N.L. pleads for carbon tax exemption for heating oil, despite 'limited flexibility'

As the Newfoundland and Labrador government pleads with Ottawa to continue exempting home heating fuels from the carbon tax, documents obtained by CBC reveal the province's "very limited flexibility" to maintain the exemption with the federal price on carbon pollution slated to triple by 2030.

Premier Andrew Furey says subjecting heating oil to a new tax, after prices skyrocketed in the last year, would place "undue economic burdens on the people of this province," noting that elderly, rural and low-income residents are far more likely to burn oil to heat their home.

Starting next year, the federal price on carbon — a policy that makes fossil fuels progressively more expensive to encourage Canadians to choose greener alternatives — will increase annually by $15 per tonne instead of $10, reaching $170 per tonne in 2030. The current price is $50 per tonne.

Ottawa sets the benchmarks, but allows each province to devise its own carbon-pricing model. Provincial governments had until Sept. 2 to submit proposals detailing how they plan to meet the new standards. The federal government must sign off on the plan.

While Ottawa's model returns carbon-tax revenue to residents in the form of cheques — four out of five people receive more money than they pay in — the Newfoundland and Labrador model reinvests revenues in provincial programs and services.

New proposal retains exemptions

In a letter to the federal environment minister, Furey wrote that the province's plan to meet the new federal benchmarks  "retains exemptions for furnace oil and other fuels that the federal government agreed to as recently as 2019." Meghan McCabe, a spokesperson for the Premier's Office, clarified Friday that the proposal submitted to Ottawa is exactly the same as the 2019 version.

"The current price signal to switch from oil heating to cleaner systems is far stronger than the signal the federal government intended to send through carbon tax requirements, and this signal is indeed having the impact that the federal government desires," Furey wrote Steven Guilbeault on Sept. 1. "Our off-oil program will be fully subscribed and we expect to switch 1,600 homes to clean heating this year."

About 48,000 homes in Newfoundland and Labrador use heating oil, according to an official with the Department of Environment and Climate Change.

In his letter, Furey writes that if the exemption on heating oil is lifted, residents will pay an extra 17.38 cents per litre of oil starting in April. Furnace oil on the Northeast Avalon currently costs $1.52 per litre, about 54 per cent more than this time last year.

"Further cost increases at this point will only provide diminishing returns in terms of decarbonization while placing undue economic burdens on the people of this province," Furey wrote.

Kaitlin Power, a spokesperson for Guilbeault, said the federal government is reviewing the plan but has not announced when a decision will be made. McCabe said the province "cannot speak for the federal government in terms of its response to the proposal." 

Extra $900 a year per household, on average, by 2030

A meeting note obtained by CBC/Radio-Canada shows that axing the exemption could cost households in the province on average $900 a year by the end of the decade. It also warns of the provincial government's shrinking ability to prolong the exemption.

"The new [federal carbon price] benchmark provides very limited flexibility to continue to exempt heating fuels in Newfoundland and Labrador," reads the document prepared on Oct. 26 and part of a series of briefings prepared for Furey ahead of the COP26 climate summit in Scotland. 

"The implications of the removal of this exemption on consumers would be significant, imposing an annual average cost of about $900 per household by 2030."

Outstanding ask for $50 million

Furey's letter to Guilbeault also highlights an outstanding request for $50 million in federal funding that, along with an equal provincial government contribution, would allow 19,000 households to transition off oil heat.

Furey wrote that Ottawa indicated it would "provide federal funding to Atlantic Canada to transition homes from oil to electric heating starting next year," but has yet to provide a firm commitment or timeline.

"Delays in the provision of that support are a principal obstacle to our further progress," he wrote, adding that skilled labour shortages and the province's limited ability for switching from oil to natural gas have also created problems.

In March, the province announced a rebate of up to $5,000 for switching from oil to electric heating. It had received 788 applications as of Aug. 31, according to the Department of Environment and Climate Change. About 100 residents received rebates of up to $2,500 under a previous version of the program, announced a year prior.

Guilbeault rejected earlier request for delay

In another letter sent to Guilbeault on Sept. 1, all four Atlantic Canadian premiers requested Ottawa delay any further increases to the federal price on carbon given "inflationary pressures" and the "affordability impacts of carbon pricing on households in our region, especially as almost 40 per cent of Atlantic Canadians experience energy poverty — by far the highest rate in the country."

Guilbeault rejected the request the same day, saying in a statement that the "Atlantic provinces, like all other provinces and territories, have had a year to prepare their submissions."

"The deadlines were clearly and repeatedly communicated and are based on the legal requirements to update the national pollution pricing system at regular, predictable intervals," he said.

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