Cost of Administering the Federal Fuel Charge and Climate Action Incentive

In response to interest expressed by parliamentarians regarding the implementation of new federal carbon policies, the Parliamentary Budget Officer (PBO) undertook an analysis of related administration costs. 

More specifically, these costs encompass the additional money required by the Canada Revenue Agency (CRA) to pay for the design, implementation and operation of the Federal Fuel Charge and Climate Action Incentive.  Importantly, they do not include the direct or indirect costs borne by firms or households to comply with the Government’s new framework.

Based on data provided by the CRA, total administrative costs between 2018-19 and 2021-22 are estimated to be $174.5 million.¹ As presented in Table 1, these costs will rise from $30.0 million in 2018-19 to $56.4 million in 2019-20, before falling to $40.6 million in 2021-22.  CRA advises that ongoing expenses will be subject to review in 2022 prior to being confirmed.²

Table 1 also presents the delineation of administrative costs between the Federal Fuel Charge and the Climate Action Incentive payments.  The Federal Fuel Charge is responsible for over two-thirds of the total costs ($121.7 million over four years, 70%), while the Climate Action Incentive will incur the balance of administrative costs ($52.8 million over four years, 30%).

Administrative expenses related to the Federal Fuel Charge are expected to rise over the next four years, stabilizing at $33.3 million in 2021-22.  In contrast, administrative expenses for the Climate Action Incentive will peak at $21.7 million in 2019-20, before falling to $7.3 million in 2021-22.

Table 1: Medium-Term Costs of Administering the Federal Fuel Charge and Climate Action Incentive ($ millions)

Source: Canada Revenue Agency.
Note: Totals may not add due to rounding.

	2018-19	2019-20	2020-21	2021-22	Total
Federal Fuel Charge	20.2	34.7	33.6	33.3	121.7
Climate Action Incentive	9.8	21.7	13.9	7.3	52.8
Total Costs	30	56.4	47.5	40.6	174.5

As presented in Table 2, most of the money will be spent on salaries and wages for CRA employees ($130.9 million over four years, or 75%).  The balance will be spent on goods and services, principally professional services ($43.5 million, or 25%).  The share of money spent on salaries and wages will grow marginally over time.

Table 2: Key Administrative Cost Categories for the Federal Fuel Charge and Climate Action Incentive ($ millions)

Source: Canada Revenue Agency.
Note: Totals may not add due to rounding.

	2018-19	2019-20	2020-21	2021-22	Total
Salaries and Wages	20.8	41.4	36.8	32	130.9
Goods and Services	9.3	15	10.8	8.5	43.5
Total Costs	30	56.4	47.5	40.6	174.5

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1. Parliamentary Budget Office Information Request #0419.
2. Ibid.