Office of the Parliamentary Budget Officer
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A Distributional Analysis of the Federal Fuel Charge – Update

Nasreddine Ammar ; Marianne Laurin ; Philip Bagnoli ; Tim Scholz
Published on October 10, 2024 PDF(opens a new window)

This report provides an update of PBO’s distributional analysis of the federal fuel charge.

PDF

Communications

Quotes

  • The main finding from our updated analysis is, as we expected, consistent with our previous reports. When only the fiscal impact of the fuel charge is considered, the average household across most income quintiles will see a net gain. However, when both the fiscal and economic impacts of the fuel charge are considered, the average household across most income quintiles will face a net cost.

  • Considering only the fiscal impact of the federal fuel charge, in 2030-31, we estimate that the average household in each of the backstop provinces will see a net gain, receiving more from the Canada Carbon Rebate than the total amount they pay in the federal fuel charge and related GST.

  • In 2030-31, taking into consideration both fiscal and economic impacts, we estimate that the average household in the top three income quintiles will face a net cost when both fiscal and economic impacts of the federal fuel charge are considered.

Yves Giroux
Parliamentary Budget Officer

News Release

{"id":68,"created_at":"2024-10-10T07:07:27-04:00","updated_at":"2024-10-10T08:57:03-04:00","slug":"pbo-releases-updated-distributional-analysis-of-the-federal-fuel-charge-le-dpb-publie-une-mise-a-jour-de-lanalyse-distributive-de-la-redevance-federale-sur-les-combustibles","title_en":"PBO releases updated distributional analysis of the federal fuel charge","title_fr":"Le DPB publie une mise \u00e0 jour de l\u2019analyse distributive de la redevance f\u00e9d\u00e9rale sur les combustibles","body_en":"The Parliamentary Budget Officer (PBO) today released an updated distributional analysis of the federal fuel charge.\n\nThe updated analysis includes recent policy changes and greenhouse gas (GHG) emissions projections. To address the computable general equilibrium (CGE) modelling oversight in previous reports, the updated analysis provides estimates of household net costs that incorporate the economic impact of the fuel charge only.\n\n\u201cThe main finding from our updated analysis is, as we expected, consistent with our previous reports. When only the fiscal impact of the fuel charge is considered, the average household across most income quintiles will see a net gain. However, when both the fiscal and economic impacts of the fuel charge are considered, the average household across most income quintiles will face a net cost,\u201d said PBO Yves Giroux.\n\nGiven the provincial focus of the report, the updated analysis uses CGE estimates of the economic impact of the fuel charge provided by Environment and Climate Change Canada (ECCC). In addition, the PBO solicited and received feedback from outside experts at the U.S. Congressional Budget Office and the CPB Netherlands Bureau for Economic Policy Analysis regarding our methodology and assumptions.\n\nThe \u201cfiscal impact only\u201d estimates of household net cost include the federal fuel charge paid directly and indirectly, as well as the related Goods and Services Tax (GST) paid, less the Canada Carbon Rebate received. These estimates, however, do not incorporate the loss in employment and investment income from the fuel charge as a distinct cost to the household.\n\n\u201cConsidering only the fiscal impact of the federal fuel charge, in 2030-31, we estimate that the average household in each of the backstop provinces will see a net gain, receiving more from the Canada Carbon Rebate than the total amount they pay in the federal fuel charge and related GST,\u201d adds Mr. Giroux.\n\nTo provide a broader measure of the net cost to households in backstop provinces, the analysis also incorporates estimates of the loss in employment and investment income from the fuel charge\u2014the \u201ceconomic impact\u201d\u2014as an additional cost. Estimates of the economic impact from ECCC capture the loss in employment and investment income that would result from the fuel charge in a general equilibrium, or macroeconomic, setting.\n\n\u201cIn 2030-31, taking into consideration both fiscal and economic impacts, we estimate that the average household in the top three income quintiles will face a net cost when both fiscal and economic impacts of the federal fuel charge are considered,\u201d said Mr. Giroux.\n\nECCC also provided the PBO with estimates of the reduction in GHG emissions attributable to the fuel charge, corresponding to its estimated economic impacts. ECCC estimates that the fuel charge in backstop provinces will account for almost 13 million tonnes (Mt) of emissions reductions in 2030 compared with what would have been emitted without the fuel charge.\n\nIn keeping with the PBO\u2019s mandate and previous reports on this subject, the scope of the updated analysis continues to be limited to estimating the distributional impact of the federal fuel charge and does not attempt to account for the economic and environmental costs of climate change.","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui une mise \u00e0 jour de l\u2019analyse distributive de la redevance f\u00e9d\u00e9rale sur les combustibles.\n\nLa mise \u00e0 jour de l\u2019analyse tient compte des changements apport\u00e9s r\u00e9cemment aux politiques et des derni\u00e8res projections d\u2019\u00e9missions de gaz \u00e0 effet de serre (GES). Pour corriger les lacunes du mod\u00e8le d\u2019\u00e9quilibre g\u00e9n\u00e9ral calculable (EGC) utilis\u00e9 dans les rapports pr\u00e9c\u00e9dents, la mise \u00e0 jour de l\u2019analyse fournit des estimations des co\u00fbts nets pour les m\u00e9nages qui prennent uniquement en compte l\u2019incidence \u00e9conomique de la redevance sur les combustibles.\n\nSelon le DPB Yves Giroux, \u00ab la principale conclusion de la mise \u00e0 jour de l\u2019analyse est, comme nous l\u2019avions pr\u00e9vu, en accord avec nos rapports pr\u00e9c\u00e9dents. Si l\u2019on ne tient compte que de l\u2019incidence financi\u00e8re de la redevance sur les combustibles, le m\u00e9nage moyen de la plupart des quintiles de revenu enregistrera un gain net. En revanche, si l\u2019on tient compte \u00e0 la fois de l\u2019incidence financi\u00e8re et de l\u2019incidence \u00e9conomique de la redevance sur les combustibles, le m\u00e9nage moyen de la plupart des quintiles de revenu fera face \u00e0 un co\u00fbt net. \u00bb\n\nPuisque le rapport se concentre sur les provinces, la mise \u00e0 jour de l\u2019analyse utilise les estimations EGC de l\u2019incidence \u00e9conomique de la redevance sur les combustibles fournies par Environnement et Changement climatique Canada (ECCC). En outre, le DPB a sollicit\u00e9 et re\u00e7u les commentaires d\u2019experts externes du Congressional Budget Office des \u00c9tats Unis et du Bureau for Economic Policy Analysis des Pays-Bas concernant la m\u00e9thodologie et les hypoth\u00e8ses utilis\u00e9es.\n\nLes estimations de \u00ab l\u2019incidence financi\u00e8re seule \u00bb sur le co\u00fbt net pour les m\u00e9nages prennent en compte la redevance f\u00e9d\u00e9rale sur les combustibles pay\u00e9e directement et indirectement, ainsi que la taxe sur les produits et services (TPS) connexe pay\u00e9e, moins la remise canadienne sur le carbone re\u00e7ue. Elles n\u2019int\u00e8grent toutefois pas la perte de revenus d\u2019emploi et de placement attribuable \u00e0 la redevance sur les combustibles en tant que co\u00fbt distinct pour le m\u00e9nage.\n\n\u00ab Si l\u2019on consid\u00e8re uniquement l\u2019incidence financi\u00e8re de la redevance f\u00e9d\u00e9rale sur les combustibles, nous estimons qu\u2019en 2030 2031, le m\u00e9nage moyen dans chacune des provinces o\u00f9 le filet de s\u00e9curit\u00e9 f\u00e9d\u00e9ral s\u2019applique enregistrera un gain net, car il recevra une remise canadienne sur le carbone plus \u00e9lev\u00e9e que le montant total qu\u2019il paie en redevance f\u00e9d\u00e9rale sur les combustibles et en TPS connexe \u00bb, ajoute M. Giroux.\n\nAfin de fournir une mesure plus g\u00e9n\u00e9rale du co\u00fbt net pour les m\u00e9nages dans les provinces o\u00f9 le filet de s\u00e9curit\u00e9 f\u00e9d\u00e9ral s\u2019applique, l\u2019analyse inclut aussi des estimations relatives \u00e0 la perte de revenus d\u2019emploi et de placement attribuable \u00e0 la redevance sur les combustibles \u2013 l\u2019\u00ab incidence \u00e9conomique \u00bb \u2013 en tant que co\u00fbt additionnel. Les estimations de l\u2019incidence \u00e9conomique provenant d\u2019ECCC tiennent compte de la perte de revenus d\u2019emploi et de placement qui d\u00e9coulerait de la redevance sur les combustibles dans un contexte d\u2019\u00e9quilibre g\u00e9n\u00e9ral, ou macro\u00e9conomique.\n\n\u00ab En 2030 2031, si l\u2019on tient compte \u00e0 la fois de l\u2019incidence financi\u00e8re et de l\u2019incidence \u00e9conomique de la redevance sur les combustibles, nous estimons que, le m\u00e9nage moyen des trois quintiles de revenu sup\u00e9rieur enregistrera un co\u00fbt net \u00bb, soutient M. Giroux.\n\nECCC a \u00e9galement fourni au DPB des estimations sur la r\u00e9duction des \u00e9missions de GES attribuable \u00e0 la redevance sur les combustibles, qui correspondent aux estimations de ce dernier relatives \u00e0 l\u2019incidence \u00e9conomique de la redevance. ECCC estime que la redevance sur les combustibles dans les provinces o\u00f9 le filet de s\u00e9curit\u00e9 f\u00e9d\u00e9ral s\u2019applique entra\u00eenera une r\u00e9duction de pr\u00e8s de 13 millions de tonnes (Mt) d\u2019\u00e9missions en 2030 par rapport aux \u00e9missions qui auraient \u00e9t\u00e9 produites sans la redevance.\n\nConform\u00e9ment au mandat du DPB et aux rapports pr\u00e9c\u00e9dents sur le sujet, la port\u00e9e de la mise \u00e0 jour de l\u2019analyse du DPB continue de se limiter \u00e0 l\u2019estimation des r\u00e9percussions distributives de la redevance f\u00e9d\u00e9rale sur les combustibles et ne vise pas \u00e0 calculer les co\u00fbts \u00e9conomiques et environnementaux des changements climatiques.","release_date":"2024-10-10T09:00:00-04:00","is_published":"2024-10-10T08:57:03-04:00","internal_id":"COM-2425-068","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/pbo-releases-updated-distributional-analysis-of-the-federal-fuel-charge-le-dpb-publie-une-mise-a-jour-de-lanalyse-distributive-de-la-redevance-federale-sur-les-combustibles"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/pbo-releases-updated-distributional-analysis-of-the-federal-fuel-charge-le-dpb-publie-une-mise-a-jour-de-lanalyse-distributive-de-la-redevance-federale-sur-les-combustibles"}},"pivot":{"publication_id":823,"news_release_id":68}}