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The federal carbon tax is set to rise April 1. How will that affect gas prices?

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Gas prices in some provinces are set to rise Friday as the federal carbon tax increases.

The federal carbon tax will increase 25 per cent on April 1, up to a total of $50 per tonne of emissions. At the pump, the feds estimate that works out to an extra 2.2 cents per litre of gas, hitting a total of 11 cents per litre.

The increased cost will hit motorists in Ontario, Alberta, Saskatchewan and Manitoba — provinces without their own carbon pricing schemes in place.

The impending hikes are coming after lower oil prices offered relief for some Canadians at the pump mid-week.

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Prices dropped nearly nine cents a litre on Wednesday in the Greater Toronto Area and are set to fall by another penny on Thursday, per fuel price prediction site gaswizard.ca. The site shows similar drops in markets such as Vancouver and Montreal, while prices in Calgary and Edmonton are generally holding steady.

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Dan McTeague, who runs Gas Wizard and is also president of Canadians for Affordable Energy, attributes the relative dip in gas prices to the latest round of COVID-19 lockdowns in China hampering predictions of future demand.

Read more: Gas prices in most of Ontario to drop 9 cents per litre on Wednesday, analyst says

The relief could be short-lived, however, as he predicts the rising carbon tax will contribute to an overall jump in prices this weekend in Ontario.

“It looks like gasoline prices will likely be making their way back up as early as Friday, possibly two, three, maybe even a four-cent-a-litre increase back up and into the $1.70 range,” McTeague says.

“My best advice to people today, Wednesday and Thursday — take advantage of it. We’re heading back up to higher prices. It is now the springtime season. Demand continues to rise and no one’s got spare oil to give.”

Carbon tax not the only factor hitting gas prices

Though the carbon tax puts a few extra cents on the cost of gas, Randy Robinson, Ontario director at the Canadian Centre for Policy Alternatives, says there’s a lot more behind the recent run-up of prices.

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The war in Ukraine, first and foremost, has constrained the global supply of oil and gas, given the impact of sanctions on Russian fuel exports.

While prices on carbon are set to rise on Friday, they’ve remained static through the war, which is set to enter its sixth week.

“(The carbon tax) had nothing to do with the recent run up in prices, nothing at all,” Robinson tells Global News.

“That change is caused by global events. The Russian invasion of Ukraine has changed everything.”

Read more: Oil prices surpass US$100 a barrel for 1st time since 2014 as Russia attacks Ukraine

Even if Canadians do notice a spike in prices at the pump this weekend, Robinson argues that they can’t really say whether or not it’s the fault of the carbon price or other global economic factors driving up the cost of fuel.

Motorists might feel the pinch directly, but McTeague notes that putting a price on carbon also contributes to extra costs for other household budget items.

Canada’s truck-based transportation industry affects prices on food and other shipped goods as the cost of filling up a tractor trailer tank increases, for example.

“These prices have to be passed on in forms of higher costs for everything,” McTeague says. “Most notably, the one no one disagrees with — the ever-increasing inflation on the price of food.”

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Rebate value called into question

The federal government has claimed that eight out of 10 Canadian families will see a net benefit from the carbon pricing plan thanks to the Climate Action Incentive.

The rebate can be claimed via federal taxes. It is shifting to a quarterly payout this year, starting with a double payment in July.

Read more: Federal carbon price rebates to rise more than expected in Ontario, Manitoba

But the longevity of that claim has been called into question as of late by the Parliamentary Budget Officer (PBO), the government’s financial watchdog.

In a report released last week, the PBO officer said that the bulk of households affected by the federal carbon tax would see an “overall negative economic impact” from the plan by 2030-31.

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“Most households in Alberta, Saskatchewan, Manitoba and Ontario will see a net loss resulting from federal carbon pricing. That is, the costs they face—including the federal carbon levy, higher GST and lower incomes—will exceed the Climate Action Incentive rebate they receive,” said PBO Yves Giroux in a statement accompanying the report.

The overall impact of the tax, however, depends on where you live and what you earn.

The PBO said that Albertans in the top income quintile would pay the largest net cost from the carbon tax — the report notes Alberta’s economy is more carbon-intensive than others included in the plan — while the lowest-income quintile households in Saskatchewan stand to see the largest net gain via the rebate.

“If you’re taking a harder hit, the reason is you have a higher income and you use more gasoline,” Robinson says.

McTeague, a former Liberal MP, recently appeared before a parliamentary committee as part of pre-budget consultations, and called on the federal government to delay the planned April 1 carbon-tax hike until energy prices settle.

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He tells Global News that while Canada’s energy economy is, and should be, undergoing an “evolution,” now isn’t the time to push its carbon cutting agenda, highlighting the plan released Tuesday to slash emissions by 40 per cent by 2030 to meet climate goals.

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Though Canada has made progress in developing nuclear and more sustainable fuel sources, the country’s economy is still reliant on oil and gas, he says, arguing the current energy crisis isn’t the time to accelerate that transition.

“To use an analogy, the wheels are falling off. The last thing you need to do is step on the gas to find out what’s going to happen,” he says.

Others have argued the war in Ukraine demonstrates Canada’s overreliance on fossil fuels and have pushed for a faster global transition away from oil and gas.

Robinson says the policy purpose of the carbon tax is exactly this, to push Canadians and industry to find more fuel-efficient options and reduce our collective dependence on an industry that underpins so much of the national economy.

Read more: Sky-high gas prices are pushing Canadians to consider electric vehicles

The climate emergency is not going to wait for an ideal economic time to implement these policies, he says.

“I don’t really buy that argument that now’s not the time, because now is the time actually, 20 years ago was the time,” Robinson says.

“We’ve attached ourselves to a commodity that is always going to have wild price swings. There’s really no other solution to both of these problems than to just say, we’ve got to figure out how to wean ourselves off of fossil fuels. So that’s really job one for Canada.”

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