Compared with other places that have debated carbon pricing globally, New Brunswick is unusual. The province is small: in 2017, the province’s total carbon pollution was less than the individual carbon pollution from any of the 24 largest US power plants. And the province’s carbon pollution comes from only a handful of large, industrial facilities, including a provincially owned power plant in Belledune and a privately owned oil refinery in Saint John. Between this refinery and forestry-related activities, two companies — J.D. Irving and Irving Oil — are responsible for 23 percent of all provincial emissions.
This makes New Brunswick a hard place to implement carbon pricing. The few large carbon polluters enjoy structural power within the economy and the political system. Energy industries have mostly been viewed as sources of economic opportunity rather than as drivers of global climate change. And, with a median household income of $59,347 — the lowest in Canada — NB consumers are particularly price sensitive.
Yet, for these reasons, New Brunswick’s experience with carbon pricing policy is also a more important case than the province’s size might suggest. A recipe for carbon pricing success in a context such as New Brunswick’s could provide valuable insights for climate policy-making in other difficult contexts.
Unfortunately, New Brunswick’s timid foray into carbon pricing mostly confirms how hard passing climate policy can be.
Provincial efforts remain weak. The province’s carbon tax was politically controversial even though it sidestepped new consumer costs. Ultimately, both consumers and large polluters ended up subject to the federal government’s carbon price. Rather than offering lessons about provincial policy action, the New Brunswick experience better illustrates the power of national political coalitions to impose costs on subnational actors who would otherwise avoid costly reforms.
New Brunswick’s Climate Change Act
New Brunswick did join other eastern Canadian provinces as an observer to the US Regional Greenhouse Gas Initiative. Yet the province took little climate policy action throughout the 2000s and early 2010s. This changed in 2016, during the federal government’s push to coordinate provincial climate policy-making. An all-party Select Committee on Climate Change was established in April and reported to the government in October 2016 with diverse adaptation and mitigation recommendations. These included the establishment of a provincial carbon price and the phase-out of coal-fired electricity generation by 2030.Remove featured image
Brian Gallant, who was Liberal Premier at the time, responded in December 2016 with a sweeping climate change plan that promised to integrate climate change into government decision-making, set up a climate-focused cabinet committee, phase out coal-powered electricity and establish a provincial carbon price. While well received by climate policy advocates, Gallant’s plan was short on detail. The plan also rejected some Select Committee recommendations. For instance, it continued to support natural-gas-fired power generation and left open a delay in the coal phase-out to 2040.
When the government finally fleshed out its plan in 2017, Gallant’s efforts underwhelmed many observers. The province’s Climate Change Act was a slim legislative bill. First, it established carbon pollution targets for the province for 2020 (14.8 megatonnes), 2030 (10.7 megatonnes) and 2050 (5.5 megatonnes). These targets can be benchmarked against the province’s current carbon pollution levels, which fluctuated from 14.2 megatonnes in 2015 to 15.2 megatonnes in 2016, then back to 14.3 megatonnes in 2017.
Second, it established a carbon tax on consumers by reallocating some gasoline and diesel taxes toward a provincial Climate Change Fund. This gasoline tax reallocation increases from 2.3 cents in 2018 to 11.64 cents from 2022 onwards. The Climate Change Fund was given a broad remit to undertake any climate mitigation or adaptation spending.
The government’s approach proved controversial. The NB carbon “tax” was not clearly a carbon price. It didn’t increase the cost of releasing pollution into the atmosphere. It simply labelled a fraction of existing gasoline taxes as a carbon price. New Brunswick consumers would not pay any more at the pump. And any impact of the policy on NB carbon pollution would occur through government spending from gas tax revenues, not through shifting incentives to pollute.
The provincial Greens criticized the proposal as an “empty accounting exercise.” And, in contradiction to the federal guidelines for provincial carbon pricing, the policy exempted New Brunswick’s natural gas. Ultimately, the Trudeau government rejected the proposal as inadequate. Instead, New Brunswick consumers were included by Ottawa in the federal carbon levy “backstop.” This means that the federal government now imposes a carbon tax on New Brunswick consumers and then redistributes these revenues as income tax rebates. The federal government estimates that the average NB household will pay $202 in carbon taxes in 2019, but will receive a rebate of $248, a net household benefit of $46. By 2022, this net benefit will increase to $113.
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The Climate Change Act was also silent on large emitters. Despite some discussions about having New Brunswick join Nova Scotia’s emissions trading scheme, the province ultimately deferred to the federal government on carbon pricing for industrial actors. Facilities that release more than 50,000 tonnes of carbon per year are now subject to the federal output-based pricing system. This system sets emissions standards for particular industrial processes. Companies are then allowed to buy or sell pollution permits for carbon pollution they release above or below this threshold. The system can be viewed as an emissions trading scheme focused on marginal pollution levels rather than absolute pollution levels. In New Brunswick, only five companies release enough pollution to have facilities covered by this system.
Adopting and then contesting the federal carbon price
Despite conversations about a New-Brunswick-specific carbon pricing approach, the province found itself subject to both the federal carbon levy and the output-based pricing system.
These federal frameworks soon became the subject of political controversy, particularly after the election of a new Progressive Conservative government under Premier Blaine Higgs in 2018. Higgs joined constitutional challenges to Ottawa’s carbon pricing policies, but signalled he would abandon this effort after similar challenges failed in Saskatchewan and Ontario.
The current government wants to replace the federal framework with weaker provincial measures, including an alternative framework for large emitters that would exempt them from the federal output-based pricing system. Whether this provincial proposal will be viewed as an acceptable alternative by the federal government remains an open question.
The case of New Brunswick thus reminds us how difficult carbon pricing politics can be. Climate change policy requires governments to restructure their economy. Policies generate new economic winners and new economic losers. In New Brunswick, governments have not been willing to impose costs on the energy and forestry industries critical to the provincial economy, or on consumers.
Instead, jurisdictions like New Brunswick might be more likely to develop carbon prices when they are swept up in broader national efforts to impose costs on carbon pollution. New Brunswick’s climate policy ambition will remain dependent on politics in Ottawa, not Fredericton.
This article is part of the The evolution of carbon pricing in the provinces special feature.
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