Gas prices will climb 17 cents by 2030 based on government policies aimed at reducing fuel emissions, says Canada's budget watchdog.Todd Korol/The Globe and Mail
One of the federal government’s policies aimed at slashing Canada’s greenhouse gas emissions is regressive and will hurt poor- and middle-income households more than the rich, according to a new Parliamentary Budget Office report.
That assessment of the Clean Fuel Regulations appears to mirror the government’s own findings released last year. Despite that Environment Minister Steven Guilbeault on Thursday lambasted the budget watchdog for what he said is a “partial,” “unbalanced” and “skewed” analysis.
The regulations are expected to cut greenhouse gas emissions by up to 26.6 million tonnes in 2030 and result in an overall GDP decrease of up to $9-billion (or a 0.3-per-cent cut), according to government figures. The budget watchdog’s report took the data from the government and assessed how the policy will affect households in different income brackets and provinces.
On a national average, the report says that by 2030, the policy will disproportionately hurt lower income Canadians. For example, it would cut the disposable income of low-income households by as much as 0.62 per cent (or about $231); high-income households’ disposable income would only be cut by up to 0.35 per cent, but overall they would pay more (up to $1,008).
The report also finds that the policy will cost Saskatchewan, Alberta and Newfoundland and Labrador the most – because their economies are more fossil fuel dependent.
The budget watchdog’s report also finds that the 2030 inflation-adjusted price tag for the policy will be up to 17 cents a litre of gas or 16 cents a litre of diesel.
The long-delayed Clean Fuel Regulations will take effect July 1. They require fuel importers and producers to reduce the carbon content of gasoline and diesel. The stringency of the policy will steadily increase to 2030 – meaning the carbon intensity of fuels will need to keep shrinking. If producers fail to lower the carbon content of the fuel, they will have to offset the carbon by buying credits.
The policy is in addition to the federal carbon tax. The government argues that both are needed because the regulations reduce the overall carbon content of fuels while the carbon price incentivizes less consumption of those fuels.
Mr. Guilbeault told reporters on Parliament Hill that the regulations are “designed to spur innovation in clean technologies and expand the use of less polluting fuels throughout the economy.”
He said the budget watchdog report is flawed because it only looks at the costs of the new regulations without accounting for the economic and environmental costs of letting climate change run unchecked.
The budget office’s report acknowledges that limitation and also says it modelled the upper-limit costs. The report also inflation-adjusted the dollars to 2030 and used a broader economic model to assess the consequences than the government’s analysis released last year. Despite those differences, the ultimate findings are similar.
“PBO results show that the Clean Fuel Regulations are broadly regressive,” the report says. “The cost to lower income households represents a larger share of their disposable income.”
Last year, the government’s own analysis said the policy is expected to increase transportation fuel costs and “will disproportionately impact lower- and middle-income households.”
Still on Parliament Hill on Thursday, Mr. Guilbeault said the budget watchdog’s report represents a “very incomplete analysis.”
“If you want to look at the cost of a regulation, you have to look at what is climate change costing Canadians.”
But in an interview, Parliamentary Budget Officer Yves Giroux noted that his job is to price policies not lay out their benefits. For example, he said past reports on the cost of new warships or the new dental-care program also only detail the price-tag without quantifying their potential benefit.
“I’m not passing a judgment call on this policy,” Mr. Giroux said. “I’m just providing parliamentarians and Canadians, a reasonable, balanced, unbiased estimate of the cost of these regulations.”
Energy and climate experts on Thursday sided with Mr. Guilbeault. In addition to ignoring the economic cost of climate change, they said the report also ignores the impact of improvements to fuel technology that are already under way.
The report essentially says, “Certainly things could be completely different, but it’s too hard for us to model that, so we’re not going to,” said Sara Hastings-Simon, at the University of Calgary’s School of Public Policy.
Carolyn Kim with the Pembina Institute, a think tank, said that the “PBO report provides an unbalanced modelling approach.”
The NDP did not provide a comment on Thursday. It had previously supported the Clean Fuel Regulations but also criticized their disproportionate impact on poorer households.
Conservative Leader Pierre Poilievre has not released a climate change plan but on Thursday told reporters he would cut both the carbon tax and the Clean Fuel Regulations. Conservatives, he said, would rely on “technology not taxes.”
They would speed up regulatory approval of tidal and nuclear energy projects, incentivize carbon capture, utilization and storage, and allow Quebec to double its hydro electricity supply, Mr. Poilievre said.
In Question Period, Mr. Poilievre called the Clean Fuel Regulations a “second carbon tax” and questioned how Canadians can afford them.
At his own news conference, Mr. Guilbeault said the new fuel regulation “is not a carbon price, it’s a polluter-pay principle.”
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