P.E.I. planning 'hybrid' carbon levy, with only some money returned in rebates

P.E.I. Premier Dennis King says his government will unveil a new carbon pricing plan before April 1, the deadline Ottawa has given the province to get back into step with the federally-mandated price on carbon.

Missing the deadline would mean Ottawa would impose its own carbon-pricing plan on Islanders.

The new price on carbon will push up record prices on gasoline another 4.4 cents per litre in the province.

P.E.I. is already a year behind implementing the federal carbon price, which is set to hit $50 per tonne of emissions on April 1. 

The province's carbon levy still sits at 6.6 cents per litre, the equivalent of $30 per tonne of emissions. When the federal price rose to $40 a year ago, King said his government had been unable to agree to a new deal with Ottawa.

Islanders will start seeing rebates

While the details still haven't been released, King told reporters Tuesday P.E.I.'s plan will start off as a "hybrid" model.

The new increase in the carbon levy will go back to consumers in the form of a rebate or dividend, the way the federal backstop does. That's something Islanders haven't seen before.

But the level of existing carbon levy revenues — the 6.6 cents per litre of gas the province has been charging since 2020, an estimated $29 million in the current budget year — will continue to go into government revenues to fund efforts to reduce the province's emissions.

King said the dividend Islanders would receive would amount to about $100 or less in the first year, and grow from there.

"We want to continue to help Islanders get off of their reliance to fossil fuels," King said. 

"And we will implement a rebate. So eventually what you'll see is we will get to a point where all of the carbon tax will be rebated at some point. But we're going to have a bit of a hybrid model to get there."

P.E.I. has been offering incentives to encourage Islanders to switch from heating oil to electric heat, something King said would be expanded. The province has also been offering incentives to homeowners to install electric plans and to purchase electric vehicles and has promised to bring in a rebate of $100 against the cost of a new bike.

Exemption on taxing home heating oil stays – for now

King said the Trudeau government will allow P.E.I. to continue to exempt home heating oil from its carbon levy for one more year.

Previously he had said Ottawa would not allow the province to keep the exemption it granted in a deal with the previous Liberal Island government of Wade MacLauchlan.

At $50 per tonne of emissions, that would have pushed up the cost of heating oil by 13 cents per litre overnight.

But recent increases in fuel prices have eclipsed anything the carbon levy will impose. On P.E.I., gas prices have risen by 29 cents a litre in a matter of days.

For home heating oil — still a primary source of heating for many Islanders — the increase was 32 cents per litre.

On Tuesday, the province announced an emergency assistance program worth a total of $20 million to help offset the rising cost of fuel in a province that already had the highest inflation rate in the country.

Opposition leader 'disappointed'

Opposition Leader Peter Bevan-Baker said he was "disappointed" in the province's plan.

The Green Party has long been advocating for the province to adopt the federal backstop carbon pricing program to allow the revenues to be returned to households.

"I'm not sure why the premier is waiting to rebate money that other provinces have given 100 per cent of directly back to their citizens," Bevan-Baker said.

The Greens say that would provide Islanders with $1,000 annual rebate rather than the $100 the premier is proposing.

Instead, Bevan-Baker said most of that money is going into programs many can't afford to access.

 "Low-income Islanders are generally not putting solar panels on their roofs, they're not buying electric vehicles, wonderful though those programs are," he said. 

"They would actually end up with more money, substantially more money, in their pockets if government chose to rebate all of the funds to Islanders evenly across the board."