Higgs's carbon tax skips the point to please pump patrons and politicos, experts say

The Higgs government's proposal for a new provincial carbon tax may allow for lower prices at the pumps and for political wins across the partisan divide, but it's less likely to actually bring emissions down, according to two experts on the topic.

New Brunswick's Progressive Conservative government hopes Ottawa will rule quickly on whether its new proposal satisfies the federal climate plan.

That approval might see the cost of gas drop by April, but the impact on fossil fuel consumption — the whole point of the policy — could be negligible. 

New Brunswick's plan is similar to the one adopted by Prince Edward Island and approved by Ottawa. It applies the 4.4-cent-per-litre national carbon price at the pumps, but cuts the provincial gas tax by almost the same amount.

The net additional cost to drivers is one cent per litre.

If the same model were allowed in New Brunswick, the 4.4-cent federal backstop would vanish and "people will see a reduction at the pumps," New Brunswick Environment Minister Jeff Carr said. "That's the whole goal here."

'It's self-defeating'

But that would give drivers less of an incentive to lower gas consumption, says Dale Beugin, the executive director of the Ecofiscal Commission, a pro-carbon tax think tank that has compared different provincial systems.

"It's certainly going to reduce the effect on consumer behaviour," he said. "You are increasing one incentive and decreasing another, so that's going to mean less of a response and fewer emissions reductions, frankly." 

University of Prince Edward Island economist Jim Sentance, who has studied the P.E.I. system, agreed. 

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"It's self-defeating, essentially," he said. "If you have any thought that carbon taxes are going to reduce carbon emissions, this basically takes that incentive away."

But the federal Liberals approved it anyway, probably because they "value the idea that [P.E.I.] is onside in a sense and not fighting the carbon tax, more than they value the immediate impact the carbon tax might have had," Sentance said.

Carr's confidence

Carr said he's optimistic Trudeau will accept the Higgs proposal for two reasons: it is similar to the approved P.E.I system and it lets the prime minister show he can reduce political polarization by bringing a PC premier onside with his climate plan. 

"I do believe Prime Minister Trudeau wants to show a new way forward and he wants to be able to show that there are provinces willing to work in the best interest of our constituents," Carr said.

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On April 1, the federal Liberals imposed the 4.4-cent-per-litre carbon tax on four provinces that refused to adopt carbon prices that complied with their plan. A fifth province, Alberta, will be added to the list Jan. 1 after a new government there repealed its carbon tax.

The previous New Brunswick Liberal government tried to find a way around the federal backstop by simply relabelling 4.4 cents per litre of the provincial gas tax as a carbon tax. Ottawa rejected that, saying there must be an increase to the cost of gas.

Higgs has been among the premiers fighting the tax in court, but after Trudeau's government was re-elected last month, including by winning the popular vote in New Brunswick, the premier said he would respect the will of voters and craft his own carbon tax on consumers.

Tax increase coming

The P.E.I. model that Higgs is using may not last long: Ottawa approved it as part of a two-year temporary agreement that will expire in 2021. 

The federal backstop is set to increase to 6.6 cents per litre in April 2020 and would reach 11 cents two years later. 

P.E.I. must also decide soon whether to raise its tax to the required 6.6 cents on April 1, and whether reduce its gas tax further to preserve that one-cent net cost. 

Beugin said the Island approach can't continue indefinitely.

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"In the longer term, the prices on carbon that we're going to need as a country are going to have to increase significant, so this kind of approach doesn't work forever," he said. "You can only offset existing taxes so much." 

But he said at least P.E.I., and now potentially New Brunswick, are playing along. Politically, "maybe you do what you need to do to get some buy-in" and then try to work out a more stringent policy later, he said. 

Carr said his department is working on legislation now so that it can be introduced quickly if Ottawa says yes to the plan. He said the goal is to replace the federal backstop with the PC carbon price before the federal tax goes up April 1.

Green leader on board

A potential side benefit for the Higgs government is that his proposal has the support of provincial Green Party Leader David Coon. 

Coon said the regional harmonization of carbon prices is "a great idea" he has long supported and he would support legislation that does it.

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Ending the battle over the carbon tax on consumers would shift the focus to tougher emissions on industry, he said. 

"What we need to do is put this to bed, get it settled, and put in place actual regulations that drive carbon emissions down," Coon said. "That's where we're going to get emissions reductions that are significant." 

The province's proposal for a levy on industrial emissions is also awaiting federal approval. It would tax only 0.84 per cent of emissions and create a special break for NB Power, a regime that environmentalists say would be too weak.