NWT MLAs said on Wednesday they could not support the Treasury Secretary’s proposed changes to the territory’s carbon tax system as it currently stands.
Bill 60, which would change the area’s Petroleum Products and Carbon Tax Act, is the NWT government’s response to upcoming federal increases in carbon pollution.
Finance Minister Caroline Wawzonek introduced it as a “made-in-the-North” approach that would give the area more freedom in designing the carbon tax refund system and more flexibility to adjust how the carbon tax is applied. The alternative would be to scrap the NWT legislation in favor of a federal version.
MLAs on the Standing Committee on Government Operations said it is not clear why the proposed legislation in the area is better than the federal one.
“In general, the committee sees no advantage in passing Bill 60 over the federal backstop alternative,” said committee chair Rylund Johnson, the MLA for Yellowknife North.
“The government has not provided the committee, or the public, with enough information to show that its approach is better.”
Johnson said the finance department had told the committee that her bill could improve the tax burden for small mines and mines close to closing, but for everyone else it would be the same as the federal system.
He said the department couldn’t provide a comparison to show how the two systems would affect the cost of living because the department said it doesn’t know how the federal government would return revenue to Northerners under the federal system.
“This missing information from the department made it difficult for the committee to assess which approach is better for the NWT and to identify ways to improve both approaches,” Johnson said.
Too much focus on large emitters
Lesa Semmler, one of the commission’s deputy chairs and the MLA for Inuvik Twin Lakes, said the commission found the territorial government’s approach to the bill problematic.
She said of the area that the department’s public consultation has focused on major emitters.
Caitlin Cleveland, another commission deputy chair and MLA for Kam Lake, said the government should spend more of the compensation revenue on community governments, Indigenous governments, businesses and non-governmental organizations (NGOs).
Cleveland said the NWT’s rebate approach allocates too much to large emitters and its own revenues.
Cleveland pointed to a projection from the finance department in November. She said the department expects to collect about $63 million in carbon tax revenue for fiscal year 2023-24, and will allocate $47 million of that as offset.
More than half of the offsets, about $24 million, are for large emitters. The remaining $16 million, about 25 percent of sales, goes to general revenue.
“The committee is disappointed that the government is not using more of these funds to reduce the impact of the tax on the cost of living,” she said.
Cleveland added that the government does not provide rebates to community governments, Indigenous governments, most businesses or NGOs.
“The government’s rationale that retail companies can easily pass on the carbon tax to customers, that companies are eligible for GNWT energy savings programs and that NGOs can adapt is not accepted by the committee,” she said.
The MLAs looked at the other territories, both of which have agreed to introduce the federal carbon tax system.
Cleveland pointed to Yukon’s approach, which applies the federal system as it designs its own community rebate program.
She said Yukon gives its municipal governments 3.5 percent of its carbon rebates.
That amount more than offsets the roughly 2.6 percent of the carbon tax paid by local governments.
If the NWT gave 3.5 percent of its rebates to community governments, they would receive $2.2 million, Cleveland said.
The Trail Breaker11:12Treasury Secretary Caroline Wawzonek’s plan to overhaul the federal carbon tax to prevent a significant change in the cost of living in Northwest Territories
She acknowledged that Wawzonek has proposed a new community compensation grant, but said the grant would only be about $1 million and likely would not fully offset the increased costs.
The commission recommends that the government compensate communities for their increased carbon tax payments.
It specifically recommends that the area provide $2.2 million in community funding in fiscal year 2023-24 and increase that figure relative to future increases in carbon tax rates.
The standing committee also recommends that the government put pressure on the federal government to recognize the conditions of the North in its approach to combating climate change.
That includes more funding to make renewable energy options accessible and affordable, Semmler said.
She said that since many northern communities rely on diesel for electricity and often natural gas or propane for heating, the North has few alternatives to fossil fuels.
That means many northerners will have to pay the higher costs, but the new legislation will have minimal effect on reducing emissions.
She recommended that Prime Minister Caroline Cochrane convey this in a letter to the Prime Minister and ask for an answer.
Johnson, the committee chair, said the committee’s recommendations will be discussed in committee as a whole, but was unsure when those discussions would take place.