Carbon Pricing Costs for Households and the Progressivity of Revenue Recycling Options in Canada

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dc.contributor.authorJennifer Winter
dc.contributor.authorBrett Dolter
dc.contributor.authorG. Kent Fellows
dc.date.accessioned2024-04-05T19:38:18Z
dc.date.available2024-04-05T19:38:18Z
dc.date.issued2023-03-01
dc.description.abstractCanadian federal policy mandates a floor price on greenhouse gas emissions in all provinces and territories or an equivalent quantity instrument. Provinces that implement a system consistent with the federal benchmark maintain control of revenues. Provinces that do not implement a carbon price are subject to a federally administered pricing system, with revenue recycling via lump-sum household rebates. Using rich synthetic household microdata, we quantify the direct and indirect tax burden on households and carbon pricing revenues in each province. We also calculate carbon pricing revenue available to each province. Using these data, we measure the net cost to households and the overall progressivity of carbon pricing under four revenue recycling scenarios: (a) a means-tested sales tax credit increase, (b) a lump-sum dividend, (c) a sales tax rate reduction, and (d) a personal income tax basic exemption increase. We find that the carbon tax is generally progressive even without revenue recycling, the sales tax credit and lump-sum rebate are progressive, the sales tax rate reduction is mostly regressive, and the income tax change is regressive. We also show that Canada’s outputbased pricing system for large emitters helps to mitigate indirect carbon pricing costs with a notable effect in reducing household costs.
dc.description.sponsorshipWe gratefully acknowledge that this project has been supported in part through the Smart Prosperity Institute Research Network and its Greening Growth Partnership, which is supported by a Social Sciences and Humanities Research Council of Canada Partnership Grant (No. 895- 2017-1018), as well as the Economics and Environmental Policy Research Network. We acknowledge financial support for open access funding from the University of Regina President’s Publication Fund and the University of Regina Faculty of Arts Publication Fund.
dc.identifier.doi10.3138/cpp.2022-036
dc.identifier.issn0317-0861
dc.identifier.issn1911-9917
dc.identifier.urihttps://hdl.handle.net/10294/16253
dc.language.isoen
dc.publisherUniversity of Toronto Press Inc. (UTPress)
dc.relation.ispartofCanadian Public Policy
dc.titleCarbon Pricing Costs for Households and the Progressivity of Revenue Recycling Options in Canada
dc.typejournal-article
oaire.citation.issue1
oaire.citation.volume49
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