Mr. Speaker, your Standing Committee on Government Operations is pleased to provide its report on the review of Bill 92: An Act to Amend the petroleum Products and Carbon Tax Act, No. 3.
Mr. Speaker, I move, seconded by the Member for Thebacha, that the Committee Report 6619(2): Standing Committee on Government Operations Report on the Review of Bill 92: An Act to Amend the Petroleum Products and Carbon Tax Act, No. 3, be deemed read and printed in Hansard in its entirety. Thank you, Mr. Speaker.
Thank you, Member for Yellowknife North. The motion is in order. To the motion.
Question.
Question has been called. All those in favour? All those opposed? Any abstentions? The motion is carried. The report is deemed read.
Carried
Bill 92: An Act to Amend the Petroleum Products and Carbon Tax Act, No. 3 (Bill 92)1 received second reading on June 1, 2023, and was referred to the Standing Committee on Government Operations (Committee) for review.
On June 27, 2023, the Minister of Finance and departmental officials provided a public briefing on the Bill. Bill 92 requires the government to set up an unconditional carbon tax revenue sharing grant with community governments. Bill 92 also requires the government to prepare and release an annual report on the carbon tax. Bill 92 ultimately fulfills commitments from the Minister of Finance to improve the government’s carbon tax approach, in response to Members’ concerns during the third reading of Bill 60: An Act to Amend the Petroleum Products and Carbon Tax Act (Bill 60).
This report summarizes Committee’s review of Bill 92, focusing on our amendments to improve the Bill. As originally drafted, Bill 92 fell short of the improvements many Regular Members wanted to see to the government’s carbon tax approach – so much so that the Member for Frame Lake introduced a parallel private member’s bill. Committee worked with departmental officials and the Member for Frame Lake to develop amendments to strengthen Bill 92 that everyone could support.
Ultimately, Committee put forward four amendments, which are included in Appendix B of this report. The Minister concurred with all four amendments, which were then adopted at the clause-by-clause review on July 28, 2023. Committee is satisfied that the changes to Bill 92 represent a reasonable compromise between the views of the Government of the Northwest Territories (GNWT) and of Regular Members.
The Legislation Division initiated two minor changes to re-arrange the definitions in the Bill and make several resulting grammatical changes. These changes were minor and non-substantive. Committee agreed to both changes.
Bill 92 sets the amount of the community revenue sharing grant at 10 percent of net carbon tax revenues. While this amount is consistent with the Minister’s commitment in the House, Committee was concerned that this may not be consistent with Committee’s vision for the grant’s purpose – to compensate community governments for the fiscal impacts of the carbon tax.
Using data from the Department of Finance, Committee projected communities’ grant revenues with their tax burden. The projections included two scenarios: one in which communities’ fuel use stays the same from 2021 through 2030, and another in which fuel use in 2030 is 15 percent lower than 2021 levels. A 15 percent reduction is consistent with a target in the 2030 Energy Strategy. Committee found that, in both scenarios, communities’ total tax burden overtakes the total grant amount in 2025. The gap widens to between $1 million and $2 million after 2028.
When the Minister committed to the 10 percent grant amount, Regular Members assumed that meant the carbon tax would be revenue-neutral for community governments. Our analysis suggested that would not be the case.
Committee sought to confirm whether the government also projects that the carbon tax would not be revenue-neutral for community governments. The government did not confirm or deny this point and emphasized that the community grants were not intended to reduce communities’ carbon tax burden to zero. The department characterized the 10 percent as a “minimum” revenue sharing rate.
However, as Bill 92 was originally drafted, the revenue sharing grants had to be “equal to” 10 percent of net carbon tax revenues. With this wording, the 10 percent was not really a minimum revenue sharing rate, but rather an exact revenue sharing rate.
Committee wanted to ensure that a future Minister would have legislative discretion to provide a bigger grant, above 10 percent of net carbon tax revenues. We would have preferred that the legislation require the carbon tax to be revenue-neutral for community governments, but this proposal was unlikely to receive support from the department. Instead, Committee developed a motion to tweak the wording for the revenue sharing rate from “equal to 10 percent” to “at least 10 percent.” The government accepted this compromise.
Committee therefore recommends:
That the Department of Finance ensure that the carbon tax is revenue-neutral for community governments. Total carbon tax revenue sharing grants should equal or exceed community governments’ total carbon tax burden each year.
Bill 92 requires the government to prepare and release an annual report on the carbon tax. Although the Department of Finance already does this work, reporting on the administration of the carbon tax was not previously required in legislation. Committee has sought legislative requirements for carbon tax reporting since the 18th Assembly, and more recently during our review of Bill 60. While Bill 92, as originally drafted, required an annual report, it did not specify a deadline for completing the report or what types of information must be disclosed.
The Member for Frame Lake, in particular, was dissatisfied with these omissions. He advocated unsuccessfully for these requirements to be included in the government’s bill before it was tabled in the Assembly. As a result, the Member for Frame Lake introduced a private member’s bill – Bill 91: An Act to Amend the Petroleum Products and Carbon Tax Act, No. 2 (Bill 91). Bill 91 provided a list of 17 types of financial and other items to be disclosed in the annual report, and a six-month deadline to prepare and release the annual report. Committee was tasked with reviewing Bill 91 alongside Bill 92. Committee received a public briefing on Bill 91 from the Member for Frame Lake on June 27, 2023.
Committee considered the competing visions for carbon tax annual reporting in Bills 91 and 92 and compared these with the department’s current reporting practices. Committee found that Bill 91’s reporting requirements surpass the department’s current voluntary reporting practices. For example, the current annual report does not disclose information on penalties and fines, refunds, and emissions reductions. Our detailed analysis on this topic is available in Appendix A of this report.
Committee preferred the annual reporting approach in Bill 91, with its more prescriptive requirements, over the approach in Bill 92. Committee believes the detailed reporting requirements in Bill 91 would ensure transparency from future Ministers and promote accountability for the government’s work to address the effects of climate change – without imposing an unreasonable burden on the department.
However, advancing the changes in Bill 91 presented a procedural challenge that implicated Bill 92. Bill 91 and Bill 92 both placed measures related to annual reporting in sections numbered ’20.2’. The Legislative Assembly could not pass two section ’20.2’s’ with different wording and legal effect.
Committee’s preferred approach was to insert the list of required contents in the annual report from Bill 91 into Bill 92. Committee sought the Minister’s support for this approach. The government was concerned that certain reporting requirements in Bill 91 would create legal obligations on matters that were impossible to measure. Two subclauses in Bill 91 highlighted this concern:
- Subclause 20.2(2)(k), which requires reporting on the anticipated reduction of emissions in the Northwest Territories thanks to the carbon tax; and
- Subclause 20.2(2)(l), which requires a description of the effectiveness of the carbon tax in reducing emissions. The government department further asserted that subclauses (k) and (l), with their focus on emissions, are outside the purpose of the Petroleum Products and Carbon Tax Act (Act), which focuses on tax rates and collection.
Committee accepted the government’s concern with subclause (k), but not with subclause (l). Committee believes subclause (l) provides enough discretion on how to report on the effectiveness of the carbon tax. We also stress that emissions reductions are indeed integral to the purpose of the Act and should not be out of scope for the annual report. The Minister has said that the carbon tax is meant to meet the territory’s commitments under the Pan-Canadian Framework on Clean Growth and Climate Change.
Under this federal framework, the government has committed to both a minimum level of carbon taxation and a target for emissions reductions. The 2030 Energy Strategy explicitly links the carbon tax with emissions reductions.
Committee therefore put forward a motion to insert the list of annual reporting requirements from clause 20.2(2) in Bill 91 into Bill 92, save and except for subclause (k). The wording of the motion contained several other minor differences from Bill 91, for clearer and more consistent wording. The Minister concurred with the motion and Committee approved the amendment at the clause-by-clause review.
Given the Minister’s concurrence with motion #4, Committee decided to not proceed with Bill 91. The government’s legislation now includes detailed annual reporting requirements that Committee supported. Committee is satisfied with this outcome. We thank the Member for Frame Lake for his tireless advocacy for greater transparency and accountability around the government’s work to address climate change.
This concludes the Standing Committee on Government Operations’ review of Bill 92. Typically, Committee includes a recommendation in each report requesting a response from government within 120 days. The recommendation is then moved as a motion in the House and Cabinet is required to respond. However, since the 19th Legislative Assembly will dissolve in less than 120 days, Committee has decided to leave out this recommendation and requests that the government provide a public response to this report, even of a preliminary nature, before the beginning of the 20th Assembly.
Reports of standing and special committees. Member for Yellowknife North.
Mr. Speaker, I move, seconded by the Member for Thebacha, that Committee Report 6619(2), Standing Committee on Government Operations Report on the Review of Bill 92: An Act to Amend the Petroleum Products and Carbon Tax Act, No. 3, be received and adopted by the Assembly. Thank you, Mr. Speaker.
Thank you, Member for Yellowknife North. The motion is in order. To the motion.
Question.
Question has been called. All those in favour? All those opposed? Any abstentions? The motion is carried. The committee report has been received and adopted by the Assembly.
Carried
Reports of standing and special committees. Member for Yellowknife North.
