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Ottawa to impose federal carbon fuel charge on three new Atlantic provinces

Canada's Minister of Natural Resources O'Regan attends news conference on Parliament Hill in Ottawa
Canada's Minister of Natural Resources O'Regan attends news conference on Parliament Hill in Ottawa

Canada’s federal carbon fuel charge will apply to three new Atlantic provinces next year, including Newfoundland and Labrador, Nova Scotia and Prince Edward Island, after they failed to put forward consumer carbon levies that meet Ottawa’s latest climate benchmarks.

The federal government made the announcement Tuesday as it laid out how its progressive pollution pricing system is expected to hit Canadian pocketbooks next year, including details surrounding how carbon tax rebate cheques will be distributed to households.

Residents in Newfoundland and Labrador, Nova Scotia and P.E.I. will begin receiving Climate Action Incentive payments for the first time in July, joining the residents of Ontario, Manitoba, Saskatchewan, Alberta, Yukon and Nunavut who will see their existing rebates increase starting in April.

British Columbia, New Brunswick, the Northwest Territories and Quebec will continue to implement their own pollution pricing systems.

Next year’s hike in the carbon levy comes as Canadians are already paying higher prices for gasoline, diesel, natural gas and heating oil.

“First, inflation is tough,” said Labour Minister Seamus O’Regan at a press conference. “Households are feeling the pinch and everything that we do right now as a government has to take that into consideration. Second, climate change is real and it’s not taking a break because of inflation. This is about making life more affordable while lowering emissions.”

The Justin Trudeau government first introduced a progressive price on carbon pollution in 2019 to encourage households and businesses to drive down their emissions. Each province and territory has the option of adopting the federal pricing system or designing its own based on local needs.

The levy is expected to rise to $65 per tonne next year, and then increase by $15 annually until it reaches $170 in 2030.

For most provinces, starting April 1, 2023, the federal carbon tax will add 14.3 cents per litre of gasoline, an increase of 3.3 cents compared to this year.

There are two systems for pricing carbon in Canada: the fuel charge, a consumer carbon tax on the gasoline, diesel and natural gas that Canadians consume, and an output-based pricing system (OBPS) applied to large industrial emitters.

The proceeds of carbon pricing are directly returned to households under Ottawa’s carbon levy system.

The federal government said quarterly climate rebate cheques for a family of four in 2023 will increase to $386 in Alberta, $264 in Manitoba, $244 in Ontario and $340 in Saskatchewan. A family of four will initially receive $328 in Newfoundland and Labrador, $248 in Nova Scotia and $240 in Prince Edward Island.

Residents in the three new Atlantic provinces won’t see higher fuel prices until the spring, O’Regan said, “so it won’t have any effect on prices this winter.”

The federal announcement last month promised $250 million to help low-income households, particularly in Atlantic Canada, that are using fossil fuels such as furnace oil to heat their homes switch to more efficient heating systems like electric heat pumps.

Ottawa had initially distributed carbon levy rebates on tax returns, but the rebates have been distributed since July as quarterly payments throughout the year to help make them more visible to Canadians, Environment and Climate Change Minister Steven Guilbeault said Tuesday.

Guilbeault also called out Nova Scotia, in particular, for resisting the implementation of a consumer carbon levy system despite Ottawa’s efforts to let each jurisdiction implement its own system or adopt the federal fuel surcharge. Nova Scotia was also slow to propose a system for industrial emitters, he said.

“It was interesting that we had an easier time negotiating this with conservative governments in Alberta and Saskatchewan than we did in Nova Scotia,” he said. “I find it unconscionable, really, that (Premier Tim Houston) would have this type of attitude, after what we’ve seen in Atlantic Canada, with (the) most severe hurricane in the history of Canada. We’ve never seen anything like this. Lives were lost and this is because of climate change.”

Houston expressed “profound disappointment” in Ottawa’s decision to impose a consumer carbon tax on the province.

“A new fuel tax when there are record highs at the pumps also makes no sense,” he said in a statement on Tuesday. “We have been told this is intended to change behaviour, but even with today’s prices, we aren’t seeing any significant change. The federal government’s failure to understand this shows they’re simply out of touch. Fuel rebates are welcome, but they won’t ease the pressure Nova Scotians are feeling now at the pump.”

Canada has had the worst record of any G7 nation in reducing emissions from greenhouse gases since 2015, according to a report last year by the country’s Commissioner of the Environment and Sustainable Development Jerry DeMarco.

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