New federal carbon charges are going to cost you more. Here's why
Clean fuel rules take effect on Canada Day but Ottawa says consumers should not have to pay yet
Amid all the noise around Policy 713 and a caucus revolt, the Higgs government in New Brunswick managed a clear, consistent message on one issue over the past month: carbon pricing.
Progressive Conservative ministers and MLAs used every chance they had to complain about two federal carbon-related cost increases taking effect on Canada Day.
"You haven't talked about the carbon tax yet," Premier Blaine Higgs joked with an interviewer from Radio-Canada.
"I assumed that was your next question."
In the legislature, backbench Tories were downright creative in pushing the message.
Moncton South MLA Greg Turner invited New Brunswickers to visit his city for a Shania Twain concert and other activities the following weekend "one of the last we will enjoy before the huge jump in the price of gas," he said.
The goal was clear: link provincial Liberal Leader Susan Holt to Liberal Prime Minister Justin Trudeau and his climate policies.
But Ottawa is pushing back, blaming a piece of provincial legislation from the Higgs PCs themselves for the biggest part of the looming price increase.
So, what are the new clean fuel regulations, why are New Brunswickers going to start paying for them this week, and what impact will they have?
What are the clean fuel regulations?
The regulations are part of the Trudeau government's climate change plan, aimed at lowering Canada's greenhouse gas emissions over time.
They're designed to lower the carbon intensity of fuel suppliersthe amount of carbon dioxide they emit per unit of product by 15 per cent by 2030.
Companies like Irving Oil can choose from different emissions-reduction strategies that will earn them credits they can sell in a credit-trading market. Those that don't reduce emissions must buy credits from that market.
That is supposed to create a financial incentive for companies to act.
Is this the same thing as the carbon tax?
No, but the two are often confused because the regulations go into effect July 1, the same day the carbon tax on consumers is going up in New Brunswick.
The Higgs government has abandoned its provincial carbon tax, adopted in 2020, in favour of letting the federal system take effect on Canada Day.
The carbon tax on a litre of gasoline will increase from 11 cents to 14.3 cents, just as it would have under the provincial system.
The goal is to steadily raise the cost of consuming gasoline to nudge consumers to other options electric cars, public transit over time.
The clean fuel regulations also take effect July 1 with New Brunswickers likely seeing the first impact on July 7, the next weekly price setting by the Energy and Utilities Board.
The regulations could add another eight cents a litre to the price of gas, according to a sample calculation submitted by experts to New Brunswick's Energy and Utilities Board.
Isn't there a rebate?
Yes on the carbon tax, because New Brunswick will now be part of the federal system.
A family of four will get $184 back every quarter this year, and Ottawa claims the majority of households will get back more than what they pay.
But there's no rebate for the extra cost caused by the clean fuel regulations, because it's not a tax on consumers.
The regulations are designed to bite the bottom line of fuel companies, not their customers.
If it's aimed at fuel companies, not customers, why are we paying?
Last year, the Higgs government passed a law forcing the EUB to create a "carbon cost adjustor," a formula that calculates how to pass on the clean-fuel costs to consumers.
The accounting firm Grant Thornton came up with a proposed model that produced the sample calculation of eight cents a litre.
That's the figure, combined with the 3.3-cent scheduled carbon tax increase, that PC MLAs have been using to attack the Liberals.
And why eight cents?
Grant Thornton consulted several industry players, including Irving Oil, whose refinery is a major supplier of gasoline in the region, to estimate the cost.
Federal Environment Minister Steven Guilbeault said the initial cost impact of the regulations should be "very small, incremental," but Irving is assuming a "worst-case scenario" that may not come to pass as the new credit market sorts itself out.
"I think it's just a pretext to increase the price of gasoline," he said in an interview. "There's no regulatory reason why the price of gasoline should increase this July."
In a letter to the EUB, Guilbeault argued Irving Oil doesn't need to file submissions to Ottawa for credits for another year, so the company has lots of time to assess its options and avoid a "high-cost compliance pathway."
Is this really about protecting Irving Oil?
Green Party Leader David Coon calls the carbon adjustor legislation "an act respecting the interests of Irving Oil."
Energy Minister Mike Holland responded by accusing Coon of trying to turn "a protection measure for small businesses in New Brunswick into some big conspiracy theory about Irving."
He said the measure was aimed at small retailers, "mom and pop shops, small convenience stores with a gas pump out front," and was not a favour to Irving Oil.
"Large, large petroleum companies can handle the absorption of a great of deal of stuff that small businesses can't," Holland said.
But Premier Blaine Higgs, a former Irving Oil executive, says the company will definitely be affected perhaps fatally.
"What it means is that ultimately this refinery could say, 'I don't need to be in New Brunswick,'" he said in the legislature.
He told Radio-Canada he believes that's why Irving Oil announced a "strategic review" that could include selling all or part of the company.
"I do see a connection because the federal policies are basically taking a business like that out of business," he said.
Irving Oil has not responded to a request for comment on the impact of the regulations.
Why doesn't Irving Oil just earn and sell credits under the regulations?
Irving exports about 80 per cent of its output.
The regulations, and the credits, are aimed at spurring clean-fuel use in Canada, so they apply only to products sold domestically.
That means it will only get about 20 per cent of the potential credit benefits of any investments in cleaner fuels, Higgs says.
"When 80 per cent of your volume is discounted and taking right off the table on the carbon credit, what does that look like to the business?" the premier asked recently.
"It says 'Is there a future here or not? How do I invest in this the way other refiners or businesses can?'"
Why did Ottawa exclude exported gasoline from the credit system?
Bora Plumptre, a climate policy analyst who was part of federal government consultations on the regulations, says the policy is aimed at emissions from the fuels Canadians consume.
To include Irving gasoline sold outside the country would inject credits into the new market that have nothing to do with that objective.
That would lower the value of all the credits, to the detriment of companies working on clean-fuel products Canadians will use.
"When they see the possibility of the credit market being flooded with a whole bunch of extra credits that don't really have a place in that market, that's a concern," he said.
What's this going to cost us?
The parliamentary budget officer in Ottawa has estimated the new regulations will cost the average New Brunswick household $501 per year.
That's a lot, but that's compared to doing nothing an option that doesn't exist.
Years of inaction on reducing emissions is already costing taxpayers, according to the Canadian Climate Institute.
Climate-related damage is increasing the average household's cost of living by $700 each year through higher grocery bills from supply disruptions, higher home insurance premiums and taxpayer-funded disaster recovery and infrastructure repairs, the institute says.
And those costs are only expected to rise in the future.
What happens next?
The EUB will adjust the carbon cost every week when it sets the price of gas, and plans to review its adjustor formula in six months.
Guilbeault said his officials will make presentations to the board and to other provincial regulators in Atlantic Canada that Irving Oil is hitting consumers with cost increases that are not warranted.
"We're confident that we'll be able to demonstrate to the utility board that it shouldn't happen," he said. "There's no reason for it."
In his May statement, Guilbeault said refineries in Atlantic Canada "are reaping whopping new profits and have the ability to be part of the solution."
The only other refinery in the region, in Come By Chance, N.L., is converting from oil to biofuels thanks to $86 million in federal subsidies.
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