Raising, then lowering, fuel taxes won't reduce emissions, says P.E.I. opposition

Opposition parties are criticizing the P.E.I. government’s plan to both increase — and decrease — the cost of fossil fuels as a politically expedient plan that won’t reduce the province’s emissions.

2 bills before the legislature would simultaneously increase and decrease fuel taxes

Two government-sponsored bills before the P.E.I. legislature would affect fuel prices — one adding a new carbon tax to gas and diesel prices, the second reducing existing fuel taxes to mostly negate the economic impact of the carbon tax. (Graham Hughes/Canadian Press)

The leader of P.E.I.'s  Green Party criticized government's plan to both increase — and decrease — the cost of fossil fuels as a politically expedient plan that won't reduce the province's emissions.

Two bills are currently before the P.E.I. legislature which would change the taxes charged on gas and diesel.

"This plan doesn't make sense economically, it doesn't make sense environmentally. The only way this plan might make sense is politically," Peter Bevan-Baker told the legislature Friday.

The Climate Leadership Act would implement a new carbon tax of 4.4 cents per litre on gas and 5.4 cents per litre on diesel starting April 1, 2019.

In the preamble to the bill, government acknowledges "carbon pricing is widely recognized as an efficient way to reduce greenhouse gas emissions and help achieve our objectives to protect the environment."

What goes up...

There's no preamble to another bill before the House, An Act to Amend the Gas Tax Act, which would reduce the province's existing excise tax on gas and diesel.

Green leader Peter Bevan-Baker argues the P.E.I. government's plan to both increase and lower taxes on gas and diesel doesn't make sense from an economic or environmental perspective. (Government of P.E.I.)

With both new laws in effect, fuel prices would increase by just one cent per litre in 2019 and another cent per litre in 2020.

"We have two separate bills before this House to accomplish, apparently, government's plan to combat climate change: one to raise the cost of fossil fuels, and the other to reduce it back down again," Bevan-Baker said during question period.

"Why are we debating two bills that are so clearly at cross purposes to each other?" he asked the premier.

"We're creating some space in order then to bring in the carbon levy," the premier responded, comparing it to the run-up required before executing a high jump.

He disputed the assertion from the Greens that government is using the revenues from the Ottawa-mandated carbon tax to cut fuel prices.

Ottawa forced hand

"Leaving three cents in Islanders pockets — we do not consider that to be a subsidy," MacLauchlan said. "Neither do we consider it to be a subsidy encouraging bad behaviour, which is exactly what the Green Party thinks."

Premier Wade MacLauchlan argues his government's plan will 'create space' for the new carbon levy, while allowing Islanders to keep some money in their pockets. (P.E.I. Government)

P.E.I. had submitted a climate plan to Ottawa that did not include putting a price on carbon, maintaining the province could reduce emissions without one.

But Ottawa rejected that plan. According to documents tabled by MacLauchlan in the legislature this week, the province submitted its revised plan just one day before Ottawa announced in which provinces it was imposing its federal carbon tax.

P.E.I.'s revised plan commits the province to implementing the federal benchmark carbon price on fuels, with an exemption for heating oil and propane, to be reviewed in 2020.

But the revised plan doesn't specify the province would decrease existing fuel taxes to mostly negate the impact of the carbon tax.

Free licences, cheaper registrations

This week the province announced its plans for the $3.2 million in revenues to be generated from the net increase in fuel taxes of one cent per litre in the first year — eliminating fees for driver's licences and reducing fees for vehicle registrations by 20 per cent. Registering an electric vehicle will be free in the province.

"Vehicle owners are the ones who will feel the most impact of the carbon levy, and these are the Islanders we are giving back to," Finance Minister Heath MacDonald explained to the House.

PC environment critic Brad Trivers took issue with that. 

"That means the people who are actually reducing their carbon emissions, and perhaps not even driving cars, won't see any benefit or reward at all."

While his party is against a carbon tax, Trivers said if government is forced to implement one, the revenues should be used to reduce other taxes — for example, by further increasing P.E.I.'s basic personal income tax exemption.

"Because it impacts everybody, and it gives it back equally to everybody, not just people who are driving."

Trivers said he agrees with the Greens' assessment that government's plan won't reduce emissions.

'Gain favour' in next election

"The federal government really bent over backwards to allow Prince Edward Island not to implement a carbon tax, essentially," Trivers said.

"I think the driving impetus behind that was, they want to make sure they give the Liberals the best chance to win in the next election," he said, noting that P.E.I.'s deal with Ottawa on carbon pricing is only for two years. An election is expected as soon as next spring.

"It's a political move, it's meant to try and gain favour in the next election."

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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.