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Those credits reduce the carbon tax payments those industries will need to make, and will be able be banked against future carbon emissions or sold to other firms. Companies won’t actually get cash from the government, Winter said.

“The whole point of the subsidy is to ensure that firms facing carbon tax don’t need to increase their price all that much because their average production costs, given the subsidy, don’t rise all that much,” said University of Calgary economist Trevor Tombe.

The idea is that if a company can increase the gap between its carbon tax cost and its production (ie., produce the same number of widgets — or more widgets — with fewer emissions) then it has found a way to both help the environment and pay less carbon tax. In the end, the point of the subsidy (and its increase) is “to prevent leakage of economic activity elsewhere,” said Winter.

So are the Liberals essentially walking back their carbon tax plan?

Academics spent Wednesday shouting themselves hoarse on Twitter: No, they aren’t, because the tax and the credit are two different levers the government has. The carbon tax remains the same per tonne of carbon emitted, so industry still has the incentive to emit less.

The credits subsidize the production costs of widgets. What this should do is ensure companies don’t attempt to emit less, thereby reducing carbon tax payments by way of producing fewer widgets.

Okay. Does this affect me?

Not really, unless you’re a steel producer. This is a separate carbon tax from the one you’ll see at the gas pumps. But it’s still important.