How much carbon tax the NWT is paying and where the money goes

People, governments and businesses in the Northwest Territories paid $68.7 million in carbon tax between April 2023 and March 2024, the latest data shows.

The figures are included in the 2023-24 annual report tabled in the territory’s legislature last week.

$68.7 million is up from $48.4 million the year before.

The NWT has its own version of the carbon tax that is designed to comply with the federal rules, rather than relying on the federal version – the “backstop” – as some other jurisdictions do.

Cabinet ministers have argued that a made-in-the-NWT version allows the territory to retain some control over how the tax’s revenue is spent. Some regular MLAs have said the federal backstop would be the better choice.

With that in mind, here’s how the territory generated $68.7 million in revenue last year and where that money went.

Who paid what

The NWT’s industrial “large emitters” – essentially, its three working diamond mines – paid $31.9 million in carbon tax in 2023-24 and got back $25.3 million in rebates.

In the past, ministers have said they believe the NWT’s version of the carbon tax results in the mines paying more than they might under the federal backstop, while also providing a rebate incentive that keeps the territory “competitive” when attracting more mining investment.

Residents, small businesses and community governments are lumped together in the reporting. Together, they paid $36.6 million, up from $23.4 million the year before.

Ottawa made the NWT drop its 100-percent rebate on home heating fuel early last year, so that rebate went from $10.8 million to zero in the annual report.

Cost-of-living offset payments were increased to try to cover that loss. The GNWT says it paid out $18 million in so-called “Colo” payments last year, an increase of $7.1 million on the year before – meaning the larger Colo payments alone did not fully cover the axed rebate.

This was the first year that community governments received a grant dedicated to them from the carbon tax revenue. The total paid out to communities in grants was $1.5 million.

Of that, Yellowknife got more than $600,000. Hay River got $116,000, Inuvik $99,000 and Fort Smith $82,000. Other communities received smaller sums.

NWT makes record surplus

The report shows the NWT government making a surplus of $14 million on the carbon tax in 2023-24.

All of that money entered the territorial government’s general fund, meaning it could be used to pay for pretty-much anything.

In an attempt to tie the $14 million to the territory’s spending on climate-related projects, the annual report says the cash could be “notionally attributed” to initiatives worth $12.3 million that happened over the same period and were designed to reduce emissions.

Examples would be $2.74 million to the Arctic Energy Alliance, which runs energy efficiency programs and subsidies for residents in the NWT, and $1.3 million toward “repairs to the Taltson and Snare hydro facilities and planning for Fort Providence and Kakisa hydro facilities.”

In the legislature last week, Range Lake MLA Kieron Testart quizzed finance minister Caroline Wawzonek on the $14-million surplus, which is far larger than any surplus the GNWT has previously recorded through the carbon tax. In the past two years, the surplus came in at $1.6 million. Before that, it barely made a surplus at all.

Wawzonek said she wasn’t in the “immediate position” to fully explain the surplus and promised to return to Testart with a more comprehensive answer.

She said the carbon tax is “not necessarily designed or intended to run with surpluses” and even the $14-million surplus recorded in 2023-24 paled in comparison to the more than $100 million the GNWT was shovelling out of the door to cover what she called “climate emergencies” in recent years – the likes of floods and fires.

“The majority of the actual tax revenue does still continue to go back to residents,” the minister said.

Pointing to the funding that goes to the Arctic Energy Alliance – which again, the GNWT said was a “notional” example of where the surplus might be considered to have gone – Wawzonek said the NWT had “lost significant funding from the federal government for that.”

“We can’t bring our power bills down if we’re not able to invest in that,” she said of the Arctic Energy Alliance’s initiatives, which help people to move to cheaper, more efficient energy systems or save money through better insulation.

“I appreciate the desire is to have a better understanding of this tax and what we’re doing with it,” Wawzonek concluded.

“I’m definitely going to go back and see if we can explain more … why there’s a change this year.”

Is the tax changing our behaviour?

The stated aim of a carbon tax is to incentivize people, businesses, communities and the entire territory so that they move away from dirtier fossil fuels toward cleaner energy.

NWT leaders have complained for years that energy already costs so much in the North – electricity prices are four times what southerners pay and set to climb further – that a carbon tax is hardly needed on top of already-high costs.

The 2023-24 report suggests that so far, “no conclusions can be derived” about whether the carbon tax is achieving its goals.

The GNWT says part of the reason for that is the pandemic.

Covid-19 hit just before the end of the first financial year of carbon tax, 2019-20, then lasted throughout 2020-21. Mines like Ekati were shut down for periods of time during the pandemic and other behaviours changed, the GNWT argues, meaning the figures for the first two years of the tax aren’t necessarily representative of the emissions the NWT would normally generate.

All of this is a preface to the slightly awkward fact that the NWT’s estimated emissions from taxed fuels have increased every year since the tax was introduced.

According to the report, estimated emissions from taxed fuels for 2023-24 were 1,224 kilotonnes of CO2 equivalent. In 2020-21, the first full year of carbon tax in the NWT, that estimate was 988 kilotonnes. (Importantly, this is just for fuels that fall under the carbon tax and not the entirety of the NWT’s estimated emissions, which is why these figures differ from other figures that try to gauge the full picture of territorial emissions.)

“Measuring the ability of the Northwest Territories carbon tax to reduce carbon emissions is complicated by the many variables affecting carbon fuel consumption and the amount of time series data required to distinguish the effect of the carbon tax introduction with other factors,” the report states by way of explanation.

“Other factors, such as changing retail fuel prices, weather and economic activity, can influence fuel consumption and make it difficult to isolate carbon tax effects without many years of data.”

Low water levels have forced the NWT Power Corporation to rely on diesel for huge quantities of electricity generation where hydro would ordinarily have been used.

Delays to the refurbishment of the Taltson hydro plant have led to a similar situation in the South Slave, where diesel has been used to supply power for a full year where hydro was unexpectedly unavailable.

Changes ahead

The 2023-24 reporting doesn’t include the three-year suspension of carbon tax on diesel home heating fuel, which kicked in on April 1, 2024.

That exemption was introduced after the federal government announced it nationally after pressure from Atlantic Canadian provinces.

Because the GNWT can’t break the national rules, the exemption only applies to diesel and not to other home heating fuels like propane.

Cost-of-living offset payments also went down from the start of the 2024-25 financial year.

For a family of four, the annual total of those payments was expected to go down by about $400 to $800, depending on where you live.

As an example, a family receiving $2,872 in annual offset payments in the Beaufort Delta might now receive $2,008 instead, the territory stated earlier this year.