In 2018, the federal government introduced a carbon tax applicable to those provinces that had not yet adopted a carbon pricing system. The purpose of this tax is to get consumers and producers to internalize the price of emissions, thereby pushing them to make more environmentally responsible choices. The federal government redistributes the amounts collected to participating provinces in the form of tax-free payments. The amount received is topped up by 10% for residents of rural regions.
The problem with this approach is that not everyone has access to the same consumption alternatives. For example, in some regions, public transit systems are not very accessible. In Quebec, ten public transit organizations account for 99% of public transit trips, and these serve only the more urban parts of the province. Residents of regions that are not as well served have no choice but to pay the tax on their trips, and end up subsidizing reimbursements paid out to their city-dwelling counterparts, who have access to transportation options that emit less GHGs.
One solution to this unfairness would be to modulate the reimbursement based on regions’ different situations: Residents of rural regions would enjoy a top-up of more than 10%, while urban residents would get a correspondingly lower reimbursement. The economic incentives of the tax would be maintained, but communities unable to fully take part in this environmental initiative would no longer be unfairly penalized.