Good afternoon.
My name is Pierre Mercille. I am the Director General, Legislation, Sales Tax Division, Finance Canada.
As we said previously, Part 5 of the bill implements the Greenhouse Gas Pollution Pricing Act. Part 1 contains provisions that implement the carbon pricing system, which is a fuel charge.
Under Part 1 of the act, the fuel charge applies to 22 kinds of fuel. Some are more common than others, like gas, light fuel-oil, often called ''diesel'', and natural gas. It also applies to less common fuels like methanol, and coke oven gas.
Schedule 2 of the bill contains the fuel charge rates. To comply with legal drafting rules, the appendices are not in Part 5, but at the end of the bill, on pages 546 and following.
The fuel charge rates in schedule 2 represent $10 to $50 levies per ton of carbon dioxide equivalent, but they are expressed in normal commercial units so as to facilitate compliance and administration of the charge. All of the rates can be found in schedule 2, but I'll give two examples.
The first example is gas. $10 a tonne means 2.21 cents per litre; $50 a tonne, in 2022, represents a charge of 11.05 cents a litre. The other example is natural gas. $10 a tonne means 1.96 cent per cubic metre; $50 a ton, in 2022, represents 9.79 cents per cubic metre of natural gas. I am referring here to marketable natural gas, which is used to heat homes.
The English title of this act is the greenhouse gas pollution pricing act. From now on, because it's very long, I will refer to it by its acronym, the GGPPA, in my remarks in English.
Part 1 of the GGPPA provides that a charge apply to fuels that are produced, delivered, or used in a listed province, brought to a listed province from another place in Canada, or imported into Canada at a place in a listed province. A listed province is a province, territory, or area that is listed in part 1 of schedule 1 to the GGPPA. Currently that schedule is empty.
Provinces will be listed in part 1 of schedule 1 if they request that the federal carbon pricing regime apply in their jurisdictions or if they do not have a carbon pricing system in place in 2018 aligned with the national benchmark to pricing carbon pollution.
Under part 1 of the GGPPA, the Governor in Council is provided with the authority to add a province, territory, or area to part 1 of schedule 1, which would result in the application of the fuel charge in that province, territory, or area.
Generally, in the most difficult case the fuel charge is paid by fuel distributors that are registered for the purpose of part 1 of the GGPPA—that is, registered with the Canada Revenue Agency. Registered distributors are, most commonly, fuel producers or persons who distribute fuels at the wholesale level. Typically these distributors will be large corporations. Registered distributors are responsible for paying the charge in respect of the fuel that they delivered to another person, and also in respect of the fuel that they may use themselves.
Part 1 provides for specific circumstances in which no charge is applicable to certain fuels that are delivered to certain persons if an exemption certificate is provided. In this case, when a registered distributor delivers fuel to certain types of persons, the registered distributor does not have to pay the fuel charge in respect of that delivery of fuel; therefore, the fuel charge is not embedded in the selling price of the distributor.
The types of persons who can use exemption certificates are, for example, other registered distributors of the same fuel, farmers in respect of certain fuels in certain circumstances, or persons subject to the output-based pricing system in part 2 of the GGPPA, where the fuel is for use at a covered facility. My colleagues will be describing part 2 of the GGPPA after my presentation.
What's an exemption certificate? An exemption certificate is a certification that the purchaser provides to the vendor—for example the registered distributor—that relieves the distributor of the obligation to pay the charge in respect of that fuel. For example, the operators of a covered facility under the output-based pricing system would be required to certify, first, that they are registered with the Canada Revenue Agency as an emitter under the output-based pricing system, and that the fuel is for use at a covered facility under the output-based pricing system. This means that the emissions from the burning of that fuel will be priced under part 2 of the legislation and not under part 1 of the legislation.
Part 1 also provides specific rules for determining the fuel charge applicable to certain interjurisdictional air, marine, rail, and road carriers. Some of these carriers will be entitled to receive fuel from a registered distributor, with no charge applying up front, when they present a valid exemption certificate. In this case they will be, instead, required to self-assess and pay the charge directly based on their fuel use. For example, air and marine carriers are generally required to pay the charge only on fuel used in intrajurisdictional journeys, which means a journey that begins and ends in the same listed province.
Part 1 also provides for limited and very specific circumstances in which a person may be eligible for a rebate of the fuel charge paid by the person. To give you an example, if a person is not a registered distributor and imports the fuel in Canada at a place in a listed province, they will be required to pay the charge in respect of that fuel. However, if the person subsequently removes the fuel from that listed province, they may be entitled to a rebate if they become registered with the Canada Revenue Agency.