Environment Committee on Nov. 6th, 2018

[Miodrag Jovanovic]

The incentive amount will not be dependent on the income of the individual or family. It's going to be dependent on the number of individuals and the composition of the family. It's going to be a fixed amount for the first adult, then a lower amount—typically half of it—to the spouse, and then a smaller amount again for each child, regardless of the income.

The effect of that approach, however, is that it is still progressive in nature. If you give the same amount to low-income families, who would typically spend less and pay lower fuel charges than a higher-income family would, they will end up receiving more than what the fuel charge will cost them. This is not the case for the higher-income family. In that sense, it's progressive in nature. The overall amount is distributed, but when you look at different classes of individuals, distribution can be different.

[Wayne Stetski]

“Progressive” is a very optimistic word in that context.

When you get a rebate, will there be any encouragement to spend that rebate on something environmentally friendly or green? Are there any extra incentives at all?

[Miodrag Jovanovic]

The encouragement comes from what we call the price signal. If you look at the approach that is taken here—first the fuel charge, and also the OBPS regime—it will change the relative price of goods and services. These approaches will make goods and services with greater carbon content more expensive relative to other goods and services. That in itself will send a price signal, whereby individuals and different agents in the economy will change their behaviour and reassess their consumption choices given that prices have changed. That's the first component.

The second component is the fact that this charge is not there to raise revenue. It's not there to make people poorer. That is why the second component is important and intrinsically part of the whole approach, which is to return the proceeds from the fuel charge and the OBPS regime in particular to individuals and families, so that financially speaking they're not worse off. They will have the financial ability to now change their behaviour and decide where they want to consume and what kinds of new habits they want to develop based on these new prices.

That's how it would operate. Implicitly the incentives are coming from changing the relative prices of goods and services and making sure people are not worse off financially.

[The Chair]

With that, you're out of time.

Mr. Fisher, you're up next.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Thank you very much, Mr. Chair.

Thank you very much, folks, for being here. I appreciate it.

As we said at the start, it's not only a little confusing; it's extremely complex. I'll ask this first question of you folks, and the five of you can decide who you think is most appropriate to answer it.

We know that pollution isn't free. We're all paying already. We're already paying millions and millions of dollars due to severe weather damage and mitigation measures. Canadians know this.

Municipalities have a strong role in the fight against climate change, and I think many are doing quite incredible things, such as coming up with rise in sea level policies. As a former municipal councillor, it's important to me that municipalities and jurisdictions without a provincial or territorial pricing plan don't face undue burden from the federal backstop.

For jurisdictions where the backstop applies, besides the low carbon economy fund, what is in place to help take care of municipalities?

[Miodrag Jovanovic]

As part of the approach, as I said earlier, the bulk of the proceeds from the regime will be given back to individuals and families. There would still be a portion. It going to vary province by province, but it may be roughly about 10% that will be allocated to funds to address or to support actions taken by different entities that would allow them to gradually change the way they operate to be more efficient from a carbon emissions standpoint.

There will be a fund set up for the MUSH sector as well as for non-profits and indigenous groups, money put aside. Again, the amount of it will vary according to the province. As well, there will be a fund created and set aside for small and medium-sized businesses. Details will be provided later, early in the year.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Do you know if it's application-based?

[Miodrag Jovanovic]

As I said, all those details—eligibility criteria and other aspects—will be released at a later time.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Chair, can you let me know when we're down to three and a half minutes? I had agreed to share my time.

[The Chair]

You're at three and a half minutes.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

All right. I'll share the remainder of my time with Mr. Bossio in the first round. Thank you.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you so much, Darren, I appreciate that.

I do have a number of questions to follow up on from Mr. Warawa.

Mr. Jovanovic, is this carbon climate action incentive going to cost the government anything?

[Miodrag Jovanovic]

This is essentially a mechanism to redistribute the proceeds from the carbon pricing regime, so it will not cost more. There will be an annual assessment to reconcile the climate action incentive payment as well as the SME and the MUSH funds so they correspond with the proceeds from the regime.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

That's the revenues that are collected, so it's revenue-neutral.

So 90% of those revenues will go to citizens who are under the federal backstop provision within those provinces, the four provinces you already mentioned.

[Miodrag Jovanovic]

Roughly, yes.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

And 10% will go, as you said, to the MUSH sector and to the small business sector.

The average cost, as you've already pointed out, is $244 a year. The GST on top of that would make it $256 a year. The rebate, on average, is $307 a year. Is that correct?

[Miodrag Jovanovic]

Yes, that's correct. I would just characterize a bit more the GST on that. I don't think it's possible to directly assess the amount of GST on that properly, because part of that charge is indirectly on costs of groceries and all that, so it's not all subject to GST.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

I want to go back to Mr. Amos's questioning around the 10% for rural areas. I have a very rural riding. Was it done, essentially, in an ad hoc manner? Was it determined that we guesstimated it's going to be 10%? If it was done in more of an ad hoc manner, is there going to be a process in place to more closely monitor the true cost to rural residents and reflect that in future climate action incentive funds and rebates?

[Miodrag Jovanovic]

I can't really speculate on what will be done in the future. What I can just repeat is that this 10% is just an amount that has been determined by the government as being sufficient and appropriate to recognize the unique circumstances. There was no science behind that.

I don't think I have much more to say on that.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

So, essentially, it's ad hoc now, but there has been no determination made at this point as to how we'll move forward in the future on that incentive rebate.

Just to kind of dwell on the rebate itself and reframe things from how they were described earlier, I will say that the rebate is essentially to incentivize people to reduce what we don't want: pollution. The less pollution they create, the more they will actually profit from the incentive.

[Miodrag Jovanovic]

The rebate is part of the incentive. The first aspect of it, which will change an individual's habits, is changing the prices through the fuel charge.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

That's right.

[Miodrag Jovanovic]

The rebate is there to ensure that individuals are not worse off, that faced with these new prices, they still have the financial ability to actually change their behaviour.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Exactly.

[Miodrag Jovanovic]

So, they both go together.