The Parliamentary Budget Officer (PBO) today released an updated distributional analysis of the federal fuel charge under the Government’s 2030 Emissions Reduction Plan.
The PBO’s latest report provides an update to the distributional analysis of federal carbon pricing report from March 2022 to include the Government’s 2030 Emissions Reduction Plan and the expansion of the federal fuel charge to Newfoundland and Labrador, Nova Scotia, and Prince Edward Island starting on July 1, 2023. The federal fuel charge continues to apply to Alberta, Saskatchewan, Manitoba and Ontario.
Under the Government’s 2030 Emissions Reduction Plan, the federal fuel charge is set to rise from $65 per tonne of carbon dioxide equivalent in 2023-24 to $170 per tonne in 2030-31.
“When both fiscal and economic impacts of the federal fuel charge are considered, we estimate that most households will see a net loss,” says PBO Yves Giroux. “Based on our analysis, most households will pay more in fuel charges and GST—as well as receiving slightly lower incomes—than they will receive in Climate Action Incentive payments.”
Estimates of the net cost of the federal fuel charge to households continue to show a progressive impact, that is, larger net costs for higher income households. The report finds that the largest net cost is for households in the top income quintile in Alberta (2.7% of disposable income) and the largest net gain is for households in the lowest income quintile in Saskatchewan (2.7% of disposable income) in 2030-31.
The report also provides estimates of the impact of the federal fuel charge on federal budgetary revenues.
“We estimate that the Government will collect and return $11.8 billion in fuel charges in the seven provinces where the charge applies in 2023-24, and that amount will rise to $25 billion in 2030-31,” adds Mr. Giroux.
The scope of the report is limited to estimating the distributional impact of the federal fuel charge and does not attempt to account for the economic and environmental costs of climate change.