Gas price spikes create carbon-tax turmoil for politicians

Soaring gas prices are scrambling the politics of carbon taxes in New Brunswick.

A federal Conservative MP who campaigned against Justin Trudeau's pricing plan now says it's the least-bad option for softening the blow to consumer pocketbooks while a litre of unleaded gas hovers around $1.70.

That in turn highlights Progressive Conservative Premier Blaine Higgs's own reversal on his promise from 2018: to ensure the federal scheme had no impact on taxpayers' bottom line.

New Brunswick Southwest  MP John Williamson startled Conservatives and Liberals alike last week when he called on Higgs to immediately scrap his own provincial carbon tax system so that Ottawa would impose its version, which includes rebates.

"The backstop will kick in, the feds will take it over, and as part of that change-up … cheques will begin to roll out to New Brunswick families," Williamson said.

Higgs dismissed that possibility, saying the faster solution is Ottawa suspending the pricing standard it imposes on the provinces. 

That standard requires provinces to charge an 8.8-cent charge on a litre of unleaded gasoline, increasing to 11 cents April 1.

The Trudeau government says that increase will go ahead despite calls for a pause.

Williamson says while his party still wants to "kill the Liberal carbon tax," the federal position leaves Higgs no choice but to let it take effect in New Brunswick so consumers here get rebates.

"This is a good way to help people right away," he said.

Federal Liberal Environment Minister Steven Guilbeault couldn't resist flagging Williamson's comments on social media.

"It's refreshing to see a Conservative MP acknowledge that our price on pollution puts money back in the pockets of middle class families," he tweeted. 

Williamson says if Higgs doesn't act now, he and his government will share the blame for high gas prices.

"They will own part of that tax increase," the MP said.

"Premier Blaine Higgs isn't responsible for the carbon tax or the annual increases but by managing it for the Liberals, he'll be perceived as driving the getaway car."

The Williamson-Higgs exchange is a reminder that the premier has yet to keep his 2018 election campaign promise to completely negate the impact of a federal carbon tax.

Higgs vowed on the campaign trail that "taxpayers of this province will not have increased taxes as a result of the federal government imposing it."

With the premier crafting his own carbon tax model and spending millions of the revenue, "it's not revenue neutral," Williamson said.

Acadia University political scientist Erin Crandall says the MP's comments pressuring a politically allied premier are unusual and reflect the policy uncertainty created by high gas prices.

"In the short term nobody is quite sure what the best answer is," she says.

"The question is what is the best response? It's not necessarily the case that there's one clear answer to that." 

Crandall says complicating the picture further is that the carbon pricing mechanisms are complicated for many voters to understand, while the impact of price spikes at the pump are clear and visible.

Under the federal pricing law, Ottawa sets the tax rate, but allows the provinces to run their own systems and decide what to do with the revenue.

In the four provinces that refused to implement their own tax – Alberta, Saskatchewan, Manitoba and Ontario – the federal government implemented its own carbon tax directly and rebates 90 per cent of the money it collects.

But the provinces that set up their own systems are free to keep and spend whatever portion of the revenue they want.

Higgs uses part of it to fund climate change projects and to cover the cost of a four-cent reduction to the provincial gas tax and a small income tax cut.

Williamson says the federal model is better because it would put almost all the money back into the pockets of New Brunswickers.

An independent review by the parliamentary budget officer in Ottawa found that people at the low end of the income scale get more money in rebates than they pay in carbon taxes.

"Right now it's those working Canadians on modest and low incomes that need the help the most and this will deliver assistance right away," Williamson said.

Current rebate levels in provinces that refused to adopt their own carbon taxes range from $600 in Ontario to $1,000 in Saskatchewan for a family of four.

Higgs argued last week that rebates are not an "immediate" solution because they'd require money "going to Ottawa and then coming back, and taking months for that to happen."

An immediate three-month suspension of the federal pricing standard would be faster, he said.

In a statement Monday the premier added that a provincial rebate would require legislation and would take time to set up.

It's not clear how fast federal rebate cheques would arrive if Ottawa's backstop took effect.The Liberals have promised to switch from a once-a-year credit on income tax returns to quarterly cheques.

Last week federal Intergovernmental Affairs Minister Dominic LeBlanc said Higgs has "a whole series of tools" he can use to lower the price at the pump as soon as he chooses.

That includes reducing or eliminating the provincial gas tax.

But Higgs said last week he can't afford to give up the gas tax revenue because it's "built into the expenses that we incur every day in the province."

He hinted the budget on March 22 will include new spending to address "many of the concerns that people are having," resulting in a smaller surplus.

"Every government, as they collect more revenue, tend to spend it," Williamson said.

When Higgs promised in 2018 to ensure New Brunswickers weren't out of pocket because of the federal carbon tax, the assumption was Ottawa would collect the money and transfer it to the provincial government to spend as it saw fit.

After the Trudeau Liberals opted to bypass the province with direct rebates instead, Higgs adopted his own system. 

Williamson says that means the Trudeau system —at least until federal Conservatives get the opportunity to kill it altogether — is the lesser of the two evils.

"Welcome to federal politics," he said. "These are normally the choices we have to make."