power generation. Companies can apply to get the remaining portion back to fund green energy projects.
The territory estimates the move will reduce greenhouse gas emissions by 3.5 per cent. The territory emitted 1.4 megatonnes of carbon dioxide equivalent in 2015 -- a tiny portion of Canada's overall emissions.
McLeod said the heating and aviation fuel exemptions were worked out with the federal government.
"We came up with a number of initiatives that were designed specifically for the North that, to their credit, they thought would work."
All three northern premiers initially resisted any carbon tax regime for the North, saying it would only make the region more expensive.
Yukon has announced it will begin collecting a carbon tax at $20 a tonne in 2019. It has promised to rebate carbon taxes to Yukoners and businesses, although it hasn't announced how those rebates will be delivered.
Nunavut has not yet developed a carbon pricing system.
Former premier Paul Quassa said previously he thinks the territory should be exempt from a carbon price. His successor Joe Savikataaq has not said what approach his government will take.