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Economy

September 1 is NWT carbon tax day one. How will it affect you?


According to the NWT government, September 1 is the designated start date of the territory's new carbon pricing regime.

Businesses in Yellowknife reported receiving leaflets in the week leading up to September 1 advising them of the coming changes.

However, some businesses and residents surveyed by Cabin Radio appeared unclear on precisely how the carbon tax would affect them.

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In particular, several expressed concern about the impact on heating costs – stating they were unaware the NWT government has guaranteed anyone purchasing heating fuels will receive a 100-percent carbon tax rebate at the point of sale.

In full: GNWT guidance on how carbon tax will work

The tax comes with a range of rebates and offsets designed to minimize its impact, but will still mean a few noticeable increases. The easiest to spot will be at the gas station, where most drivers will see an increase of about five cents per litre (which will then increase over the next few years).

On this page, we'll go through the basics of the NWT carbon tax to help you figure out how it'll impact you.

Will the cost of flights go up?

Not directly. Aviation fuel is exempt, meaning airlines don't have to pay any more than they did to fuel aircraft in the Northwest Territories.

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It's feasible that other impacts of the carbon tax might lead airlines to experience higher operating costs and charge higher prices, but no airline has yet publicly said this will be the case.

So, am I paying this on propane and natural gas?

If you're using propane or natural gas (or diesel or anything else) to heat your home, then no, you are entitled to receive a 100-percent rebate at the point of sale.

(What that means is, technically, the company selling the fuel to you applies the carbon tax to the price, then immediately gives you all of that tax back, in the same transaction – so you end up paying what you would have paid before.)

Small businesses also receive this rebate. Large emitters – diamond mines and the like – get most of this, but not all of it, rebated.

Will my electricity costs go up?

The NWT Power Corporation will get a full rebate on the diesel it uses for electricity across the territory's communities so, theoretically, no, your electricity cost isn't affected.

What are the diamond mines paying?

They have their own custom system devised by the NWT government, which had to make sure the NWT's own version of the carbon tax treated mines in roughly the same way as the federal backstop does. (Initially, the NWT's carbon tax was tougher on mines than the federal version, which could have had negative consequences for the territory's mining industry.)

Around three-quarters of the carbon tax paid by the mines will be given back as rebates. Twelve percent of the tax will be held back and put into accounts which the mines can then use to fund emissions-reducing initiatives.

Will this change over time?

Yes. Some parts of NWT carbon pricing are designed to increase steadily over the next few years.

The tax on gas is the main example of this. While it works out to around five cents per litre now, it'll be more like 12 cents per litre by 2022 (if the tax remains in place at that point).

What is the cost-of-living offset?

It's a payment every NWT resident receives to help with the increased costs brought on by the carbon tax.

By 2022, when the rest of the carbon tax is as high as it's planned to get, the cost-of-living offset is going to be worth $300 per child aged under 18, and $260 per adult.

However, the offset will be smaller for the next few years while the tax gradually increases.

In 2019, an adult can expect $106 and a child $120 through the offset. In 2020, it'll be $156 for adults and $180 for kids.

In June, the NWT government said you could expect your first offset payment in October 2019, then another one in April 2020. Since carbon tax was supposed to start in July but was delayed by two months, it's not clear if that means the payments are also delayed.

After April 2020, the Canada Revenue Agency will take over and distribute the cost-of-living offset in four quarterly payments to each resident.

Where is the money going?

In June, the NWT government said it expected 79 percent of the revenue to be given back in offset and rebates; 20 percent to be spent on "energy initiatives;" and one percent to be spent on administering the tax.

Is it true some families will make money from this?

The NWT government insists many families could end up making a profit of about $400 per year, because their rebates and cost-of-living offsets will bring in more money than the extra cash they spend paying the tax. (If you want to see the territorial government's math on this, click here.)

Having said that, the NWT government's math does not take into account indirect impacts – for example, communities having to increase tax rates to cover their own additional carbon tax costs (like tax on gas for their vehicle fleets).

Given the NWT's finance minister has said he doesn't like his own tax – but is doing it because the federal government is making him – that would suggest it can't be quite as rosy an outlook as that $400 figure would imply. If the tax were guaranteed to help the environment and leave families a few hundred bucks better off each year, you would imagine the finance minister would quite like it.

After the election, could anything change?

Yes. Looking at the positions of the two major federal parties, a Liberal government would be expected to ensure the tax remains in place while a Conservative government would relax Ottawa's stance on the issue.

The NWT's finance minister, Robert C McLeod, has said he expects any future NWT government to repeal its carbon pricing legislation as soon as Ottawa allows that to happen.

However, if those circumstances arise, that would be down to the NWT government of the day – which won't include McLeod, who is retiring from politics this year.

What, exactly, will this do to help the environment?

Good question. The whole point of a carbon tax is to make certain high-emissions fuels and ways of life more expensive, so that people start choosing other options instead. In 2019, the carbon tax is set at $20 per tonne of greenhouse gas emissions. By 2022, that'll be $50 per tonne.

But in practice, as you can see above, many areas where the tax would be applied are the subject of rebates and offsets – to the extent that the NWT government thinks many families will end up a few hundred bucks better-off each year as a result.

Some MLAs have duly questioned what environmental impact can reasonably be expected from a tax that actually gives some residents money to carry on doing what they were doing.

The territorial government's answer to that has consistently been that there is no alternative means of implementing carbon tax without significantly increasing the northern cost of living.

Increasing your cost of living would mean the carbon tax is doing what it is supposed to do – and emissions would probably come down – but the territory says its residents would not be able to cope with the financial impact.

That means the result is a compromise in which a tax exists, and some prices (like gas) do go up, but NWT residents are shielded from the brunt of its effects.

That approach's resulting impact on emissions remains to be seen.

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