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N.B. cabinet still deciding what to do with $28 million in carbon tax revenue

Click to play video: 'N.B. cabinet still deciding what to do with $28 million in carbon tax revenue' N.B. cabinet still deciding what to do with $28 million in carbon tax revenue
WATCH: New Brunswick is still deciding where a portion of projected revenue raised from the carbon tax will be spent, but the finance minister says it will get back to consumers in some way. Silas Brown reports – Mar 18, 2021

New Brunswick is still deciding where a portion of projected revenue raised from the carbon tax will be spent, but the finance minister says it will get back to consumers in some way.

“There are four options that they’re looking at right now,” said Ernie Steeves, minister with the Finance and Treasury Board, declining to list those options due to cabinet confidentiality.

According to the budget tabled on Tuesday, the province is projecting $163 million in carbon tax revenue over the coming fiscal year. Of that, $36 million will go to the climate change fund, $12 million will go to the province’s natural gas distributor to offset the increased costs of the carbon tax and $9 million will go to First Nations communities.

The largest chunk, about $78 million, is to offset the 4.6 cents a litre reduction in the gas excise tax announced in last year’s budget in order to partially offset the carbon tax, which rose to about 6.6 cents a litre on April 1.

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Read more: Carbon tax revenue to go to climate change fund, not rebates: N.B. minister

That leaves $28 million unaccounted for, which premier Blaine Higgs says will not be used for a similar reduction in the excise tax this year.

“We aren’t contemplating that at this time,” Higgs told reporters on Wednesday.

That means consumers will see an additional 2.2 cents per litre at the pumps come this April, when the carbon price rises to $40 a tonne, or 8.8 cents per litre of gasoline. Legislation to allow that increase was introduced on Wednesday.

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Higgs said the 2020 reduction of the excise tax was a one-time move to soften the blow of what would have been about a 7 cents per litre jump for consumers. Though Higgs did raise concerns over the ability of the Canadian energy sector to stay competitive with jurisdictions that impose less stringent environmental standards.

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What will be done with the $28 million is under discussion, but Higgs hinted that rebates could be one of those options. New Brunswickers received a tax rebate from the federal government in 2019 when the province was under the federal backstop, after the previous Liberal government’s carbon plan was not approved by Ottawa.

“It’s not like I’m inventing a change,” Higgs said.

“We’re really …. looking at options of how we follow the federal formula while at the same time protecting consumers around the province.”

Higgs admitted that to keep reducing the excise tax would not be within the spirit of the federal carbon tax, which Ottawa says is intended to change behaviour by adding the true cost of carbon to goods.

Read more: How carbon pricing works across the country

“If we did that routinely, they would say, ‘that wasn’t what it was intended to do,’ it was intended for people to recognize that they would be paying more for fuel, but yes, they could get it back in some other way,” Higgs said.

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JP Lewis, an associate professor of political science at the University of New Brunswick, says Higgs’ stance on carbon pricing has been shifting over the last number of years. Higgs moved to implement a made in New Brunswick carbon tax after the 2019 federal election, noting that the majority of the province voted for parties that support carbon pricing.

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Lewis said the latest move to bring the province even more in line with the federal system is the latest piece of that trend.

“Where does it fit with Conservative parties in 2021 as compared to a couple years ago? It appears to be evolving,” Lewis said.

“This could fall within his political realism where he looks at this and thinks this isn’t going anywhere and it’s not worth fighting in the courts and in the political arena.”

The provincial government, under Higgs, acted as an intervener in the Supreme Court case against the federal backstop. That legal involvement continued even after the province moved to implement its own carbon pricing system.

When it comes to the unaccounted for revenue from the carbon tax, Green leader David Coon is calling for it to go directly to the climate change fund.

Read more: Most Canadian households to get more in rebates than paid in carbon tax: PBO

“It should go into the climate change fund, since a large part of that has already been committed to not the kinds of things households and businesses are looking for, like insulating their homes, or putting in a heat pump or adding solar panels, or buying an electric vehicle,” Coon said.

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“A large part of it has already been committed to atomic energy research.”

Coon is referring to the $20 million in funding for ARC Nuclear, a Saint John based company looking to develop small modular nuclear reactors. The $5 million going to the company in the first year of the agreement came from the climate change fund.

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Green MLAs have been critical of the projects funded through the climate change fund so far, saying that certain things like culvert replacements are better taken care of through other departments.

In the past fiscal year, only $25 million of the $36 million earmarked for the climate change fund was spent. The rest went back into general revenue.

Steeves said that was due to some project delays in an unusual year, which was also reflected in December’s capital budget, that saw some spending deferred.

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