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A Distributional Analysis of the Federal Fuel Charge under the 2030 Emissions Reduction Plan

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Published on March 30, 2023 PDF

This report provides a distributional analysis of the federal fuel charge under the Government’s 2030 Emissions Reduction Plan.

April 17 2024: Estimates of household net costs incorporating “fiscal and economic impacts” reflect the broad economic impact of federal-equivalent carbon pricing—that is, the economic impact of the fuel charge and output-based pricing system (OBPS).

April 17 2024: Distributional analysis of carbon pricing (Additional Analysis)

March 24 2022: A Distributional Analysis of Federal Carbon Pricing under A Healthy Environment and A Healthy Economy (Report)


Communications

Quotes

  • When both fiscal and economic impacts of the federal fuel charge are considered, we estimate that most households will see a net loss. 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.

  • 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.

Yves Giroux
Parliamentary Budget Officer

News Release

{"id":46,"created_at":"2023-03-30T08:34:12-04:00","updated_at":"2023-03-30T08:57:03-04:00","slug":"pbo-releases-updated-analysis-of-the-impact-of-the-federal-fuel-charge-on-households-le-dpb-publie-une-analyse-actualisee-de-lincidence-de-la-redevance-federale-sur-les-combustibles-sur-les-menages","title_en":"PBO releases updated analysis of the impact of the federal fuel charge on households","title_fr":"Le DPB publie une analyse actualis\u00e9e de l\u2019incidence de la redevance f\u00e9d\u00e9rale sur les combustibles sur les m\u00e9nages","body_en":"The Parliamentary Budget Officer (PBO) today released an updated distributional analysis of the federal fuel charge under the Government\u2019s 2030 Emissions Reduction Plan.\n\nThe PBO\u2019s latest report provides an update to the distributional analysis of federal carbon pricing report from March 2022 to include the Government\u2019s 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.\n\nUnder the Government\u2019s 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. \n\n\u201cWhen both fiscal and economic impacts of the federal fuel charge are considered, we estimate that most households will see a net loss,\u201d says PBO Yves Giroux. \u201cBased on our analysis, most households will pay more in fuel charges and GST\u2014as well as receiving slightly lower incomes\u2014than they will receive in Climate Action Incentive payments.\u201d\n\nEstimates 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.\n\nThe report also provides estimates of the impact of the federal fuel charge on federal budgetary revenues.\n\n\u201cWe 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,\u201d adds Mr. Giroux. \n\nThe 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.","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui une mise \u00e0 jour de l\u2019analyse distributive de la redevance f\u00e9d\u00e9rale sur les combustibles au regard du Plan de r\u00e9duction des \u00e9missions du Canada pour 2030.\n\nDans son dernier rapport, le DPB met \u00e0 jour l\u2019analyse distributive de la redevance f\u00e9d\u00e9rale sur les combustibles r\u00e9alis\u00e9e en mars 2022 de mani\u00e8re \u00e0 tenir compte du Plan de r\u00e9duction des \u00e9missions du Canada pour 2030 et de l\u2019\u00e9largissement de la redevance \u00e0 Terre Neuve et Labrador, \u00e0 la Nouvelle \u00c9cosse et \u00e0 l\u2019\u00cele du Prince-\u00c9douard \u00e0 compter du 1er juillet 2023. La redevance f\u00e9d\u00e9rale sur les combustibles continue de s\u2019appliquer \u00e0 l\u2019Alberta, \u00e0 la Saskatchewan, au Manitoba et \u00e0 l\u2019Ontario.\n\nSelon le Plan de r\u00e9duction des \u00e9missions du Canada pour 2030, la redevance f\u00e9d\u00e9rale sur les combustibles devrait passer de 65 $ la tonne d\u2019\u00e9quivalent en dioxyde de carbone en 2023-2024 \u00e0 170 $ la tonne en 2030-2031.\n\n\u00ab Selon nos estimations, si l\u2019on tient compte des r\u00e9percussions \u00e0 la fois financi\u00e8res et \u00e9conomiques de la redevance f\u00e9d\u00e9rale sur les combustibles, la plupart des m\u00e9nages constateront une perte nette en ce sens que les paiements de l\u2019incitatif \u00e0 agir pour le climat qu\u2019ils recevront ne compenseront pas compl\u00e8tement les redevances sur les combustibles et en TPS et les revenus l\u00e9g\u00e8rement moins \u00e9lev\u00e9s \u00bb, a d\u00e9clar\u00e9 le DPB Yves Giroux.\n\nLes estimations du co\u00fbt net pour les m\u00e9nages de la redevance f\u00e9d\u00e9rale sur les combustibles indiquent une incidence progressive, c\u2019est-\u00e0-dire que les co\u00fbts nets sont sup\u00e9rieurs pour les m\u00e9nages \u00e0 revenu \u00e9lev\u00e9. \nSelon le rapport, le co\u00fbt net le plus important concerne les m\u00e9nages du quintile de revenu sup\u00e9rieur en Alberta (2,7 % du revenu disponible), et le gain net le plus important concerne les m\u00e9nages du quintile de revenu inf\u00e9rieur en Saskatchewan (2,7 % du revenu disponible) en 2030-2031.\n\nLe rapport pr\u00e9sente \u00e9galement une estimation de l\u2019incidence de la redevance f\u00e9d\u00e9rale sur les combustibles sur les recettes budg\u00e9taires f\u00e9d\u00e9rales.\n\n\u00ab Nous estimons \u00e0 11,8 milliards de dollars en 2023 2024 la somme que le gouvernement percevra et reversera au titre de la redevance sur les combustibles dans les sept provinces o\u00f9 elle s\u2019applique. Cette somme passera \u00e0 25 milliards de dollars en 2030-2031 \u00bb, a ajout\u00e9 M. Giroux.\n\nLa port\u00e9e du rapport se limite \u00e0 l\u2019estimation de l\u2019incidence distributive de la redevance f\u00e9d\u00e9rale sur les combustibles. Le rapport n\u2019a pas pour objectif d\u2019estimer les co\u00fbts \u00e9conomiques et environnementaux des changements climatiques.","release_date":"2023-03-30T09:00:00-04:00","is_published":"2023-03-30T08:57:03-04:00","internal_id":"COM-2223-046","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/pbo-releases-updated-analysis-of-the-impact-of-the-federal-fuel-charge-on-households-le-dpb-publie-une-analyse-actualisee-de-lincidence-de-la-redevance-federale-sur-les-combustibles-sur-les-menages"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/pbo-releases-updated-analysis-of-the-impact-of-the-federal-fuel-charge-on-households-le-dpb-publie-une-analyse-actualisee-de-lincidence-de-la-redevance-federale-sur-les-combustibles-sur-les-menages"}},"pivot":{"publication_id":734,"news_release_id":46}}