Premier Blaine Higgs has opened the door to rebating carbon tax revenue directly to New Brunswickers, a move that would bring his provincial price on emissions more in line with federal policy.
Higgs said in question period Wednesday that his government is still looking at what to do with an additional $28 million it will collect when the provincial carbon tax increases on April 1.
One consideration is "what if any proportion should be returned directly," he said, "because that was the original [federal] program, a rebate program."
It would be an about-face for the Progressive Conservatives, who last year slashed the gas excise tax to blunt the impact of the new carbon tax on drivers.
"We aren't contemplating that at this time," Higgs said of a further gas tax cut this year.
Instead, he said, a direct rebate may be the best way to reduce the impact of the carbon tax, a logic that the federal Liberals have used in designing the national climate plan.
"So it's not like I'm inventing a change," Higgs told reporters.
"We are really … looking at options of 'how do we follow the federal formula' and at the same time be consistent and protect consumers around the province, and the federal formula has a mechanism to do that."
Possible rebate 'sounds very similar' to Ottawa's
Ottawa's so-called federal backstop imposes a carbon tax on provinces that do not adopt their own, recycles the revenue and sends it back to consumers in those provinces through rebates.
Higgs's talk of a rebate "sounds very similar to the federal backstop policy itself," said economist Nicholas Rivers, the Canada Research Chair in climate and energy Policy at the University of Ottawa.
"This is an approach that has been advocated for a long time," he said.
"It provides incentives for people to cut their greenhouse gas emissions, because the price of greenhouse gas emissions goes up, but it insulates from any income shock that's associated with that, by providing rebates back to them."
The federal price increases every year, and provinces with their own carbon taxes are required to raise their price at the same rate.
Higgs reluctantly adopted his own provincial version last year, matching the federal rate of $30 per tonne of emissions or 6.6 cents per litre of regular gasoline.
But he slashed the 15.5-cent-per-litre gas excise tax by 4.6 cents at the same time, leaving a net two-cent carbon tax for consumers to pay at the pumps.
At the time, then-environment minister Jeff Carr argued that the cut to the gas excise tax amounted to a rebate.
Ottawa ruled the system complied with the federal requirements, though Rivers argued that allowing New Brunswick to cut the gas tax would undermine the federal ability to enforce national standards in the future.
This year the carbon tax on a litre of gasoline would have to increase to 8.8 cents per litre to comply with the new $40 per tonne federal requirement taking effect April 1.
No further cuts to gas tax coming
In Tuesday's budget, the government said it will maintain the four-cent gas tax reduction from last year but won't reduce it any further, which will leave the carbon tax costing consumers 4.21 cents per litre as of April 1.
Higgs said Wednesday the gas tax cut was needed last year to cushion consumers from the sudden impact of a nearly seven-cent increase at the pumps, which he called "pretty dramatic."
"But to do that on a continuous basis was not the design of the carbon tax, so moving up two cents and two cents [each year] is likely not going to be offset by [cutting] provincial taxes. … It's reasonable to say that a spike of two cents is a whole lot less impactful than one of seven."
Most of the carbon tax revenue is used to make up for the gas tax cut, with some money offsetting the tax's impact on natural gas bills and another $36 million going into a fund for climate initiatives.
In Tuesday's budget there's $28 million of extra revenue left over that the province hasn't accounted for yet.
Finance Minister Ernie Steeves said there were four options for what to do with that money but wouldn't say what they were.
Higgs said he remains concerned about how rising energy costs will affect the economy, especially when neighbouring United States has no carbon tax.
"How do we ensure that New Brunswick or Canada for that matter doesn't become a completely uncompetitive jurisdiction to live and work in?" he said.
Rebating the $28 million is one way to do that, he added.
"People drive a lot and we have to balance that in some way that people can afford to live here."
The federal government is set to review its carbon pricing plan next year and Higgs acknowledged that if he tried to cut the gas excise tax every year to offset the carbon tax, Ottawa might not allow it.
"If we did that routinely, they would say that wasn't what it was intended to do," he said. "It was intended for people to recognize that they would be paying more for fuel, but yes, they could get it back in some other way."
Put extra revenue into green initiatives, says critic
Green Party Leader David Coon said Wednesday that the money shouldn't be rebated to consumers.
"It should go into the climate fund," he said.
Coon said the money could provide more incentives for people to reduce their own emissions by insulating their homes, installing solar panels or buying electric vehicles.
The Green leader has also criticized the Higgs government for using money in the climate fund on initiatives such as support for small nuclear reactors.
Coon says the nuclear technology is unproven and an expensive gamble, but Higgs says that because nuclear power doesn't emit greenhouse gases, it could be a key part of the province turning away from carbon-emitting energy sources.
Ottawa plans to keep raising the required price on carbon until it reaches $170 per tonne in 2030. New Brunswick officials estimated recently that would translate into 37 cents per litre of gas.
New Brunswick is one of five provinces that fought the federal carbon tax in court, arguing it exceeded Ottawa's constitutional authority. But after the Trudeau Liberals were re-elected in 2019, including with a majority of New Brunswick seats, Higgs said he would comply.
The Supreme Court of Canada heard the legal challenge last year and has not ruled yet.