Economist baffled by Yukon's carbon tax plans

An economist with the University of Calgary says Yukon has a lot of freedom of choice when it comes to implementing a carbon tax next year — despite what the territorial government believes. 

Trevor Tombe specializes in studying factors that influence productivity of industries or countries, and last year he sat on the Yukon government's financial advisory panel. 

Tombe is bullish on the carbon tax in general, but readily acknowledges that northern Canadians face additional challenges when it comes to reducing their carbon footprint.

He agrees there's a paucity of details when it comes to how targeted rebates — such as those for municipalities and First Nations governments — will work. 

But Tombe says Ottawa "is clearly willing to consider the territories differently than the provinces," when it comes to carbon pricing.

He points to the N.W.T., which has gained a complete exemption on home heating fuel, saying that it's something Yukon could do, given that its neighbour has already been granted that concession. 

Tombe disagrees with Yukon finance officials and Premier Sandy Silver, who say their hands are tied until Ottawa reveals more details.

He says Yukon, like Nunavut and P.E.I., is following the federal backstop on carbon tax voluntarily, so the territory has full discretion over how to use revenues. 

"The ball is in the Yukon government's court. They can tailor their rebates to their own unique circumstances," Tombe said.

"It's not like they need to wait for anyone. They need to decide how they want to implement their own rebate plan, or incentives, or whatever."

One option, he says, is for Yukon to lower the territorial gas tax, like Newfoundland and Labrador. That would mean the price of gas wouldn't change much once the carbon tax is in effect.

Tombe says that could be a very real solution for rural Yukoners who don't have access to public transit.

"You can imagine implementing that everywhere except Whitehorse, for example. That's a political question, but it's something that could be done."

'I'm genuinely surprised'

Yukon has been clear already about one thing — Premier Sandy Silver has promised that the territorial government won't be collecting any rebates itself. Any carbon tax money paid by the territorial government will be rebated to Yukoners, and not go back into government coffers.

"Our territorial government will be paying at the pump, but not receiving that money back," Silver has said.

Maybe just the economist in me — [it's] typically not how I think about tax revenue.- Trevor Tombe, University of Calgary economist

That fiscal decision mystifies Tombe.

"I'm genuinely surprised ... I would have thought that the amount [being] returned to Yukoners would be the net revenue raised from the carbon tax."

"I'm genuinely surprised if they would build into their revenue plan the portion of the carbon tax paid for by the government itself. That's maybe just the economist in me — [it's] typically not how I think about tax revenue."

Yukon finance officials could not say what the estimated cost of the carbon tax will be on government operations, for things such as heating schools, hospitals and other government buildings, or operating its huge fleet of vehicles, which includes trucks, graders, and ferries.

Tombe says government represents roughly 50 per cent of Yukon's economy, and paying out to the public that portion of carbon tax paid by the government, "wouldn't be a trivial amount. It would have material implications for the Yukon government."

Silver is so far holding firm on his decision. 

"We made the commitment to Yukoners from the beginning that we will be rebating 100 per cent of that money back to Yukoners and Yukon businesses," Silver recently said. 

"We're going to look for efficiencies in government. And we're going to maintain the commitment that we made to Yukoners at the doorstep." 

Waiting on specifics, premier says

As for when Yukoners will have more details on the carbon tax — which comes into effect in July in Yukon — and how rebates will work, Silver said the territory is "still waiting for some specifics."

"I understand that Yukoners are waiting for these responses, and it seems like it's been a long time."

Silver met with federal Environment Minister Catherine McKenna in Ottawa last week and said after the meeting there were "no announceables yet."

"We're looking for flexibility when it comes to home heating," he said. 

A briefing held last spring revealed some hard figures: by 2022, the average Yukon household will be paying about $760 annually in carbon tax, according to officials from Climate Change Canada.

So far, the aviation industry in Yukon has an exemption on the fossil fuel it uses to fly its aircraft, and placer miners operating their heavy equipment will get a "dollar for dollar" rebate on the fuel they use to work their claims (although it's still not known precisely how that will happen).

The territory's transportation sector — significant, given that the bulk of the territory's goods and materials are trucked up the highway — will feel the biggest impact. A federal study on carbon pricing estimates that by 2022, the tax will cost Yukon's trucking industry $12.3 million.

Tombe says diesel generation in remote communities is also exempt, although the Yukon Energy Corporation says it still does not know if its fossil fuel use will be exempt, or, if it is taxed, what that will look like. 

While officials with the Yukon's finance department confess there's still a lot they don't know, they do say that Yukon will have four categories of carbon taxation: individuals, businesses, First Nations governments and municipalities.

As for when the territory's finance officials will get some details, Silver — also the finance minister — says they will know as soon as he does.

"I'm their minister, and their questions are the same as my questions."

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