Future carbon tax could spike gas, electricity prices in Nova Scotia, leaked documents suggest

Nova Scotia's environment minister and department officials have been tight-lipped about what new carbon pricing for the province could mean in 2023 and beyond, but internal government documents show big changes could be coming.

Documents obtained by CBC News show that if Nova Scotia opts for a federal carbon tax, it could add 40 cents to the price of a litre of gasoline by 2030 and increase the price of electricity by a compound average of 17.5 per cent from 2023 to 2030.

Premier Tim Houston and Environment Minister Tim Halman told reporters Thursday they are not happy the documents were made public and they've instructed staff to investigate how it happened.

"I'm very concerned about that," Houston said following a cabinet meeting in Halifax.

"First off, it's old. Second off, it contains very, very sensitive information — information that has the potential to have an impact on the market."

CBC News received the documents, which are about a year old, on Wednesday. It says the province's Environment Department contracted Navius Research to analyze three options for future carbon pricing.

Since 2019, the province has priced carbon using a cap and trade program of its own making for industrial polluters. That program was able to avoid the sticker shock other provinces experienced with their own carbon price programs because of work the government has done through the years to develop renewable energy.

Nova Scotia's program, for example, added a little more than one cent to the price of a litre of gasoline. By comparison, the federal program, or backstop, added close to nine cents to the price at the pumps for other provinces.

Despite this, the documents recommend moving away from the internal cap-and-trade program because of a danger that participants will not be able to comply with pending regulations.

Beginning in 2023, the federal government is increasing the price of carbon by $15 per tonne until it hits $170 in 2030. Nova Scotia's government must have an agreement with Ottawa on one of three models by the end of the year: continuing with cap and trade; a straight carbon tax; or a hybrid of the two.

Carbon tax could generate $1.1 billion

Halman insisted on Thursday that his government still has not settled on which option it will choose, but he and Houston said there's enough time to get a new deal in place with Ottawa by the end of the year. Affordability for Nova Scotians is the top priority for whatever pricing model is selected, the minister said.

"This is probably the biggest public policy decision I think I may ever be a part of. So we want to make sure we get this correct and in order to do that, you need to take that time to do that analysis."

While Halman said that analysis won't be shared with the public until the government settles on what carbon-pricing model it will select, the internal documents outline what the stricter federal guidelines could mean for Nova Scotia.

The continued use of an internal cap and trade system, for example, is estimated to generate $196 million in revenue by 2030. It would add 6.8 cents to the price of a litre of gas by 2030 and increase the price of electricity by a compound average of 3.2 per cent from 2023 to 2030.

Using the federal option, meanwhile, would generate $1.1 billion in revenue by 2030 along with the predicted major spikes in gasoline and electricity prices. The assumptions do not consider revenue recycling, such as rebate cheques or mitigation projects to help Nova Scotians shoulder the burden.

Another alternative the documents present is for the province to join the cap-and-trade system used by Quebec and California.

The analysis says there is a high risk that continuing with an internal cap-and-trade program will not align with benchmark requirements drafted by Environment and Climate Change Canada. It says linking a cap-and-trade program with California and Quebec could lead to a wealth transfer outside of Nova Scotia.

The federal backstop or hybrid option, meanwhile, would have the highest direct impact on fuel costs but produce higher revenues that could be used to help mitigate costs, according to the documents. That option also presents the least amount of regulatory burden on companies and could allow for industry protection based on Nova Scotia circumstances, it says.

Public deserves more information

Opposition politicians said the information contained in the documents is the kind of detail the public should already have.

NDP Leader Gary Burrill said Halman and Houston's concerns about how the information was leaked are misplaced.

"The principle concern isn't that it's become available, it's what it says," he told reporters.

"And it says what people have been worried about for some time — that there is an inadequacy in the cap-and-trade system and that the chickens are going to come home to roost from this within a very short period of time."

Liberal MLA Braedon Clark said the government should be more open with the public about the potential effects of all options being considered.

"I just wish the government would treat Nova Scotians like adults and give them the real goods as to what's going on and what they can expect in six month's time."

Clark said it seems unlikely the government has not already decided which model it will use, given the amount of time required to put such measures in place.