Ottawa is years behind in rebating businesses for carbon tax: report

Michael Bernstein, executive director of the non-profit group Clean Prosperity, claims businesses contribute an estimated 25% to 35% of the total revenue generated by the carbon tax.

Ottawa is years behind in rebating businesses for carbon tax: report
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Ottawa is years behind in rebating small and medium-sized businesses for the cost of the federal carbon tax. Hundreds of millions are owed, and recipients have only received a tenth of what the feds promised them, claims the Canadian Federation of Independent Business (CFIB).

When Ottawa introduced the federal carbon tax in 2018, it pledged a "revenue neutral" tax with nearly 89% of the proceeds — $11.4 billion — returned to households through rebates.

The federal government allocated 7% of revenues to small and medium-sized businesses to fund projects that curb their greenhouse-gas emissions and the costs associated with the carbon tax.

In 2019, Environment Canada promised an initial $155 million rebates for small businesses, reported Blacklock's Reporter. The figure fell to $150 million, and its scope was limited to subsidizing the purchase of electric vehicles, high-efficiency appliances and building refits.

Between April 2019 and March 2022, Ottawa collected more than $12.8 billion from the carbon levy, according to annual reports on carbon tax revenues. As of April 2022, businesses had only received $89 million — only 7% of the expected revenues.

Environment Canada pledged $218 million in compensation through the Climate Action Incentive Fund in 2019 and 2020, but they only sent $95 million before they shut down the program. The department is "looking at other options to deliver these funds."

"In our view, due to the issues encountered in delivering the funding, the department had not addressed the burden from carbon pricing faced by small and medium‑sized enterprises," reads a report by the environment commissioner.

An Environment Canada spokesperson said they are hiring organizations in Alberta, Manitoba, Ontario and Saskatchewan to organize the payments and would commence reimbursement soon after this Fall — compensation details are expected in July.

"Despite the promises made, close to zero has been returned to small business," added Jasmin Guenette, the vice president of national affairs for the CFIB.

Guenette suggested smaller businesses contributed nearly half the carbon tax revenues but could not explain the methodology used to reach that figure.

Michael Bernstein, executive director of the non-profit group Clean Prosperity, claimed businesses contribute an estimated 25% to 35% of the total revenue generated by the carbon tax.

The Canadian Press included the federation's claim in questions about the carbon tax and the small business rebate programs posed to Environment Minister Steven Guilbeault's office Tuesday. The written response did not specifically address the 50% figure.

Instead, they claimed the financial hit to small and medium-sized businesses is offset through "targeted programs."

"The fight against climate change is in all our interests, and we continue to work to ensure the revenues help farmers, small business owners and others find the energy savings to make them both profitable and environmentally responsible," reads the statement.

However, the feds cancelled the first of those programs established by year three because of difficulty getting money out the door. The promised programs for the other 10% of revenues also face a complete overhaul, including a refundable tax credit for farmers pledged in 2021.

Budget 2022 also promised a new retrofit program for businesses, with $2.5 billion allocated for companies in Alberta, Saskatchewan, Manitoba and Ontario by 2025. Ottawa said they would provide additional funds to the pool after the four Atlantic provinces join the federal carbon tax program on July 1.

Last November 22, Cabinet also promised a Fuel Charge Proceeds Return Program to pay small business rebates by 2025. Payouts would be "direct payments to eligible small and medium-sized enterprises, specifically those in emissions-intensive and trade-exposed sectors."

Guenette had reservations that the retrofit program would only succeed with a simplified application process as businesses lack the capital to qualify. As of writing, the federal government continues consultations on eligibility requirements.

"Increases in the carbon tax coupled with minimal compensation are making the cost of doing business substantially higher, negatively impacting thousands of businesses," reads Fueling Unfairness: Carbon Pricing And Small Business, a CFIB report.

"Three in five small businesses have seen their overall energy costs increase substantially, over ten percent, in the last year while the majority have used the same amount of energy as in previous years," it reads.

"The government must take immediate action to provide relief to small businesses by freezing the carbon pricing backstop and making the promised federal carbon tax proceeds readily available."  

Scott Ross, the co-chair of the Agriculture Carbon Alliance, said the carbon tax particularly impacts the agricultural sector as it remains a growing concern. 

"One of the realities that the farming industry faces…is they're operating in global commodity markets, and they're price takers," he said. "So they can't pass on additional costs, like carbon surcharges, into the market."

The Alliance, consisting of 15 groups including the Canadian Federation of Agriculture and the Canadian Cattle Association, supported Bill C-234, a private member's bill that expands the types of machines and fuel exempt from the carbon price.

Conservative MP Ben Lobb tabled the bill, which passed in the House of Commons last week with the support of all Conservative, NDP and Bloc Québécois MPs. Three Liberals voted in favour, and 145 voted against.

While the CFIB said most businesses dislike the carbon tax, most support offsetting their emissions and costs through retrofit grants. 

"Our research shows business owners care about the environment and take proactive steps to reduce their environmental footprint. But to date, they have received little or nothing in carbon tax revenues from the federal government," said Taylor Brown, senior CFIB policy analyst. 

The federation's data shows over half (52%) of small firms oppose carbon pricing. If the carbon tax increases to $170 per tonne in 2030, over half (56%) of small businesses said they would have to increase their prices to offset costs.

Over four in ten (45%) said it would increase pressure on them to freeze or cut salaries and wages, while 40% said they would have to reduce investment in their business.

"Businesses want their money back," said Brown.

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