Nfld. & Labrador

Why the lax tax? Finance minister says Muskrat burden played role in carbon pricing

The average consumer won't see a big difference, and many industries will be exempt from the carbon tax plan.

Average consumer won't see big difference, many industries exempt

Finance Minister Tom Osborne and Natural Resources Minister Siobhan Coady speak to reporters about the province's carbon tax plan. (CBC)

The federal government has accepted Newfoundland and Labrador's plan for carbon pricing, which comes into effect Jan. 1, the provincial government announced Tuesday.

The tax plan will be rather lax for the average consumer — the temporary four-cent gas tax will be repealed, and replaced with a 4.42-cent carbon tax.

"The average consumer in the province, I mean if you're burning 150 litres of gasoline a week, you'll pay eight dollars a year difference than what you're paying today," said Finance Minister Tom Osborne.

Many industries will be exempt from the carbon tax, including aquaculture, agriculture and offshore exploration.

Osborne said the province was able to convince the feds the cost of Muskrat Falls is too large for the taxpayers to handle another hike.

The Holyrood thermal generating station burns up to 18,000 barrels of bunker C oil per day to generate electricity for the Newfoundland power system. (Twitter/@markwbutt)

Another factor is the closure of the Holyrood generating station — the largest greenhouse gas emitter in the province — when Muskrat Falls comes online.

"The environmental impact [is] probably the only good thing for the consumers of this province, but we've been able to show the burden of Muskrat Falls," Osborne said. "Plus the fact that the province is going to be 98 per cent green energy after Muskrat Falls." 

No carbon tax on home heating fuels for consumers

Under the plan, residents will not be taxed on home heating fuels, as they would have been under the federal plan.

The province's five-cent additional tax on diesel fuel will be replaced with a 5.37-cent carbon tax. Both of the new carbon taxes equate to $20 per tonne, according to a government news release.

The provincial plan also includes exemptions to the carbon tax for off-grid diesel electricity generation, aviation fuel, interprovincial marine transportation and municipalities.

Exemptions for some industries

For industry, a performance-based system for both offshore and onshore industries will help establish targets for greenhouse gas reductions.

Natural Resources Minister Siobhan Coady used the oil and gas industry as an example when speaking with reporters.

She said businesses will have to reduce emissions by six per cent in the first year of the plan, then gradually increasing by two percentage points each year until they reach a 12 per cent reduction.

If they cannot meet the targets, they'll have to pay up.

"So if, for example, an emitter does not meet those targets they choose to either put money into an emissions reduction fund or they can buy credits that will be available because of the Holyrood closure."

There will also be exemptions from carbon tax for agriculture, fishing, forestry, offshore exploration, mineral exploration and methane gas.

A press release by the provincial government says it will also continue to partner with the feds to create green jobs and reduce the impact of climate change and climate emissions through initiatives like the Climate Change Action Plan.

The implementation of the provincial carbon plan is still contingent on the implementation of a national carbon pricing system.

Read more from CBC Newfoundland and Labrador