NWT introduces carbon tax – and plans to pay for much of it

The Government of the Northwest Territories revealed its carbon tax proposals on Wednesday, including a range of measures designed to shield residents from the very same tax.

The territory claimed benefits and rebates introduced in its tax plan would actually leave many families better off.

The NWT intends to begin carbon pricing on July 1, 2019 at $20 per tonne of greenhouse gas emissions – in line with federal recommendations. That will grow annually to $50 per tonne by 2022.

As an example, that means NWT residents can expect to pay 4.7 cents extra per litre of gas in 2019; a figure which rises to 11.7 cents by 2022.

“The main thing people will notice is the price of gasoline,” said David Stewart, from the territory’s Department of Finance.

More: Read the territory’s full briefing note on carbon tax plans

However, the territory itself will end up paying for a large chunk of its own tax through rebates and benefits.

Stewart said the impact of those measures would leave an average NWT family up to $400 richer, annually, than they are now without a carbon tax in place.

That does not take into account an expected increase in the cost of goods, given the higher cost of transporting things to the NWT once the tax is in place.

Premier Bob McLeod had hinted at rebates and exemptions as the territory worked on its plans over the past 18 months.

All provinces and territories committed to carbon pricing, a central plank of the present federal government’s philosophy, through an agreement signed in December 2016.

Rebate details

Carbon tax on heating fuel will be rebated in full for all residents, governments, and small businesses. The territory says this measure will save municipalities like Yellowknife and Inuvik more than $100,000 each, per year, in tax they would otherwise have paid, and will mean residents avoid up to $500 a year in extra tax.

That measure will cost the territory around $9.4 million per year from 2022, once the tax is fully implemented, according to briefing documents released by the territorial government.

The territory will also give its own power corporation a carbon tax rebate to ensure electricity rates don’t have to go up as a consequence of the tax. That will cost the NWT up to $3 million per year.

On top of that, NWT residents will each receive cost-of-living benefit payments – rising to $260 per adult and $300 per child in 2022 – to offset the impacts of the new tax. Those payments are claimed through your personal income tax return. The territorial government expects providing the benefits to cost up to $12 million per year.

Aviation fuel will be entirely exempted from the new carbon tax, in a move the federal government is expected to back across the three territories. In a statement on Wednesday, the NWT said air travel was ‘critical’ and too costly to further tax. Officials estimate the tax would have cost NWT residents and businesses more than $6 million a year in aviation-related charges alone from 2022.

In explaining why the territory is footing a significant portion of its own tax bill, the territorial government said in a statement: “The planned approach recognizes that there is already considerable incentive for residents and businesses to minimize energy use due to the high costs.”

‘Need to do our part’

In total, the territorial government expects its carbon tax to generate $16.3 million in revenues in 2019, rising to $54.5 million in 2022.

The rules are slightly different for large emitters of greenhouse gases like diamond mines and oil producers, who will provide a sizeable proportion of that revenue – but even then, the territory will rebate three-quarters of the tax on heating fuel and diesel not used to power vehicles.

The remaining 25 percent will be held in a trust, then given back to companies to help fund initiatives that reduce emissions.

Rebates to large emitters are, again, expected to cost the NWT up to the region of $12 million annually.

In prepared remarks, finance minister Robert C McLeod said: “The approach to carbon pricing planned for the NWT balances managing the high cost of living and doing business in the NWT and the need to do our part to address climate change.

“Carbon pricing is just one of the components of our overall approach and we are implementing it in a way that reflects our northern realities.”

The actual impact of the carbon tax on climate change was not fully laid out in documents released on Wednesday.

The territory says an initial, federal assessment of the territory – using the planned federal carbon tax measures as a guideline – suggested emissions in the NWT would be reduced by 3.4 percent as a result of the tax coming into force.

“We expect similar kinds of results,” Stewart told reporters.

Currently, two-fifths of the territory’s emissions come from electricity and heating, both of which are taxed but then effectively paid back in full under the plans released on Wednesday.

Almost all of the remaining emissions are transportation-related – mostly road transport and mining.

Some of the territory’s carbon tax revenues will be invested into green initiatives it has already announced, such as introducing wind power to Inuvik.