Ottawa warns provinces to not follow N.B.'s example of offsetting cost of carbon tax

Federal Environment and Climate Change Minister Jonathan Wilksinson is warning other provinces not to adopt the carbon-price sleight-of-hand that Premier Blaine Higgs used when he created his New Brunswick carbon tax last year.

Wilkinson says cutting gas taxes to reduce the impact of carbon pricing would be "problematic" if any provinces follow the New Brunswick example.

A year ago, the provincial PCs reluctantly adopted a pricing system that complied with the federal requirement for a 6.6-cent-per-litre levy at the pumps.

But they also cut the provincial gas excise tax by more than four cents, leaving consumers with a net two-cent cost.

Now that the Supreme Court of Canada has ruled that Ottawa can force provinces to meet its pricing standard, Saskatchewan Premier Scott Moe says he may adopt a similar manoeuvre.

Minister warns such cuts defeat purpose of carbon tax

On Thursday Moe called it "an immediate rebate right at the pump," the same way Higgs's then-environment minister Jeff Carr described the New Brunswick gas tax cut last year.

Wilkinson told CBC's Power and Politics that such a move "would defeat the whole purpose. It would defeat the price signal that exists which is to incent people to adopt more efficient behaviour." 

Asked why Ottawa allowed New Brunswick to do it last year and won't let Saskatchewan do it now, Wilkinson said that is "something that we are looking to change and to fix on a go-forward basis."

He didn't specify whether Ottawa would retroactively outlaw the New Brunswick gas-tax cut, but spokesperson Moira Kelly said the government plans to "strengthen" its requirements "post-2022," after its original five-year climate plan ends. 

No plan for further gas-tax cuts

Higgs said Friday he didn't think the federal government would act retroactively.

And he said the PC plan now and into the future is to leave the gas tax where it is and increase the carbon price incrementally as Ottawa requires. 

"We would be carrying on with an incremental increase in the carbon tax pricing, which will increase the price of fuel," he said.

The New Brunswick price will be 8.8 cents per litre of gasoline in the coming year, with last year's gas tax cut keeping the net cost to 4.2 cents. 

Last year the PCs said they would continue to cut the gas tax each year to keep the net cost to consumers at two cents indefinitely. 

But in December Wilkinson announced new pricing standards Ottawa would enforce through 2030, at levels beyond what a New Brunswick gas tax cut could offset.

Now Higgs is ruling out future gas tax cuts and describing the one last year as a one-time move designed to blunt the impact of a sudden 6.6-cent-per-litre price shock. 

He said last week annual two-cent increases are easier for consumers to absorb.

Higgs also said he is considering rebating the additional new revenue from this spring's carbon price increase directly to New Brunswickers, similar to what the federal government does in provinces that have refused to adopt their own pricing. 

"We are still contemplating the best way to get that back into the hands of people in the province and we want to have it make a different in real ways," he said Friday.