Federal carbon tax hike will hammer New Brunswick economy

Federal carbon tax hike will hammer New Brunswick economy
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New Brunswickers should understand the real-life effects of this tax, as the job loss and economic contraction will be substantial

As the New Brunswick economy emerges from the COVID-19 pandemic and recession, the federal government’s new plan to raise its carbon tax will have major economic consequences for the province.

Under the federal Greenhouse Gas Pollution Pricing Act, the original plan was to raise the carbon tax (from $30 per tonne) by $10 per tonne each year until reaching $50 per tonne in 2022. Now, beginning in 2023, the Liberal government of Prime Minister Justin Trudeau will raise the tax by $15 per tonne annually until it reaches $170 per tonne in 2030.

Almost none of the problems with the existing design of the carbon tax have been resolved through the new measures. For example, well-designed carbon taxes replace emission-related regulations. But to date, the carbon tax in Canada has simply been applied in addition to existing regulations – and the government has added more regulations.

Unlike when past major policy initiatives have been announced, the government has not yet released any detailed analysis that measures the economic consequences of the higher carbon tax, though the Liberal government repeatedly claims there will be “almost zero impact” on the economy.

But a new study published by the Fraser Institute sheds light on what the higher carbon tax means for jobs and economic growth in New Brunswick.

The numbers are stark.

The study estimates that a $170-per-tonne carbon tax will result in the New Brunswick economy (measured by gross domestic product) contracting by 2.2 per cent, cost the province nearly 2,200 jobs and reduced per-worker income by three per cent (after accounting for the effects of the tax’s rebate back to households). Clearly, New Brunswickers will be poorer as a result of this tax hike.

The study included cost estimates for the Canadian economy as a whole. A $170-per-tonne carbon tax will cause the national economy to contract by 1.8 per cent. In today’s economy, that would mean the loss of about $37.8 billion and result in nearly 185,000 lost jobs.

The higher carbon tax will cost the average Canadian worker an estimated $1,540 in lost income, after accounting for rebates.

While the design of the tax can vary by province depending on whether the federal version applies, the effects of the increase will nonetheless be nationwide.

Like several other provinces, New Brunswick has negotiated with the federal government to implement its own version of the tax. Introduced in 2020, the provincial tax applies to fossil fuels such as gasoline and home heating oil.

However, the federal government’s position (currently being challenged in court) is that provincial plans require federal approval. Therefore, the increase to the federal tax will almost certainly be imposed on New Brunswickers.

The federal government’s planned carbon tax hike came with little discussion and no publicly available analysis of the costs of such an aggressive approach.

New Brunswickers should understand the real-life effects of this tax, as the job loss and economic contraction will be substantial.

By Alex Whalen
and Elmira Aliakbari
The Fraser Institute

Alex Whalen and Elmira Aliakbari are analysts at the Fraser Institute.

Courtesy of Troy Media.

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