Small businesses will get a carbon levy rebate, federal budget announces — but nothing yet for Indigenous groups who were promised the same

While Tuesday’s budget responds to that criticism with the creation of a new tax credit, Indigenous groups who were promised proceeds from the same pool of carbon price cash are still waiting. The budget repeats the government’s existing stand on the issue, stating that consultations continue with Indigenous governments “on how best to direct return” the proceeds of the fuel levy.

Since the federal carbon price was created in 2019, the Liberal government has said 90 per cent of the fuel levy’s proceeds would be returned to households that pay the price on carbon. That level increased to 93 per cent when the government increased the rebates for households in regions defined as “rural.”

Going forward, the new tax credit for small business that each have under 500 employees is supposed to account for five per cent of carbon price proceeds, while Indigenous governments are supposed to eventually receive the remaining two per cent, according to government officials.

A central plank in the Liberal government’s hugely expensive climate plan, the federal carbon price is a locus of political controversy. Opposition politicians have blamed it for juicing the recent spike in inflation, while the government insists its rebate scheme returns more money to most households while preserving an incentive across the economy to slash greenhouse gas emissions that are causing the climate crisis.

The federal government is also going to change the Financial Administration Act to allow itself to tell banks how to label government payments to Canadians — another step in Ottawa’s efforts to boost awareness about the carbon levy rebates. Ottawa has been pushing banks to use the word ‘rebate’ in Canadians’ quarterly refund — but a senior government official told the Star the federal government was ‘furious’ with a lack of co-operation and one bank flat out refusing.

Spearheading provincial opposition to the policy, the Saskatchewan government has vowed to stop collecting the carbon levy on home heating, after Ottawa paused the application of the fuel charge on emissions-heavy and expensive heating oil, but not natural gas.

Ottawa responded by threatening to stop sending out rebates to residents of Saskatchewan altogether, and the province has said it did not collect the fuel charge on home heating in January. But citing confidentiality laws, Ottawa has been tight-lipped about how it will respond, and how much — if any — money Saskatchewan has withheld.

In Tuesday’s budget, without mentioning Saskatchewan, the federal government proposed changing the carbon pricing law to allow federal officials to publicly share details regarding non-compliance. Essentially, this would allow the federal government to name and shame non-compliant provinces without breaking the law.

Outside of that, Tuesday’s budget was light on new measures to address climate change. One of the only new initiatives is the creation of a new tax credit aimed at Canada’s nascent — and heavily subsidized — electric vehicle battery industry.

The new credit would pay out 10 per cent of the cost of buildings used in “key segments” of the industry’s supply chain, for businesses investing in all three of the following areas: electric vehicle assembly, batter production and related “cathode active material” production. Like other credits the government announced in last year’s budget — Ottawa’s response to the huge green economy subsidies under President Joe Biden in the United States — this new policy is set to expire in 2034, in order to encourage investment in the near term.

The budget says the government expects its new electric vehicle supply chain tax credit to cost $1.1 billion by 2035.

When combined with the suite of previously announced green economy tax credits — including those for investments in clean electricity, clean tech manufacturing and carbon capture technology — the government now expects the total cost of these policies to hit $93 billion by 2035, up from the $80 billion estimated in last year’s budget.

Beyond this, the budget pledges to add $608 million over the next two years to its existing incentives for people to buy zero-emission vehicles.

It also signals it will introduce improvements designed to speed up the permitting process for major development projects, with new targets to cap timelines for approval at five years for projects in federal jurisdiction, and a three-year target for nuclear projects.