New Brunswick has struck a carbon-tax truce with the federal government and agreed on Wednesday to impose its own greenhouse-gas levy on consumers, but the province is blunting the impact by cutting the provincial gas tax at the same time.
New Brunswick – along with Alberta, Saskatchewan, Manitoba and Ontario – had resisted Ottawa’s national carbon-pricing plan and was challenging it in court. But since the Liberals’ victory in the federal election, the province’s Progressive Conservative government has changed course.
Jeff Carr, the Minister for Environment and Local Government, said New Brunswick will implement a system similar to that of Prince Edward Island, which cut its gasoline taxes before its own version of the carbon tax took effect, resulting in a net increase of just 1 cent a litre. That meant PEI drivers paid less than a quarter of the 4.4-cent charge per litre Ottawa imposed on New Brunswick, Ontario, Manitoba and Saskatchewan. PEI was also allowed to exempt home heating fuels from the carbon levy.
Mr. Carr said gasoline prices will be lower under the provincial plan than they would have been under the federal carbon tax, but did not provide specifics. “There will be a decrease of some sort," he said, adding that similar efforts will be made to mitigate the impact of carbon pricing on natural gas.
Under the federal carbon plan, consumers pay a rising charge on fossil fuels for greenhouse gas emissions, starting at $20 a tonne in 2019 and rising to $50 a tonne in 2022. That equates to a tax of 4.4 cents a litre on gasoline this year, and reaching 11 cents a litre in 2022. Ottawa has imposed the levy on provinces that don’t have a plan to meet that benchmark.
The deal with New Brunswick falls short of that standard. It does give Ottawa a political win in plucking a province from the ranks of those opposed to the tax, and allows the Liberal government to point to an incremental cost imposed on greenhouse gas emissions. And the province said it can now tailor its carbon tax to its needs.
But the agreement does not deliver on the national price of $20 a tonne in 2019 of greenhouse gas emissions that Ottawa has portrayed as a floor, once offsetting tax reductions are taken into account. And the deal with New Brunswick embeds further inequities in carbon pricing across Canada. Consumers in Ontario, Manitoba, Saskatchewan and, in 2020, Alberta, will effectively pay a carbon tax rate more than three times as high as those in PEI. (As of April 1, the federal carbon levy on gasoline rises to 6.6 cents a litre, while PEI drivers will pay an incremental cost of just 2 cents a litre.)
Newfoundland and Labrador also cut its gasoline taxes as a carbon tax came into effect. Nova Scotia has no direct carbon levy on consumers because Ottawa said that province’s cap-and-trade system met its benchmark for carbon pricing.
Isabelle Turcotte, director of federal policy for the Pembina Institute, said she views the agreement between Ottawa and New Brunswick as a positive development, since it adds another jurisdiction to those supporting carbon pricing. But she said it’s disappointing that the signal to consumers the carbon tax is intended to send via a price increase is being muted. “This shouldn’t be a race to the bottom."
Federal Environment and Climate Change Minister Jonathan Wilkinson said in a statement that New Brunswick’s decision shows “growing momentum for pricing pollution in Canada because it’s a cost-effective way to cut pollution and deliver clean growth.”
His office did not respond to a question about the province’s move to cut gasoline taxes at the same time, beyond noting that such levies are within provincial jurisdiction.
In a subsequent emailed statement, Mr. Wilkinson said New Brunswick had met the federal benchmark for 2020, but would need to increase the tax on carbon to remain compliant, as will other jurisdictions.
The accord with New Brunswick on a carbon tax for consumers is Ottawa’s second carbon-policy deal this month with the provinces. Last week, the federal government said it would accept Alberta’s carbon pricing for industry rather than imposing its own system for reducing greenhouse gases from heavy emitters. New Brunswick has made a similar proposal, but the federal government has not yet responded.
With a report from The Canadian Press