Canadian System of Environmental-Economic Accounts - Environmental tax statistics (ETS)

Canadian System of Environmental-Economic Accounts - Environmental tax statistics (ETS)
Summary of changes
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Detailed information for 2020

Status:

Active

Frequency:

Annual

Record number:

5376

The new experimental Environmental tax statistics (ETS) product is one of the elements of the United Nations System of Environmental-Economic Accounting - Central Framework (SEEA-CF), which was adopted as an international standard in 2012. This product records, in monetary units, government revenues generated from environmental tax from industry, households, government institutions and non-profit organizations and gross fixed capital formation. These taxes include energy taxes, carbon taxes, emission trading permits, transportation taxes, pollution taxes and natural resources taxes.

Data release - December 13, 2023

Description

Economic instruments for pollution control and natural resource management, including environment taxes, are an important policy tool used by government. Statistics Canada's Environmental tax statistics (ETS) estimates measure taxes according to guidelines outlined in the SEEA-CF.

The product records the revenue received by government from environmental taxes that were paid by industry, households, government institutions and non-profit organizations and gross fixed capital formation. The data presented follow the industry, commodity, and tax classification systems used in Statistics Canada's Supply, Use and Input-Output Tables (record 1401).

For the purpose of this product, environmentally related taxes are taxes whose tax base is a physical unit (or a proxy of it) of something that has a proven, specific, negative impact on the environment. The estimates produced by the ETS relate to the annual taxes levied on products and production processes which could potentially affect the environment. The estimates are comprised of the following four broad categories of environmentally-related taxes: energy taxes, transportation taxes, pollution taxes and natural resources taxes. Due to the method in which the data are collected and constructed, it is possible to produce disaggregated estimates for each environmental tax category at the geographical level.

The Canadian System of Environmental-Economic Accounts, which is structured as per the SEEA-CF and takes into account the Canadian environment, studies the relationship between the environment and human and economic activity. This integrated framework guides the compilation of a comprehensive set of tables, accounts, statistics and indicators. Compatibility with the traditional national economic accounts greatly facilitates the integration of the environmental data into macroeconomic models and analysis.

This ensures international comparability and reflects that environmental tax statistics align to the national accounts. The environmental tax statistics framework uses the tax definition of the national accounts as a reference. The national accounts definition improves international comparability of the statistics and allows integration of the tax data with the national accounts and with systems of integrated environmental and economic accounting.

Reference period: The calendar year

Subjects

  • Economic accounts
  • Environment
  • Environmental and resource accounts

Data sources and methodology

Target population

The Canadian economy.

Instrument design

This methodology does not apply.

Sampling

This methodology does not apply.

Data sources

Data are collected from other Statistics Canada surveys and/or other sources.

Data for the ETS are sourced from Statistics Canada's Industry Accounts Division (IAD) and Public Sector Statistics Division (PSSD). IAD data sources are predominantly based on the Canadian Supply and Use tables (SUT) from the Canadian System of National Accounts with coverage at the national, provincial and territorial levels. The SUTs account for all products supplied and used in the Canadian economy. The ETS extracts environmentally-related taxes paid by the different sectors from the Margins and Taxes tables of the SUTs, which are a sub-set of the SUT's main framework. The SUT framework also provides data for the product such as the total taxes on products from the Use table and the total taxes on production extracted from the Use table at purchasers' prices.

Taxes on products are payable per unit of a good or service which usually becomes payable when said good or service is produced, sold or imported, as well as when a good is exported, leased, transferred, delivered, or used for own consumption or own capital formation. Whereas, other taxes on production comprise all taxes (except taxes on products) incurred as a result of engaging in production. These may be payable on fixed assets or on certain activities or transactions.

PSSD provides estimates through the Canadian Government Finance Statistics (CGFS). These statistics are useful for understanding the management of government finances and allow users to analyze government revenues and expenditures. The CGFS provides selected environmentally-related tax revenue for the ETS such as: emission trading permit revenue, hunting and fishing licenses, other taxes on goods and services, and both personal and commercial motor vehicle registration revenue. It is important to note that this tax revenue extracted from the CGFS cannot be disaggregated by industry level at this time for the in-scope reference years. This information is compiled, integrated and analyzed in order to produce estimates of environmentally-related taxes.

As a quality control measure, aggregated CGFS data estimating revenues and expenditures for government are compared to Revenue, Expenditure and Budgetary Balance data from the National Economic Accounts Division (NEAD).

Methodology
It is important to note that the decision of whether (or not) a tax is considered environmentally-related is made according to the specific tax base on which the tax is levied. The list of environmentally-related tax bases is a practical way to identify relevant taxes. If a tax base is considered environmentally-related, all revenue arising from this tax is recorded in the ETS, however not all tax types will be considered.

The Organization for Economic Cooperation and Development (OECD) proposed that the SEEA-CF guidelines would be best suited to structure an environmental taxes product. Following these guidelines, the exclusion of general value-added taxes and goods and services taxes, general profit taxes, personal income taxes and labour taxes is recommended. The reason for excluding such general taxes is that the OECD guidelines maintain that these taxes do not change relative prices in the same way that taxes levied on environmentally related tax bases do. Taxes that do not fall under the guidelines as per these recommendations are considered not in-scope and are excluded from the ETS. A tax base is comprised of the aggregate of the in-scope commodity level estimates whereas a tax type refers to the in-scope taxes to be applied to said bases. As mentioned, not all tax types recorded in the Margins & Taxes sub-sets are considered in-scope.

Other information, such as the name of the tax, have not been shown to provide a clear basis for defining environmentally-related taxes. However, this type of information can be helpful for determining whether a newly introduced tax might be an environmental tax and for classifying environmentally-related taxes into different sub-categories (e.g., pollution tax or a transportation tax).

In-scope taxes for the ETS include taxes with an environmental rationale. These in-scope taxes are derived from the Margins and Taxes tables and include: the federal air transportation tax (FATT), federal custom import duties (FCID), the federal excise tax (FEX), the federal gas tax (FGS), the provincial gas tax (PGS), the provincial environment tax (PENV), and the federal fuel charge tax (FENV) . Environmentally-related tax statistics apply the same definitions as the underlying taxes of the Environmental Accounts.

Environmentally-related taxes from the Margins and Taxes sub-set are selected from relevant tax bases as per the OECD guidelines; taxes levied on these tax bases are considered environmentally-related. In some cases the tax base is the measured or estimated amount of emissions of a polluting substance. However, it is often difficult and expensive to measure emissions directly, since so many taxes are based on proxies for emissions, for example the use of fuel oil. For this reason, identifying taxes on selected tax bases proves useful.

The environmental tax amounts are then reported for four main categories: energy taxes, transportation taxes, pollution taxes, and natural resources taxes. The energy tax category is the sum of three sub-groups: Energy and fuel for transport, carbon taxes and emission trading permits.

Energy taxes include taxes on energy products used for both transport and stationary purposes. The most important energy products for transport purposes are fuel and diesel fuel. Energy products for stationary use include fuel oils, natural gas, coal, electricity and biofuels. The ETS also reports carbon taxes which is a tax charge placed on greenhouse gas emissions released mainly from burning fossil fuels. Other taxes on greenhouse gas emissions other than CO2 are also included. Also in-scope are the emission trading permits which record government revenue from the auctioning of emissions permits (also known as a 'cap and trade' system), which are treated as taxes on production in the national accounts. For the purposes of environmental tax statistics, payments for emission permits are recorded as taxes on production.

Transportation taxes include taxes related to personal and commercial motor vehicle permits. Taxes on commercial transport equipment such as buses or trucks and related transport services such as duties on charter or scheduled flights are also included here, as they conform to the general definition of environmentally-related taxes. 'One-off registration' or import taxes, not related to the actual use of the vehicles or to the actual emissions generated, are also included. Transportation taxes exclude the cost of the fuel required for transport.

Pollution taxes include taxes on measured or estimated air and water emissions, taxes related to the management of solid waste, and taxes levied on noise, such as those produced by aircraft take-off and landings. Recycling fees on products such as computer parts or paint products are placed in this category. Non-energy related CO2 taxes are also included, such as levies on tires and plastic waste.

Natural resources taxes include taxes linked to the extraction or use of natural resources, such as water, forests, wild flora and fauna, as these activities deplete natural resources. These taxes do not include those designed to capture the resource rent (royalties) from the extraction of natural resources nor do they include taxes on land.

Application of SUT and CGFS Taxes to ETS Tax Categories

Two data sources are used to populate energy taxes. The first one, the SUT in-scope taxes, which are: FCID, FGS, PGS, PENV, and FENV. PENV taxes applied to energy commodities are subject to a ratio where a proportion of the tax goes into the energy and fuel for transport sub-category and the remaining proportion into the carbon tax sub-category. All FENV taxes go into the carbon tax sub-category. The second source for energy taxes, which is used to populate the emission trading permits sub-category, comes from the CGFS. The CGFS also provides data on the Output-Based Pricing System since 2019.

The SUT taxes in the transportation tax category include: FCID, FEX, FATT and PENV. FCID and FEX taxes are applied to all goods commodities and FATT taxes are applied to services. PENV taxes applied to goods commodities are subject to a ratio, some of which may go into the transportation tax category and the remaining proportion goes into pollution tax category. Data from CGFS also populate the transportation tax category.

The natural resources tax category only includes data from CGFS.

Error detection

This methodology does not apply.

Imputation

This methodology does not apply.

Estimation

In the process of preparing statistical estimates, data from various sources are confronted, analyzed by subject-matter experts, and used to compile estimates that are methodologically consistent with other estimates in the Canadian System of National Accounts (CSNA). Hence, the estimation process provides a valid and coherent statistical picture of environmental taxes. Consistency is a key feature of the statistics produced by the CSNA and the environmental tax statistics. This analysis and integration process can also lead to revisions to the monetary source data and helps to improve the quality of both the source data and the resulting estimates.

Quality evaluation

The quality of the SUT estimates from which the data for the environmental taxes are extracted and produced is ascertained using time series consistency analysis, as well as analysis of the coherence of the estimates with current economic events and with related data from other programs. Issues arising from the source data are also identified and corrected where appropriate.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects which could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable information provided by respondents.

The environmental tax statistics follow the confidentiality patterns used in the supply and use tables and other source data for all taxes measured.

Revisions and seasonal adjustment

The product follows the dissemination cycle of the final SUT and is published three years after the reference year. The supply and use tables are only revised for the most recent periods when there is a comprehensive revision of the macroeconomic accounts to comply with changes to international standards for the System of National Accounts. Only said revisions would be applied to the ETS. CGFS data are considered final upon publication, unless there are specific revisions made. The product is not released in preliminary form.

Seasonal adjustment is not necessary given that ETS are compiled on an annual basis.

Data accuracy

No direct measures of the margin of error in the estimates can be calculated. The quality of the estimates can be inferred from analysis of revisions and from a subjective assessment of the data sources and methodology used in the preparation of the estimates. In general, the data derived from survey data and final supply and use tables are considered to be reliable.

Documentation

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