Madam Speaker, pricing pollution is the most efficient way to reduce greenhouse gas emissions and reach our objective to protect the environment and create a clean growth economy. For this reason, it is a foundational pillar of Canada's action on climate change.
The Government of Canada has demonstrated national leadership and has worked in partnership with provinces and territories to establish a pan-Canadian approach to pricing pollution. It is a core element of the pan-Canadian framework on clean growth and climate change released by Canada's first ministers on December 9, 2016. Under this framework, pricing pollution will apply to a broad set of emission sources throughout Canada, with increasing stringency over time in order to reduce GHG emissions at lowest cost to business and consumers, and to support innovation and clean growth.
As affirmed in the pan-Canadian framework, provinces and territories have flexibility to design their own pollution pricing policies adapted to their specific circumstances. Provinces and territories can put a direct price on carbon pollution, either through a direct price on pollution, like in British Columbia, or in implementing a hybrid system along the lines used in the Alberta model, or they can adopt a cap-and-trade system.
A federal pollution pricing backstop will apply in provinces and territories that do not have a pollution pricing system in place that meets that benchmark in 2018. Pollution pricing revenues will remain in the jurisdiction of origin, and each jurisdiction can use those revenues according to its needs. This gives provinces and territories the flexibility to decide how to reinvest pollution pricing revenue in their economies to support their workers and their families, and to minimize the impact on vulnerable groups.
Pollution pricing systems create an incentive for households and businesses to reduce their consumption of carbon intensive goods and fuels and to choose lower carbon alternatives. For example, households could choose to reduce fuel consumption by either using public transit more often or by replacing their vehicle with a more fuel efficient vehicle.
The cost of pollution pricing to households will vary by province and territory, depending in part on differences in energy and fuel consumption, and the electricity generation mix across provinces and territories. The cost to households will also depend on the design of pollution pricing policies introduced by each jurisdiction as well as the decisions they make as to how to use the revenues from pollution pricing.
An illustrative modelling scenario conducted by Environment and Climate Change Canada estimates that the average increase in the cost of energy to households across Canada would be $290 per year when the backstop pollution price reaches $50 per tonne in 2022. This captures the increase in the fuel price, approximately 12¢ per litre, and a modest reduction in the amount of energy used by the average family. Further analyses on the economic impacts of pollution pricing, including analyses of impacts on households and businesses, will become available as each province and territory clarifies the precise design of its pollution pricing system, including how it will utilize its revenues and as experience is gained.
It is important to recognize that the goods and services purchased by low-income people are usually not more carbon intensive than those purchased by higher-income earners. Accordingly, a direct price on pollution does not exhibit a greater burden on low-income families. However, because low-income earners spend a greater share of their income, they may be disproportionately impacted by any price on consumption unless specific measures are taken to compensate them.
There are a number of ways to protect low-income Canadians and vulnerable communities from price increases associated with pollution pricing. Revenue generated from pricing pollution can be used in a variety of ways. Under the pan-Canadian approach to pricing pollution, all revenues raised, as we have stated, will remain in the province or territory of origin.
This gives provinces and territories maximum flexibility to decide how to reinvest the revenue from pollution pricing in their own economies and work to support their workers and their families, and to minimize the impact on other vulnerable groups. Provinces and territories can choose to use pollution pricing revenues to compensate low-income and middle-income families for higher energy costs, for example, while still maintaining an incentive to reduce energy use and thereby helping to reduce emissions.
For example, British Columbia provides a tax credit for low-income families and has made its direct price on carbon revenue-neutral by reducing income taxes for British Columbians and for businesses operating in the province.
Alberta's pollution pricing system includes rebates for low- and middle-income households to offset the cost of the carbon levy charged on fuels used for transportation and heating. The Government of Alberta has estimated that six out of 10 households will receive a rebate to compensate them for the cost of the carbon levy. For example, the full rebate amount for a household with two adults and two children will be $540 annually in 2018, when Alberta's carbon levy reaches $30 per tonne of carbon dioxide. This will exceed Alberta's estimate of the total annual cost of the levy for a household with two adults and two children, which is $508 for 2018. Alberta has stated that it will provide the full rebate amount for couples and families earning less than $95,000 per year and for singles earning less than $47,500 per year.
The approach chosen by the Province of Ontario is to include, in its climate action plan, investments that low-income individuals and households stand to benefit from. Ontario plans to spend $380 million to $500 million on social housing retrofits, starting in 2017-18, to improve comfort for residents and to save money for social housing providers to use to make other improvements.
Ontario also plans to consider options for legislative and regulatory changes that would lessen the impact of pollution pricing on all tenants who rent their housing to make sure that pollution pricing is not passed on to tenants who are unable to make changes to reduce energy use.
In addition, Ontario plans to invest $45 million to $75 million in post-secondary training and innovation to ensure that the province has the capacity to build, maintain, and repair low-carbon buildings. This will include training for first nation and Métis peoples. Low-carbon jobs and training partnerships will be established among post-secondary institutions and indigenous communities.
The Government of Canada is committed to working with all provincial, territorial, and indigenous partners in ensuring that vulnerable groups, including indigenous peoples and low-income Canadians, are protected from any significant price increases resulting from pollution pricing.
Our climate is already changing, and Canadians are already feeling the effects. In the past, in some dream world, pollution was treated as an externality that people did not have to pay for and that the market did not have to worry about it. In fact, economists are telling us that it is time to internalize that so-called externality, make the price of pollution part of the market price of goods and services, and then let markets and governments take care of it. This is the approach taken by Patrick Brown, for example, who is the leader of the Conservative Party in Ontario.
The changes have already begun. Extreme weather, in the form of droughts and floods, is increasing in frequency. North of 60°, the average annual temperature has tripled, compared to the global average, since the middle of the last century. Snow, sea ice, glaciers, and permafrost are all in rapid decline.
We must address climate change now for the well-being of our people, our communities, and our economy and most of all, as a parent, for our children and grandchildren. We can no longer afford to not take action.
