On June 19, 2008, the official federal opposition Liberal
Party formally added a broad-based national carbon tax to its
policy platform. The announcement, which had been anticipated
for several weeks, was accompanied by the release of a detailed
policy document titled The Green Shift. In it the
Liberals promise that if elected they would introduce a carbon
tax that is expected to generate up to $15.4 billion in
its fourth year. Proposed as a revenue-neutral tax, the Liberal
plan promises to return all of the revenue generated by the tax
to Canadians and Canadian business.
The tax rate would escalate through its first four years,
from $10 per tonne of greenhouse gases (GHGs) emitted to $40
per tonne. According to The Green Shift, these rates
would translate to the following additional taxes on
Light Fuel Oil
Heavy Fuel Oil
Coal Canadian Bituminous
Notably, the proposal would not tax gasoline, ostensibly on
the basis that it is already subject to another (excise) tax
roughly equal to $42 per tonne of GHGs emitted upon combustion.
Similarly, because diesel and jet fuel are currently taxed at a
rate of $0.04 per litre, these fuels would not be additionally
taxed in the first year of the proposal.
The tax revenue would be shifted back to taxpayers through a
variety of personal and corporate tax reductions, including
reductions to personal income tax, the federal corporate tax
and the small business corporate tax rates. The proposal would
also use approximately $600 million in annual revenues to
accelerate the capital cost allowance rates for green
technology assets. Other methods to offset the impact of the
tax would include certain refundable tax credits for persons
with low incomes or who live in rural or northern areas.
The carbon tax would not replace the Liberal Party's
proposed cap-and-trade regime for large industrial
emitters1. Rather, The Green Shift
envisions a combination of the two proposals, with the carbon
tax being implemented first to establish a prompt price signal,
followed by a hard (not intensity-based) cap-and-trade regime,
which would take longer to implement.
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