The Syncrude oilsands extraction facility is reflected in a tailings pond near the city of Fort McMurray, Alta., in June 2014. THE CANADIAN PRESS/Jason Franson

TORONTO — When Ottawa imposes a carbon tax on Ontario next year, families could end up better off, according to a report from the province’s budget watchdog.

The report released Tuesday shows more than 80 per cent of Ontario households could enjoy a net benefit from the federal carbon tax.

The federal government has not yet said how it will make its carbon tax revenue-neutral or who will get the rebates, but Environment Minister Catherine McKenna has previously suggested Ottawa could send cheques directly to residents.

With that in mind, Financial Accountability Officer Peter Weltman looked at what would happen if Ottawa used a carbon dividend to rebate households. The dividend is a flat rate that every household would get, regardless of income or how much carbon tax they pay.

“Under this scenario, it would be positive,” Weltman said about the net impact of a carbon tax.

The report finds that the dividend, which would be given to households but not businesses, would total $355 per household in 2019, compared to the average cost of the carbon tax, which would be $258. Because lower- and middle-income households also emit less greenhouse gas, Weltman said the dividend would cover the costs of the carbon tax for households that earn less than $150,000.

By 2022, he estimates the federal backstop will cost the average household $648, but his office didn’t model what the dividend would be for future years.

His office’s findings are in line with a report released last month by Canadians for Clean Prosperity. That study also found that with a dividend model, households would, on average, take in more than they pay for carbon taxes.

[READ MORE: Low-income Canadians benefit most from federal carbon tax: study]

Weltman said his office did its own analysis and only discovered the report from Canadians for Clean Prosperity after his work was done.

Jessica Green, an associate professor at the University of Toronto who researches climate change and carbon markets, said Weltman’s report is an important reminder that “it’s not just about what the tax is, it’s about what is done with the revenue.”

She said that’s an important message for the federal government to sell, as it faces growing opposition to its plan to impose a carbon price.

If the government chooses to use a dividend model to rebate households, it would mark a big departure from the rebates that were provided through the now-cancelled cap-and-trade program. The report from the Financial Accountability Office points out that Ontarians only recouped the costs of cap-and-trade if they were able to take advantage of the energy retrofit or electric-vehicle programs on offer.

For example, unless someone had thousands of dollars to buy an electric car, she or he couldn’t take advantage of the rebate offered by the province. Conversely, the dividend model would ensure every household got a piece of the carbon-tax pie.

Weltman’s report also found that the Ford government’s decision to cancel cap-and-trade leaves the provincial budget short $3 billion over the next four years.

A spokesperson for Intergovernmental Affairs Minister Dominic LeBlanc said the government respects the work of Weltman’s office, but wouldn’t say what Ottawa is considering.

“If provinces refuse to make polluters pay, we will — and we’ll give the money back to Canadians. We will announce further details in the coming weeks,” LeBlanc’s spokesperson, Vincent Hughes, said in an email.

Ontario Environment Minister Rod Phillips said he’s “skeptical” about Weltman’s findings and suggested Ontarians should also be wary.

“When people say they’re going to tax you and (you’ll) end up with more money, I think every Ontarian knows to question that,” he said.

He also questioned the effectiveness of the carbon tax if it doesn’t put the financial pinch on households. The Liberals, he said, justified putting a price on carbon “to change people’s behaviour; if they give people back more money than they took, then they’re hardly changing behaviour.”

But experts who spoke with iPolitics on Tuesday said he’s wrong.

“Rebating the revenues from carbon pricing does not undermine carbon pricing at all,” said Brendan Frank with the Ecofiscal Commission.

There are two key points to consider, Frank said. The first is that the rebate is unrelated to how much one pays for a carbon tax, so there’s still an incentive to reduce costs where one can. The second is that the carbon price and dividend option work “independently of one another” in a two-step process.

For example, he said research shows that if people are faced with the choice of paying for gas that’s going up in price or taking public transit, they’ll take the cheapest option, whether or not they get a cheque in the mail a few months down the road.

In a blog that further explains the phenomenon, Frank writes that the dividend cheque would serve to protect people who don’t have a public-transit option and have to drive.

Green added that the carbon price will increase the incentive for wealthy people — who emit the most — to reduce their emissions, because the government cheques wouldn’t cover all the costs they incur from a carbon tax.

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