Energy and taxpayer advocacy groups warn that Canada’s Clean Fuel Standard (CFS) will create a “second carbon tax” that, coupled with the carbon tax, will make life less affordable and kill Canadian jobs.
Franco Terrazzano, Alberta director for the Canadian Taxpayers Federation, calls the CFS a “second carbon tax” and predicts that “costs are going to go through the roof … at the worst possible time” as Canada emerges from the pandemic.
“This is just going to be another cost on top of this first carbon tax that is going to hammer families and businesses with higher costs,” Terrazano said in an interview.
“Carbon taxes are not an environment plan, they’re a tax plan,” he adds.
“B.C. right now has the highest carbon tax in Canada, but we’re still seeing emissions going up. We continue to shoot our own economy in the foot here because we make up 1.5 percent of global emissions. So the carbon tax in Canada making life cost more isn’t going to solve a global issue.”
Starting in December 2022, the CFS will require refineries and other suppliers and importers of liquid fossil fuels, such as gasoline, diesel, and kerosene, to reduce the amount of carbon in their products. Its goal is to cut emissions over the life cycle of the fuel, from extraction to refining to consumption. The requirements, which will gradually increase between 2022 and 2030, mean producers must find innovative solutions.
The CFS establishes a carbon credit trading scheme to drive this innovation. Under this scheme, fuel suppliers can create or buy credits to meet the carbon-intensity reduction requirements. They can also sell excess credits or bank them for later use.
Companies can create credits and cut their products’ carbon intensity in different ways. For example, they can reduce the life-cycle emissions of fossil fuels by using carbon capture and storage or generating renewable electricity, they can blend biofuels into their product, or they can invest in technologies such as electric or hydrogen fuel cell vehicles.
The Dec. 18 update to the CFS narrowed the scope to liquid fuels, with solid and gaseous fuels including natural gas removed from the regulations following strong opposition to the standard from advocacy groups as well as industry and the Atlantic provinces.
Many Canadians rely on liquid fuels like gasoline, diesel, and heating oil. A 2019 study by the Canadian Energy Research Institute estimates that gasoline and diesel could rise by 5–11 cents a litre by 2030 as a result of the fuel standard. Those who heat their homes with oil will also face higher costs.
Supplementary documentation for the CFS published in the Canada Gazette indicates that “seniors living on fixed incomes may also face higher transportation and heating costs … [especially] in the Atlantic provinces.” The document adds that other groups “that may have disproportionately lower income” may also bear the weight more heavily.
As for the carbon tax, its aim is to have users consume less fuel by making it more costly. The carbon tax will rise gradually from $40 per tonne in 2021 to $170 per tonne by 2030. This will add 37.5 cents to a litre of gasoline and 45 cents to a litre of diesel by 2030, and add roughly $900 a year to the average residential natural gas bill, according to Canadians for Affordable Energy.
Dan McTeague, a former longtime Liberal MP and now president of Canadians for Affordable Energy, also says the CFS amounts to a “second carbon tax,” making it “a violation amongst carbon tax purists.”
“You don’t mingle and mess up a price signal to an existing carbon tax with further regulations. Not only do they distort, they have the tendency of undermining the efficacy of the first,” he said in an interview.
The carbon tax and CFS are part of the effort to meet Paris Climate Agreement targets, under which Canada committed to reducing greenhouse gas emissions to 30 percent below 2005 levels by 2030.
McTeague calls the Paris accord “a bad agreement … which is uniquely punishing to Canada, given [that] Canada had already undertaken major dramatic measures to reduce emissions before 2005, [and that the agreement does] not take into account Canada’s ability to … prevent or stave off or encourage China—the real builder in emissions globally—from increasing the amount of coal by selling them more natural gas.”
“You’re not given credit for that under the terms of the agreement,” he said.
The economic cost of the CFS will not be rebated, unlike the carbon tax. But Terrazzano believes carbon tax rebates don’t mitigate its total damage anyway.
“It’s magic math to think that [Prime Minister Justin] Trudeau is going to tax us and then give us all rebates and we’re all going to be made better off. We’re not going to tax and rebate our way to prosperity.”
The federal government will also spend $15 billion toward its 2030 efforts on such things as energy-efficient building retrofits, incentives for zero-emission vehicles, renewable energy projects, and funding for remote and indigenous communities to stop burning diesel.
Alberta Environment Minister Jason Nixon told the Calgary Herald that the federal measures could cause as much as a 5 percent reduction in the province’s GDP, causing 92,000 to 100,000 job losses by 2030.
“I am definitely expecting a disproportionate impact upon the province of Alberta, which is why we’re so concerned about this,” Nixon said.
In response, Jonathan Wilkinson, the federal environment minister, told the Herald that, “overall, in Canada, … between now and 2050, the effect on GDP is almost zero.”
“What I am telling you is the world is moving to a lower-carbon future, whether folks want it to or not … and what we’re saying is we are going to move with it,” he said.
McTeague shares concerns that the government’s measures will lead to higher costs and job losses. He believes they will damage the country and fuel western alienation.
“It’s pretty clear that the carbon tax is going to smash this country to pieces—and that’s both carbon taxes.”