Analysis

P.E.I.'s carbon plan doesn't meet federal guideline, says expert

One of the leading experts on carbon pricing in Canada says Islanders should be prepared to start paying Ottawa’s carbon tax starting January 1, 2019.

Islanders could be paying federal carbon tax starting Jan. 1, 2019

P.E.I. says it can reduce emissions without including a carbon tax on fuel. An economist with Canada's Ecofiscal Commission says Islanders should prepare for Ottawa to impose its own federal carbon tax in the province starting Jan. 1, 2019. (CBC)

One of the leading experts on carbon pricing in Canada says Islanders should be prepared to start paying Ottawa's carbon tax starting January 1, 2019.

Friday, P.E.I. unveiled its climate change action plan, which does not include putting additional taxes on carbon emissions from things like gasoline and home heating fuel.

Dale Beugin is executive director of Canada's Ecofiscal Commission, a group of economists advocating for carbon pricing as a practical and cost-effective measure to reduce carbon emissions and spur innovation.

P.E.I.'s plan 'insufficient' 

Beugin expects federal officials "to take a close look" at P.E.I.'s plan "and decide that this doesn't price carbon across a sufficiently broad set of emissions."

Dale Beugin of Canada's Ecofiscal Commission says P.E.I.'s climate action plan doesn't put a price on as broad a range of carbon emissions as required under Ottawa's rules. (submitted by Dale Beugin)

Ottawa has given the provinces until Sept. 1 to submit their plans for carbon pricing. In any jurisdictions which don't meet federal standards, the feds say they'll implement their own measures, referred to as the federal carbon pricing backstop.

In its climate change action plan released on Friday, P.E.I. said it would implement part of the federal backstop — adopting federal emissions rules for industrial emitters. Only one business in the province, Cavendish Farms, is big enough to be included under those rules.

But including only industrial emitters gives P.E.I. "an insufficient carbon pricing plan, to put not too fine a point on it," Beugin said.

Must include fossil fuels

The pan-Canadian agreement on climate change between Ottawa and the provinces is clear on what emissions need to be included in carbon pricing, Beugin said.

P.E.I. Environment Minister Richard Brown says P.E.I. could use a carrot or a stick approach to carbon pricing, and he believes in the carrot — giving Islanders incentives to reduce carbon use instead of a tax. (Natalia Goodwin/CBC)

"That's including all combustion of fossil fuels, that's including cars using gasoline, and buildings using natural gas," he said. "And those emissions are not covered by [P.E.I.'s] proposal."

For months leading up to the release of its climate action plan, the P.E.I. government touted what it considers the province's already-impressive record of tackling carbon emissions, particularly with regards to the province's wind energy generation.

"We're working with Ottawa right now to show them all the good stuff that Prince Edward Island has done since 2005," said P.E.I. Environment Minister Richard Brown, referring to the benchmark year for Canada's and P.E.I.'s carbon reduction targets.

Statistics Canada figures show P.E.I.'s carbon emissions hit 1.8 million tonnes in 2015, ten per cent below 2005 levels. The province has pledged to reduce emissions 30 per cent below 2005 levels by 2030.

"Our plan's not about increasing furnace oil prices and increasing fuel prices for Islanders," Brown said, saying the province could achieve its targets without a carbon tax.

Second-lowest emissions, but with a caveat

P.E.I. has been touting the fact it has the second-lowest per capita carbon emissions in the country. But that figure includes a caveat the province hasn't been talking about.

P.E.I. says it will adopt federal carbon emissions rules for Cavendish Farms, the only large industrial emitter in the province. ((CBC))

While roughly 25 per cent of the province's electricity comes from wind generation, the rest is generated on the mainland, and carbon emissions to generate that electricity are not included in P.E.I.'s total.

Internal government documents obtained by CBC through a freedom of information request show that based on 2013 levels, P.E.I.'s per capita emissions would be 42 per cent higher if carbon from electricity generated in New Brunswick were taken into account.

without NB powerincluding NB powerincrease
P.E.I. per capita carbon emissions, 201312 tonnes17 tonnes42%

*source: P.E.I. Climate Change Secretariat

Regardless of what P.E.I.'s record of environmental stewardship may be, Beugin expects Ottawa will impose its carbon tax on the province if it doesn't amend its proposal — and he's not the only economist who thinks so.

The cost of Ottawa's plan

So how much might it cost Islanders if Ottawa brings its carbon tax to the province?

The tax would be introduced at $20 per tonne of emissions starting January 1, 2019.

Here's what P.E.I.'s internal calculations, again obtained through freedom of information, suggest that tax would do to fuel prices:

2019 prices increases with carbon at $20 / tonne2022 increases with carbon at $50 / tonne
Gasoline+ 4.6 cents / litre+ 11.5 cents / litre
Diesel+ 5.3 cents / litre+ 13.3 cents / litre
Heating OIl+ 5.5 cents / litre+ 13.6 cents / litre

*source: P.E.I. Climate Change Secretariat

If Ottawa did impose its backstop carbon price on Islanders, the province would receive the revenues. Those same internal calculations show those could amount to $23.5 million in the first full year, rising to $58 million per year in 2022 when carbon prices reach $50 per tonne.

Beugin said those revenues create opportunities for P.E.I., which could follow the lead of provinces like B.C. which initially used carbon tax revenues to reduce personal and corporate taxes.

Or, the province could use the money to invest in low-carbon technologies as Ontario and Quebec have done, he said.

'Going to cost more'

But the premise behind a carbon tax isn't to raise revenue, even if that money were to be put toward efforts to reduce carbon emissions — it's to make purchases that create carbon more expensive. That's intended to reduce emissions by encouraging households and industries to choose alternatives which are less harmful.

In that capacity, Beugin said carbon pricing is the most cost-effective way to reduce emissions.

"It's really important not to think about [carbon pricing] as cost and only cost," Beugin said. "Any other policy that's going to achieve these emissions reductions is going to cost more."

More P.E.I. news

Corrections

  • A previous version of this story incorrectly listed the 2019 price for home heating oil at +5.2 cents/litre. In fact, it is +5.5 cents/litre.
    May 16, 2018 10:51 AM AT

About the Author

Kerry Campbell

Provincial Affairs Reporter

Kerry Campbell is the provincial affairs reporter for CBC P.E.I., covering politics and the provincial legislature. kerry.campbell@cbc.ca