New fuel regulations will increase price of fuel and decrease GDP: budget watchdog
CBC
New fuel regulations set to take full effect in 2030 are expected to increase the price of fuel and shrink the size of Canada's economy, according to a new report from Canada's budget watchdog.
The Parliamentary Budget Officer (PBO) released a distributional analysis of the federal government's Clean Fuel Regulations Thursday.
After its release, the report became a lightning rod for federal politicians, with the Conservatives calling the policy a financial burden on families.
The other political parties criticized the PBO because they said the analysis ignores the cost of inaction on climate change.
The Clean Fuel Regulations take effect in July.
It will require producers or importers of gas or diesel to gradually reduce the carbon intensity of the fuels they sell.
By 2030, the carbon intensity of these fuels must fall to 15 per cent below 2016 levels. According to Environment and Climate Change Canada, this will deliver 26 million tonnes of greenhouse gas emissions reductions. It establishes a carbon credit market in which reducing emissions earn credits that can be sold.
B.C., California, Oregon and others have adopted similar regulations.
By increasing the price of carbon-intensive fuels, the government hopes to encourage the production and consumption of cleaner fuels like hydrogen and biofuels.
Once these regulations take full effect, according to figures the PBO obtained from Environment and Climate Change Canada, it will increase the price of gas and diesel by as much as 17 cents per litre.
"It is a significant increase in price due to these clean fuel regulations," Yves Giroux, the Parliamentary Budget Officer, said.
The Canadian economy will also take a hit, the PBO reported, with the regulations decreasing real GDP in 2030 by up to 0.3 per cent or $9 billion.
The PBO estimated that the cost would range from 0.62 per cent of disposable income, or $231, for lower-income households to 0.35 of disposable income, or $1008, for higher income households.
"For most households, it's below one per cent of their income," Giroux said. "It is not a large impact in the grand scheme of things."
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