Critics weigh in on province's carbon tax deal

Critics of the MacLauchlan government came out swinging from both sides of the political ring Wednesday, a day after P.E.I. announced an agreement with the federal government that will lead to carbon taxes being applied on gas and diesel sold in the province.

'To get where we want to go as a country, we're going to need more aggressive and more stringent policies'

According to the province, if P.E.I. didn't implement a tax on gas and diesel, Ottawa was prepared to impose its full federal carbon tax on the province, which would have applied a carbon tax to home heating as well. (CBC)

Critics of the MacLauchlan government came out swinging from both sides of the political ring Wednesday, a day after P.E.I. announced an agreement with the federal government that will lead to carbon taxes being applied on gas and diesel sold in the province.

According to the province, Ottawa insisted P.E.I. implement a carbon tax on gas and diesel of four cents per litre by April 2019.

However, Ottawa is allowing the province to offset that by dropping its provincial excise tax by three cents, meaning the price per litre will only jump by one cent.

The pump price will increase another cent in 2020, the last year of the two year deal.

According to P.E.I., if it didn't implement the tax increase, Ottawa was prepared to impose its full federal carbon tax on the province, which would have applied a carbon tax to home heating as well.

The Progressive Conservatives say the MacLauchlan government went too far by increasing pump prices, while the Greens say the province didn't go far enough.

'Disastrous for vulnerable Islanders'

Green Leader Peter Bevan-Baker said P.E.I. should have allowed Ottawa to implement its full federal carbon tax here, so households could collect the rebates that go with that plan.

"Our province has done an extraordinary thing, in that they've managed to negotiate a deal with the federal government which is considerably worse than the federal backstop," said Bevan-Baker.

Households in provinces under the federal system will receive annual rebates worth hundreds of dollars.

'Our province has done an extraordinary thing, in that they’ve managed to negotiate a deal with the federal government which is considerably worse than the federal backstop,' says Green Party Leader Peter Bevan-Baker. (Shane Hennessey/CBC)

The federal government said for 70 per cent of households, the rebates will be worth more than what that family paid in carbon taxes for the year.

"The critical thing here is that on Prince Edward Island we're going to see increases in costs without the benefit of that rebate cheque. So this is disastrous for vulnerable Islanders," said Bevan-Baker.

On Tuesday, MacLauchlan portrayed the gas tax increase as the lesser of two evils — saying it would create $7.3 million in additional tax revenue over two years.

He said the alternative, the full federal carbon backstop, would cost Islanders $46 million in increased taxes over that time period.

'I'm quite disappointed'

MacLauchlan said the $7.3 million will be returned to Islanders, but no details have been offered on how that will happen.

Outgoing PC Leader James Aylward said the two year deal seems to punt the issue of carbon pricing past the next federal and provincial elections.

"I'm quite disappointed," Aylward said.

"Unfortunately it means Islanders are going to be paying more in taxes as we move forward."

He also warned, Islanders would be impacted from carbon pricing in other provinces.

'Unfortunately it means Islanders are going to be paying more in taxes as we move forward,' says outgoing PC Leader James Aylward. (Shane Hennessey/CBC)

"We source our gas, we source our electricity from New Brunswick. All of the goods that are consumed here on P.E.I. come across the Confederation Bridge."

New Brunswick is one of four provinces where the full federal backstop carbon tax is being implemented.

Earlier this year, Maritime Electric said it had negotiated a new five year power purchase agreement with NB Power which factored in "the potential risk for costs associated with a carbon tax."

On one hand, they're increasing the price on carbon, and on the other they are decreasing the price on carbon, and the two will cancel each other out to some extent.- Dale Beguin, Canada's Ecofiscal Commission

While the utility hasn't said how that will affect rates on P.E.I., NB Power is projecting nine years of annual increases of 3.7 per cent for its customers.

An application from Maritime Electric for a new rate increase is expected to land with the Island Regulatory and Appeals Commission this fall.

On Twitter, UPEI economist Jim Sentance didn't hold back voicing his displeasure with P.E.I.'s new carbon plan.

Dale Beguin from Canada's Ecofiscal Commission, a group of economists consulted by the federal government in the development of its carbon strategy, made similar points, but more diplomatically.

He told CBC News P.E.I.'s plan would have a limited impact on reducing emissions because the province is effectively using carbon tax revenues to decrease fuel prices.

"On one hand, they're increasing the price on carbon, and on the other they are decreasing the price on carbon, and the two will cancel each other out to some extent."

Beguin said even a one cent increase would have a "small impact" on emissions.

"Every change in price has changes in behaviour, but the bigger the change in price, the bigger the change in the behaviour," said Beguin.

"To get where we want to go as a country, we're going to need more aggressive and more stringent policies over the long-term, absolutely."

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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