P.E.I.'s approach to carbon pricing hinges on results of federal election

The P.E.I. government did not strike a new agreement with Ottawa over carbon pricing before the federal election was called.

That means how the province moves forward putting a price on emissions, and, potentially continued access to millions of dollars in federal funding to help Islanders go green, hinges on which party comes out ahead on election night.

A two-year deal struck with Ottawa by the previous P.E.I. government of Wade MacLauchlan was set to expire on March 31, 2021. 

In late February, Premier Dennis King told the P.E.I. Legislature despite "extensive negotiations," the two sides had at that point not been able to come to a new agreement, and "the existing agreement that we have in place will probably extend until the first of September."

King said favourable conditions P.E.I. enjoyed in its first carbon pricing agreement — such as exemptions for home heating oil and propane — "would not be an option this time."

Dave Sawyer, an economist with the Canadian Institute for Climate Choices, says carbon pricing is a "larger piece of a policy package" the government has been looking at, but that many other policies are in place.

"P.E.I. has been pretty active in talking about net zero and thinking about net-zero planning and energy self-sufficiency," he said. "It's not the only piece to the puzzle. I suspect these sort of policies to be continued to be developed, like carbon pricing, and to continue to be tweaked."

An example of policy being looked at is P.E.I.'s home heating oil exemption, he said, as it's a policy that's been done away with in New Brunswick.

"Well what that does is erodes the price signal, which means there's no incentive to reduce your energy bill as it were … so there's a movement now to clean that stuff up and deal with the income problem another way."

Province pledges net zero by 2040

The original deal from 2019 also exempted fuel for farming and fishing, as well as fuel used by airlines and the cruise ship industry.

In addition, the province was allowed to offset rising pump prices when it instituted its own carbon levy by reducing existing provincial excise taxes on fuel.

As a result, pump prices increased by just one cent as a result of carbon pricing on April 1, 2019, and again by a cent on April 1, 2020.

The federally-mandated price on carbon increased from $30 to $40 per tonne of emissions on April 1 — equivalent to an increase of 2.2 cents per litre on gas prices. While pump prices in other provinces changed to reflect the new price, there's been no change yet in P.E.I., while the province has been negotiating with Ottawa.

The King government has pledged to reach net zero emissions by 2040, and the province passed legislation introduced by the Green Party setting a more ambitious 2030 emissions target of 1.2 megatonnes, compared to the previous target of 1.4 megatonnes. 

P.E.I. government to speak after federal election

As part of its original carbon pricing deal with Ottawa, P.E.I. was able to access its share of $34 million from the Trudeau government's $2 billion Low Carbon Economy Fund, money the province has used to provide rebates on heat pumps and other upgrades to reduce household emissions.

CBC asked to speak with the provincial Minister of Environment, Energy and Climate Action Steven Myers and was told he would speak after the federal election.

The province has said it would create its own rebate program to deliver proceeds from carbon pricing back to Islanders.

But in making that commitment in the legislature in February, King made it clear carbon pricing is a federal government initiative, making his government sound like a reluctant partner in a shotgun wedding. 

"I don't like to see the price of fuel increase beyond what it's been increasing already because I think it unfairly impacts those who live far away from the major centres," King said. 

"I'm not opposed to doing what we need to do. I have wondered aloud, and I continue to wonder, is a carbon tax the best solution for P.E.I.?"