GNWT approves carbon tax exemption for diesel home heating fuel

Effective April 1, 2024, the carbon tax on diesel home heating fuel will be suspended in the Northwest Territories (NWT). Consumers will receive a point-of-purchase rebate on all diesel home heating fuel purchased in the NWT until March 31, 2027.

The Government of Canada’s decision to suspend the carbon tax on light fuel heating oil under the federal system provided the Government of the Northwest Territories (GNWT) with the opportunity to mirror the change under the NWT’s carbon tax. The NWT may copy the federal carbon tax relief but cannot extend the relief to other heating fuels. This would make the territory non-compliant with the federal carbon pricing rules.

Cost of Living Offset payments, also known as COLO payments, are intended to reduce the carbon tax burden on residents. These payments are issued quarterly and adjusted as required to ensure they align with the average carbon tax paid by NWT households. The last COLO payment was issued by the Canada Revenue Agency in January 2024 to offset home heating bills for the first quarter of 2024. The next payment will be issued in early April 2024.

The NWT carbon tax system generates own-source revenue that assists the government in offsetting some of the costs of funding “made-in-the-NWT” climate change solutions. For example, to help residents reduce their reliance on fossil fuels, the GNWT has increased funding for energy audit capacity and energy rebates and provides support for community biomass projects.  Overall, the GNWT allocates far more in funding to climate change solutions than it collects in revenues from the carbon tax.

Quote(s)

“We need flexibility on the application of the Federal carbon tax in the Northwest Territories, particularly with respect to heating fuel, to avoid raising the cost of living for residents and creating more barriers to Northern economic development. We will continue to advocate for the introduction of a carbon tax model in which Canada fully recognizes the challenges faced by residents and businesses in the Northwest Territories and asks those who have benefitted most from historic GHG emissions for more meaningful support towards a green energy transition for those regions who are now on the front lines of climate change.”

– Caroline Wawzonek, Minister of Finance

Quick facts

• The carbon tax suspension on diesel home heating fuel will run from April 1, 2024, to March 31, 2027.
• The carbon tax will continue to be applied to propane and natural gas for all uses.
• The Petroleum Products and Carbon Tax Act Regulations will be amended to facilitate the suspension.
• The COLO payment is a tax-free benefit paid quarterly to individuals and families living in the NWT to help offset the cost of the territorial carbon tax. The Canada Revenue Agency issues COLO payments in July, October, January and April, provided residents file their annual income tax returns.
• Without making changes to these offset payments, the GNWT would end up offsetting more than it collects through the carbon tax, which is not a sustainable or fiscally responsible option.

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For media requests, please contact:

Adetoyeke Adedipe
Senior Communications Officer
Department of Finance
Government of the Northwest Territories
[email protected]