Fiscal and Distributional Analysis of the Federal Carbon Pricing System (Revised May 23, 2019)

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Fiscal and Distributional Analysis of the Federal Carbon Pricing System.pdf

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This additional data provides the household projected energy use in the residential and the transport sectors by energy sources (e.g., electricity, fuel, natural gas) and by province. Also, it includes the direct and the indirect cost estimates to the Canadian households.
Summary Data.xlsx

PBO estimates that the federal government will generate $2.63 billion in carbon pricing revenues in 2019-20. The vast majority of revenues ($2.43 billion) will be generated through the fuel charge; the balance, roughly $197 million, will be generated by output-based pricing. In addition, PBO estimates that by 2023-24, carbon pricing revenues will increase to $6.20 billion, with fuel charge proceed accounting for $5.77 billion and OBPS accounting for the rest.

Households will largely bear the cost of the pricing system through their consumption of energy used for residential and transport purposes, and carbon charges embodied in non-energy products. Regions currently using carbon-intensive energy will have higher costs per household. PBO estimates that Saskatchewan households will incur the highest average annual cost, starting at $425 in 2019-20 and reaching $910 in 2023-24. By comparison, these amounts are roughly twice the average household cost in New Brunswick, where it will be $191 in 2019-20 and $430 by 2023-24.

The federal government has stated that the carbon pricing system will be revenue neutral; any revenues generated under the system will be returned to the province or territory in which they are generated.  Households will receive 90 per cent of the revenues raised from carbon levy. Based on this assumption, a typical household will receive higher transfers than average amounts it pays in fuel charges. The net benefits are broadly progressive by income group. That is, lower income households will receive larger net transfers than higher income households.

Revised on May 23, 2019
The estimates have been revised and very small adjustments have been included. There is no change in the main results relating to the fiscal and distributional impact of the carbon pricing on households and the fuel charge proceeds.