Ottawa OK's New Brunswick's new carbon tax plan

The Higgs government's new carbon pricing plan has won federal approval — with one offset for consumers surviving stricter national rules and another being eliminated. 

Unlike other Atlantic provinces, New Brunswick is complying with Ottawa's climate plan, which will see the carbon tax on a litre of gasoline rise from 11 cents to 14.3 cents next April.

In 2019 the province reluctantly adopted its own carbon tax but cut the provincial gas tax by four cents at the same time, to offset part of the impact on consumers. 

Last year Ottawa warned other provinces that under its new, more stringent pricing standards starting in 2023, they would not be allowed to imitate New Brunswick's offsetting gas tax cut.

On Tuesday the province said the federal approval will allow the 2019 cut to remain in place.

But another measure designed to blunt the impact of the carbon tax will be gone next year. 

The initial Higgs system included an "instant rebate" on natural gas bills for homeowners so that they saw no extra cost.

The carbon tax was charged, then credited back immediately, with the province using carbon tax revenue from other sources to compensate gas retailers.

"When the new carbon measures take effect, the natural gas offset as previously delivered will not be allowed," said Anne Mooers, a spokesperson for the environment department.

Ottawa has said provincial measures that interfere with the carbon tax's "price signal" — an incentive for consumers to reduce their fossil fuel consumption – are not allowed.

New Brunswick is the only province in Atlantic Canada to craft its own provincial carbon tax system that complies with the national climate plan.

The other three had their proposals rejected Tuesday, meaning Ottawa will impose its own federal carbon tax  — known as the backstop — on them next July.

That means governments in Nova Scotia, Prince Edward Island and Newfoundland and Labrador won't see any carbon tax revenue, while consumers there will get hefty rebates from Ottawa.

Premier Blaine Higgs has opted to use provincial carbon tax revenue, projected at $170 million this year, for a combination of energy conservation programs, climate change mitigation spending and income tax cuts.

"We never wanted a carbon tax," he told reporters, "but reluctantly accepted a plan that we felt [let us] look at an energy consumption reduction as part of this and reduce taxes as well." 

Higgs said one benefit of not rebating all the provincial carbon tax revenue is that money is available to help fund a program that would allow people to move away from shorelines facing severe erosion.

The remnants of hurricanes Fiona and Nicole caused dramatic erosion of some properties in Caraquet this fall.

"We don't have a program landed yet, but there will be one," he said. "That's why we were using the carbon tax, for those very things."

Ottawa's approval Tuesday also applies to the province's output-based pricing system for large industry, a regime that environmentalists say gives large emitters too generous a break compared to consumers.

The system sets a target for emissions reductions. Next year, it's 96 per cent of 2020 emissions levels and will shrink every year, reaching 82 per cent of 2020 levels in 2030.

Emitters that exceed the target will have to pay a carbon tax on emissions above the threshold, or buy credits from other emitters who succeed.

It means large industrial players won't pay any carbon tax at all on 82 per cent of their emissions, letting them "off the hook" according to a statement from the Conservation Council of New Brunswick. 

Green leader David Coon said that means there won't be enough carbon tax revenue to mitigate all the potential extreme weather damage along New Brunswick shorelines.

"The revenue would be much greater if the federal government's requirements were stronger," he said.

Coon also brushed off Higgs's complaint that the province must raise its carbon tax rate April 1 next year, while the new federal backstop will only be imposed on the other three Atlantic provinces on July 1. 

Higgs suggested New Brunswick may stall on raising its rate until July to match others in the region.

"There's always a wrinkle with Premier Higgs when it comes to these things," Coon said with a chuckle

"What was accepted by the federal government was the proposal that New Brunswick made, and that did not include a delay in implementing our responsibilities around carbon pricing."