PBO Stands By Report That ‘Clean Fuel Regulations’ Will Hurt Canadian Households Financially

Despite fierce criticism from the Liberals, the Parliamentary Budget Officer (PBO) stands by his analysis of the government’s Clean Fuel Regulations (CFR), which finds that Canada’s lower-income households will bear a greater burden in terms of disposable income due to the increased costs associated with the policy. The CFR aims to reduce carbon emissions from fossil fuels by 26 million tonnes by 2030, while the government further strives for net-zero emissions by 2050. This policy, however, comes at the cost of an estimated $231 for lower-income households and up to $1,008 for higher-income households at the national level in 2030, according to the PBO’s distributional analysis. The PBO’s conclusion that the CFR is “broadly regressive” prompted Environment Minister Steven Guilbeault to criticize the federal budget agency’s modelling approach, saying in a May 18 statement that it has overlooked the costs of climate change. “While we recognize the work of the PBO, their analysis takes the same unbalanced modeling approach as they did with the analysis of the price on pollution,” Guilbeault wrote, a reference to the PBO’s earlier report in March, which found most Canadian households will suffer a net loss from the carbon tax introduced by the Liberal government. Under the 2030 Emissions Reduction Plan, the federal fuel tax charge is set to rise from $65 per tonne of carbon dioxide in 2023 to $170 per tonne in 2030. Gerald Butts, former adviser to Prime Minister Justin Trudeau, also accused the PBO of incompetence on climate change and damaging policy discussions in Canada. However, PBO Yves Giroux is standing by his office’s analysis, saying that they were not questioned by Guilbeault’s own department, Environment and Climate Change Canada, prior to the release of the minister’s statement. “I can understand that people are not happy when we underline that government action will have repercussions, and in this case, costs, but I stand by the analysis we provided,” he said, according to National Post. “Over the years we have estimated the costs of many policy proposals without assessing their potential benefits,” Giroux also told in a previous interview. The CFR, slated to take effect in July, will lead to an increase in gasoline and diesel prices by up to 17 cents and 16 cents per litre, respectively, in 2030. Meanwhile, the regulations are projected to decrease Canada’s real GDP by up to 0.3 percent or $9 billion in 2030. “When both fiscal and economic impacts of the federal fuel charge are considered, we estimate that most households will see a net loss. Based on our analysis, most households will pay more in fuel charges and GST—as well as receiving slightly lower incomes—than they will receive in Climate Action Incentive payments,” the PBO analysis said. The PBO estimated that the federal government will collect and return $11.8 billion in fuel charges in the seven provinces where the charge is applied in 2023–24, and that amount will rise to $25 billion in 2030–31. Relative to disposable income, the cost of the CFR to the average household in 2030 is the highest in Saskatchewan (0.87 percent, or $1,117), Alberta (0.8 percent, or $1,157), and Newfoundland and Labrador (0.8 percent, or $850), reflecting the higher fossil fuel intensity of their economies, according to the report. In contrast, the cost of the CFR to the average household in 2030 is the lowest for British Columbians (0.28 percent, or $384), relative to their disposable income. Meanwhile, the cost to the average household is $495 (0.35 percent) in Ontario and $436 (0.39 percent) in Quebec. Peter Wilson contributed to this report.

PBO Stands By Report That ‘Clean Fuel Regulations’ Will Hurt Canadian Households Financially

Despite fierce criticism from the Liberals, the Parliamentary Budget Officer (PBO) stands by his analysis of the government’s Clean Fuel Regulations (CFR), which finds that Canada’s lower-income households will bear a greater burden in terms of disposable income due to the increased costs associated with the policy.

The CFR aims to reduce carbon emissions from fossil fuels by 26 million tonnes by 2030, while the government further strives for net-zero emissions by 2050. This policy, however, comes at the cost of an estimated $231 for lower-income households and up to $1,008 for higher-income households at the national level in 2030, according to the PBO’s distributional analysis.

The PBO’s conclusion that the CFR is “broadly regressive” prompted Environment Minister Steven Guilbeault to criticize the federal budget agency’s modelling approach, saying in a May 18 statement that it has overlooked the costs of climate change.

“While we recognize the work of the PBO, their analysis takes the same unbalanced modeling approach as they did with the analysis of the price on pollution,” Guilbeault wrote, a reference to the PBO’s earlier report in March, which found most Canadian households will suffer a net loss from the carbon tax introduced by the Liberal government. Under the 2030 Emissions Reduction Plan, the federal fuel tax charge is set to rise from $65 per tonne of carbon dioxide in 2023 to $170 per tonne in 2030.

Gerald Butts, former adviser to Prime Minister Justin Trudeau, also accused the PBO of incompetence on climate change and damaging policy discussions in Canada.

However, PBO Yves Giroux is standing by his office’s analysis, saying that they were not questioned by Guilbeault’s own department, Environment and Climate Change Canada, prior to the release of the minister’s statement.

“I can understand that people are not happy when we underline that government action will have repercussions, and in this case, costs, but I stand by the analysis we provided,” he said, according to National Post.

“Over the years we have estimated the costs of many policy proposals without assessing their potential benefits,” Giroux also told  in a previous interview.

The CFR, slated to take effect in July, will lead to an increase in gasoline and diesel prices by up to 17 cents and 16 cents per litre, respectively, in 2030. Meanwhile, the regulations are projected to decrease Canada’s real GDP by up to 0.3 percent or $9 billion in 2030.

“When both fiscal and economic impacts of the federal fuel charge are considered, we estimate that most households will see a net loss. Based on our analysis, most households will pay more in fuel charges and GST—as well as receiving slightly lower incomes—than they will receive in Climate Action Incentive payments,” the PBO analysis said.

The PBO estimated that the federal government will collect and return $11.8 billion in fuel charges in the seven provinces where the charge is applied in 2023–24, and that amount will rise to $25 billion in 2030–31.

Relative to disposable income, the cost of the CFR to the average household in 2030 is the highest in Saskatchewan (0.87 percent, or $1,117), Alberta (0.8 percent, or $1,157), and Newfoundland and Labrador (0.8 percent, or $850), reflecting the higher fossil fuel intensity of their economies, according to the report.

In contrast, the cost of the CFR to the average household in 2030 is the lowest for British Columbians (0.28 percent, or $384), relative to their disposable income. Meanwhile, the cost to the average household is $495 (0.35 percent) in Ontario and $436 (0.39 percent) in Quebec.