Federal environment minister says he'll work with Atlantic premiers, but carbon price deadline stands

A day before the deadline for provinces to submit their plans to the federal government on how they will price carbon until 2030, Atlantic premiers asked the federal environment minister for more time — a request that was denied.

Nova Scotia Premier Tim Houston, writing on behalf of the four Atlantic premiers, sent a letter to federal Environment Minister Steven Guilbeault on Thursday requesting the extension.

He said he and his counterparts are concerned the increased cost of energy through a carbon tax "will amplify the inflationary pressures currently being felt in Atlantic Canada and we believe that any discussion on carbon pricing should prioritize mitigating these impacts."

• Read the letter from the premiers

The Nova Scotia government says the federal carbon tax would add 14 cents to the price of a litre of gas in this province beginning next year.

Looking for 'practical solutions'

Unlike most provinces, Nova Scotia has so far been shielded from shock at the pumps related to pricing carbon because of its use of a provincially designed cap-and-trade program. That program is set to expire this year.

"We are deeply concerned about the affordability impacts of carbon pricing on households in our region, especially as almost 40 per cent of Atlantic Canadians experience energy poverty — by far the highest rate in the country," writes Houston.

Houston and Nova Scotia Environment Minister Tim Halman were not available for comment on Thursday. Halman's office issued a statement that reiterated the points in the letter from the premiers to Ottawa.

The Atlantic premiers requested "a short-term extension for the provincial carbon pricing plan submissions" so they could meet with Guilbeault and his department officials to find "practical solutions to this issue, especially as they relate to home heating fuels" and discuss "options for the federal government to support energy affordability in the region" before the provinces formally submit their plans.

Friday deadline stands

In a statement to CBC News, Guilbeault said he remains committed to working with the premiers during the next two weeks to identify practical solutions to address their concerns about home heating, but Friday's deadline to submit plans for pricing carbon stands.

"Atlantic provinces, like all other provinces and territories, have had a year to prepare their submissions. The deadlines were clearly and repeatedly communicated and are based on the legal requirements to update the national pollution pricing system at regular, predictable intervals. I am therefore continuing to request that provinces submit their plans by the Sept. 2 deadline…"

Nova Scotia's plan, submitted in late August, was rejected by Guilbeault earlier this week because it did not include a pricing mechanism for pollution.

With the province's cap-and-trade system set to expire and internal documents showing it's unlikely to be sustainable into the future, Nova Scotia instead submitted a proposal based on legislation passed last year.

The proposal calls for the closing of coal-fired power plants to generate electricity by 2030, an increase in the use of electric vehicles as well as other measures to reduce greenhouse gas emissions by 2030.

Guilbeault told the province that Ottawa is requiring all provinces to have some plan to price pollution. Beginning in 2023, the price on carbon will increase each year by $15 per tonne until it hits $170 per tonne in 2030.

In the absence of a cap-and-trade program, Nova Scotia was left with the option of accepting the federal carbon tax or coming up with a tax of its own design. The latter option would mean the province would have control over all the revenue generated by the tax. Ultimately, the province opted for none of those options in its proposal.

Federal tax includes rebate cheques

Guilbeault has acknowledged the affordability concerns Houston and his government have been raising since July, but he's also pointed out that quarterly rebate cheques paid out by the feds mean many people receive more money back than they pay out related to the federal tax.

Should a province get approval for its own tax design, it would get to determine how those revenues would be used. Internal documents obtained by CBC earlier this year show officials with Nova Scotia's Environment Department favoured using a carbon tax, which could generate $1 billion in revenue for the province, money that could be used to offset the impacts of the tax.

"Provinces have every opportunity to design systems that support families by returning revenues back to people," Guilbeault said in his statement. "For our part, the federal system already in place in some provinces is returning rebate cheques four times a year totaling between almost $800 to $1,100 for the average family of four, with eight out of 10 getting more back than they pay."

New Brunswick approach

New Brunswick adopted a consumer carbon tax in 2020 but reduced its provincial gas tax by four cents to offset the impact of the initial charge of 6.6 cents per litre.

Ottawa has warned other provinces that  — under the new, more stringent pricing standards starting in 2023 — they won't be allowed to imitate New Brunswick's offsetting gas tax cut.

But it hasn't forced New Brunswick to eliminate the four-cent offset, either.

As the carbon tax increased last year and this year, New Brunswick Premier Blaine Higgs's government didn't cut gas taxes further.

Instead, the government reduced income taxes to blunt the higher cost at the pump — something the federal plan allows. This year, the income tax cut was worth $40 million, equivalent to the new revenue from the carbon tax's jump from 8.8 to 11 cents this year.

The other question mark for New Brunswick is its rebate offsetting the carbon tax on natural gas for home heating.

The federal rules require that the tax apply to gas sales, but the province is using that revenue to pay gas distributor Liberty Gas to provide customers a rebate directly on their bills, eliminating the additional cost.

Ottawa allowed that when it approved the initial Higgs carbon tax model in 2020, but says the new more stringent standard won't allow any rebates that interfere with the "price signal" the carbon tax is supposed to send to consumers.

It remains to be seen whether New Brunswick will be forced to eliminate the rebate.

Meanwhile, in Newfoundland and Labrador

In Newfoundland and Labrador, the federal government accepted the province's carbon pricing plan in October 2018. Price changes began Jan. 1, 2019.

The province dropped its tax on gasoline and diesel, replacing it with a 4.42 cent and 5.37 cent carbon tax respectively, equating to $20 per tonne and rising by $10 per year, up to $50 this year. 

The plan also included exemptions for home heating fuel, which is not subject to a carbon tax. 

Certain industries were also exempt from the tax — aquaculture, agriculture, the fishery and offshore oil exploration among them. Instead, the government brought in a performance-based system for both offshore and onshore industries, to establish targets for greenhouse gas reductions.

N.S. government takes to the airwaves

Meanwhile, even before Nova Scotia's proposal to Ottawa was turned down, Houston's government recorded a radio ad touting its proposal and opposing a federal carbon tax.

The ads, which cost $13,300, started running on commercial radio stations on Monday, the day Ottawa turned down the province's proposal.

Nova Scotia NDP Leader Claudia Chender called the ads by Houston's government "a lot of smoke and mirrors to try to avoid our commitments as this deadline looms."

"They not only are fighting against this carbon tax, but they're refusing to come up with a substantive alternative," she said.

"We know, and the minister knows and the premier knows that what is required by the federal system is a price on carbon. Nothing in anything that has been submitted by our Houston government here prices carbon. So they're not doing their homework."

Nova Scotia Liberal environment critic Iain Rankin said the last-minute efforts by Houston's government have an air of desperation.

"It's been a year and they're desperate now to show that they want to have this battle with the federal government's policy that has been in place for over five years now," he said.

"It's not new news that carbon pricing is the law of the land in Canada, and to ask for more time when they are just kind of throwing up a Hail Mary, I think is disingenuous, to say the least."