Carbon tax pause on home heating oil will cost federal government $755M: PBO

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OTTAWA — The federal government will forgo $755 million in carbon taxes from Atlantic Canadians over the course of its three-year pause on the heating oil tax, according to a new report from Ottawa’s spending watchdog.

That’s as it gives Ontario a $295-million reprieve, but hardly any break for the western provinces.

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The Parliamentary Budget Officer has costed out the Trudeau government’s suspension of the carbon tax on home heating oil and doubling of the rural rebate.

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While the temporary pause applies across the country, the new data show how the move clearly favours Atlantic Canada over elsewhere.

Nova Scotians are expected to benefit the most: roughly $372 million in carbon taxes now won’t be collected, while $185 million won’t be collected in Newfoundland and Labrador, $135 million in New Brunswick and $63 million in Prince Edward Island.

The varying amounts depend on how many homes in each province use home heating oil.

Roughly 40 per cent of Prince Edward Island residents, 32 per cent of Nova Scotians, 18 per cent of Newfoundlanders, and seven per cent of New Brunswickers use heating oil, according to Statistics Canada data.

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Nationally, StatsCan says, just three per cent of households rely on furnace oil.

The PBO report shows the rest of the country getting a much smaller carbon tax reprieve.

In Ontario, the pause will cost $295 million, while there’s very little savings in every western province.

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Roughly $10 million less in carbon taxes will be collected in Manitoba over three years, $6 million in Saskatchewan, and $3 million in Alberta.

The federal government has maintained that the carbon price is revenue neutral, meaning that every dollar in carbon tax it collects is returned to the people from the province it was collected.

Prime Minister Justin Trudeau has said that isn’t changing.

It means that while the federal government will now be collecting less money in Atlantic Canada, at the same time, the base rebate will be going down by a yet-to-be-determined amount.

However, Ottawa is also doubling what’s known as the rural top-up rate, increasing from 10 to 20 per cent an extra payment going to those residing in small and rural communities in recognition of their increased energy needs and reduced access to cleaner transportation options.

To be eligible for the rural top-up, an individual must reside outside a census metropolitan area.

For the current year, there are just two in New Brunswick — Saint John and Moncton, and their surrounding areas.

It means the vast majority of New Brunswickers will get the extra top up.

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The PBO estimates that will mean an extra $11 million for the province’s residents in the current fiscal year.

That amount then grows over the next six years from $13 million in 2024-25 to $21 million in 2030-31.

The rural top-up applies across the country, increasing total rural supplement payments by $304 million in 2024-25, rising to $536 million in 2030‑31.

The PBO report says that a few unknowns still exist over where the money comes from to top up the rural rebate.

Under the current structure, 90 per cent of carbon tax proceeds collected in a province are returned to households in the jurisdiction.

The rural 10 per cent top-up is included in that.

The remaining 10 per cent of proceeds are remitted to emission-intensive trade-exposed small and medium-sized businesses, some farmers, and Indigenous groups in the province.

Where the extra 10 per cent rural top-up will come from remains uncertain, says the PBO.

The budget officer’s report said the base amount every person receives could be decreased to pay out larger rural rebates, the amount going to business, farmers, and Indigenous groups could be reduced, or the money could come from the federal government, meaning the carbon tax would no longer be revenue neutral.

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