Will Premier Gallant go with carbon tax or cap-and-trade system?

It's a sign of how much climate politics have changed that Premier Brian Gallant is not pondering whether to impose a carbon price ahead of the next election, but what kind of price he should set up.

Eight years ago, a proposal to create a carbon tax while cutting other taxes helped doom the election changes of then-federal Liberal leader Stephane Dion.

Now — even though it's being forced on him by Ottawa — Gallant is embracing the climate change issue, including a price on carbon.

"Today, we act in a way that we will be able to look our children, and our children's children, in the eyes, and say that we did everything we could to make the world better," he declared as he unveiled the government's action plan on Wednesday.

But it remains to be seen whether Gallant will choose the frying pan or the fire — a carbon tax or a cap-and-trade system. That will help determine how noticeably the price hits people in their wallets.

Devil in the details

"The devil will be in the details of the policy itself," said Brad Walters, a professor of geography and environment at Mount Allison University. "Each has relative advantages and disadvantages."

Green Party Leader David Coon says any carbon tax should apply to fossil fuels brought into the province — such as crude oil imported for Irving Oil's refinery but not at the consumer level, such as when people fill their gas tanks.

But Coon says his "hunch" is that the province will opt for a cap-and-trade system instead.

In that system, emitters who exceed a legislated cap must buy credits from other emitters who earn them by staying below the cap.

Ontario and Quebec have joined a shared emissions-credit trading market with California, and Nova Scotia is also adopting a form of cap-and-trade.

"It likely would make sense that we look most closely at cap and trade here to connect in to our neighbouring provinces," Coon said.

But Environment Minister Serge Rousselle says the Quebec and Nova Scotia systems are different from each other, so New Brunswick could not easily join them to create a single regional market for emissions credits.

"We have to look at what our neighbours are doing, but at the end of the day, we have to find the solution, the option, that is best for the province," Rousselle said.

Which option is best?

Louise Comeau of the Conservation Council of New Brunswick said without joining a large, existing credit market, it would be difficult for a small province to set up a stand-alone cap-and-trade system.

There simply wouldn't be enough buyers and sellers of the credits for a market to work. "You need a fairly large jurisdiction," she said.

Another advantage of cap-and trade is the cap itself.

"Cap and trade provides more certainty," Coon said. "With a carbon levy or carbon tax, it's not so clear what your emissions are going to be. With cap and trade, you know."

Gallant's climate plan aims to lower emissions by 35 per cent of 1990 levels before 2030 — to 10.7 megatonnes of carbon — but there's no sign it will make that a legal cap.

If we tax, are they going to look at reducing taxes in other areas?-  MLA Brian Kierstead 

Walters told CBC's Information Morning in Moncton that another argument against cap-and-trade is large emitters in the province "are economically and politically prominent," and might negotiate special exemptions.

"There's more likelihood that deals will be cut in a cap-and-trade system that may undermine its effectiveness," he said.

In Ontario, natural gas customers have seen their bills go up to help pay for their utility's purchase of carbon credits. And because those credits are being bought from low emitters in Quebec and California, money is leaving the province – to the tune of $466 million by 2020, according to the province's auditor-general.

More taxes

Those problems and obstacles may tempt the Liberals to opt for a carbon tax, which Walters said is simpler and less expensive to administer.

But that could lead to more political headaches. The PC opposition say New Brunswickers are taxed enough.

"People are hurting," MLA and energy critic Jake Stewart said Thursday. "They don't have any more to give. I see it every day. They just can't take any more money out of their pockets."

The party's environment critic, however, was less adamant. "If we tax, are they going to look at reducing taxes in other areas?" Brian Kierstead said this week.

Asked if that would make the idea acceptable, Kierstead said, "I don't know whether acceptable is the right word. It's very ambiguous and there are so many unknown factors here. But it's something we could look at."

The Liberals have already said they won't be lowering other taxes. They also haven't mentioned carbon-price rebates for low-income New Brunswickers, similar to what British Columbia and Alberta does.

The Liberal plan says the carbon price will "take into consideration" the impact on low-income families and vulnerable industries, but also says revenue from the pricing will go into a climate change fund to pay for programs.

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Stewart said carbon pricing is unnecessary because New Brunswick's emissions have been falling and are likely to exceed the province's reductions target for 2020. Even if that was the result of several forestry mills closing, he said, "the truth of the matter is we're there now."

He also said there's a contradiction in deterring energy use by taxing it to make it more expensive, while at the same time subsidizing energy efficiency programs to make power bills more affordable.

Not all Conservatives oppose a carbon tax. Federal Conservative leadership candidate Michael Chong says he would tax carbon while slashing other taxes; Ontario PC Patrick Brown has promised to scrap his province's cap-and-trade system in favour of a carbon tax.

The Liberals haven't said when they'll announce their carbon-price decision, but there is a firm deadline: the federal government says it will impose a carbon tax on any provinces that don't bring in their own system by 2018, the same year Gallant will run for re-election.