BY MICHELLE ROBICHAUD
Recent volatility in fuel prices has stunned most Atlantic Canadians and risen as a top concern for provincial governments across our region. While these extreme fluctuations are shocking, regional solutions are less so, though not without their own challenges.
Russia’s war on Ukraine and corresponding import bans on Russian oil and gas from many parts of the world, including the United States and Canada, sent fuel prices to record highs. Unfortunately, these prices foreshadow the annual increases on the way from now until 2030 for nearly all fossil fuels, including heating oil, gasoline and natural gas.
Residents and businesses across Atlantic Canada must brace themselves and prepare for the impacts of rising fuel costs over the next eight years. Under the federal carbon pricing plans, most provinces will see a carbon tax on gasoline of roughly 40 cents per litre in 2030; about a 350 per cent increase from today. There may also be significant additional costs related to the federal Clean Fuel Standard, which by Environment and Climate Change Canada’s own admission will impact Atlantic Canada more heavily than any other region in Canada.
These costs are on top of the federal excise tax, provincial gasoline taxes and HST, which increases as the carbon tax increases because the excise tax is calculated on top of total fuel costs.
Higher fuel costs a reality
The carbon tax increases were to be implemented over time for a reason. Reducing emissions is a laudable goal, and many economists around the world believe a price on carbon provides a simple policy tool to help achieve net zero by 2050. However, the dramatic spikes in fuel pricing witnessed recently reduce the need for – and the effectiveness of – a carbon tax.
So what can be done?
A foundational principle for an effective carbon pricing policy is to gradually and steadily increase the cost of carbon-based energy sources over time.
While higher fuel costs are a reality of our future, residents and businesses need time to adjust. They need help finding ways to reduce their greenhouse gas emissions and often the solution involves an investment in technology. In order to ensure going green can be accessible to everyone, education and incentives are required to help an affordable transition.
New Brunswick Premier Blaine Higgs asked the federal government to temporarily remove the carbon tax to help lower fuel costs immediately. The proposed measure would provide residents with a nine cent reduction per litre now and 11 cents after April 1, 2022. However, the request was rejected and the federal government confirmed that the carbon tax increase to $50 per tonne of CO2 would indeed proceed as planned.
Longer-term stability needed
The Government of Alberta announced it is suspending its provincial gas tax entirely for the time being, while the price of crude remains above $90 US per barrel. While this is undoubtedly a positive step to help residents and businesses in Alberta manage the sharp fuel price increase, some believe this policy would be unaffordable for provincial governments in Atlantic Canada..
There could be a large window to help calm fuel price instability if the provinces had more regulatory flexibility over fuel pricing. Allowing additional measures to offer relief from federal and provincial fuel taxes could save up to 55 cents per litre on gasoline in Nova Scotia and New Brunswick when the price hits $2 per litre. In Prince Edward Island, the combined provincial and federal taxes would be up to 51 cents per litre at that price.
The Atlantica Centre for Energy is calling on our leaders to meet and discuss reasonable and timely solutions that offer longer-term stability to our already disadvantaged Atlantic Canadian provinces. The recently released report: Clean Power Roadmap for Atlantic Canada outlines several key principles and encourages regional cooperation. The roadmap is a great first step toward creating long-term energy security.
In the Energy Regulatory Reform: An Atlantic Canadian Imperative report from 2021, the Atlantica Centre for Energy recommended the Atlantic provinces work collaboratively to modernize fuel pricing regulations to adapt to other emission reduction policies.
Sense of urgency needed
This work is currently underway, but there needs to be an increased sense of urgency for the governments of New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador. We need immediate and effective decisions to help ease the strain on Atlantic Canadians, while respecting the goals of carbon pricing and our need to reduce emissions.
Easing the pain of massive price swings rests largely in the hands of the federal and provincial governments working together to proactively address this issue. Developing new policies takes time, but we have seen how quickly governments can make regulatory decisions when world events affect our residents, businesses and economy.
The consequences of not using some of the options available in the face of the current volatility on the global energy markets are dire.
Michelle Robichaud is incoming President of the Atlantica Centre for Energy. The Centre provides a unique meeting ground for industry, government, the education and research sectors, and the community at large to foster partnerships and proactively engage in energy-related issues. The Centre’s membership represents the largest employers, energy producers, distributors, and consumers in the region. More information is available at www.atlanticaenergy.org.