Economy
Environment

NWT remains skeptical of own carbon tax as data shows modest impact

Last modified: October 28, 2020 at 12:48pm


The Northwest Territories continues to be unsure its carbon tax will have a meaningful impact on the climate, even as its first annual report on the tax suggested a modest reduction in emissions.

A year ago, finalizing the legislation that introduced the territory’s carbon tax, then-finance minister Robert C McLeod said he was “not a fan” of his own tax and expressly advised his successor to repeal it the moment they had the chance.

But McLeod said either the NWT implemented its own tax or a worse fate – a federal carbon tax not designed for the territory – would be foisted on the territorial government by Ottawa.

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More than a year on, McLeod’s successor Caroline Wawzonek this week released the NWT government’s first annual report on its carbon tax. The report covers the period up to the end of March 2020, meaning it excludes most of the Covid-19 pandemic’s impact.

In many respects, the report states, not enough time has elapsed to be at all sure of the carbon tax’s impact on NWT emissions. “Many years” of data will be needed before conclusions can be drawn, it remarks.

However, an appendix to the report uses one data source to suggest emissions did drop in 2019-20, the first financial year involving a carbon tax (it took effect on September 1, 2019).

That appendix uses fuel tax data for the past 20 years to estimate the territory’s greenhouse gas emissions. It doesn’t include diesel heating fuel.

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According to fuel tax data, the territory’s estimated emissions for 2019-20 come to 863 kilotonnes.

By comparison, the same data shows the NWT registering an estimated 939.3 kilotonnes in 2018-19 and 931.9 kilotonnes in 2017-18.

The NWT estimate hasn’t been as low as 863 kilotonnes since 2011.

‘Reductions will be increasingly difficult’

Yet the report is explicitly skeptical that carbon pricing will make much difference to emissions in the near future.

Wawzonek’s report states: “Carbon pricing is not expected to significantly reduce greenhouse gas emissions in the NWT over the short to medium term because the incentive to limit fuel use already exists, due to high energy costs.

“The easiest and least costly changes that could be made to reduce consumption of carbon-based fuels may already have been pursued.

“As the carbon tax rate increases over time, further reductions will be increasingly difficult without considerable technological improvements that allow economically viable reductions in fuel use.”

The territory says it doesn’t yet have the data to examine whether household or business carbon emissions are decreasing in the NWT following the tax’s introduction.

At the moment, the territory’s carbon tax is $30 per tonne, up from $20 per tonne when it was first introduced. It’ll reach $50 per tonne by 2022.

A vast amount of the revenue brought in by the tax is immediately returned to those paying it. For example, there is a 100-percent rebate on heating fuel purchases and all residents get a tax-free cost-of-living offset to compensate for the tax’s impact. (The NWT government, ahead of the tax’s implementation, said many families would end up around $400 per year richer through the tax than they would have been without it.)

The report states the territory both received and spent a little under $13 million related to the carbon tax from September 2019 until the end of March 2020. Money coming in from the tax essentially cancelled out money spent on rebates, offsets, and administration.

The next carbon tax hike will come on July 1, 2021, bringing the overall carbon tax rate in the NWT to $40 per tonne.

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