Digging in on gas tax cut
Province will maintain 2019 cut on gas taxes to offset carbon price
The decision will mean that gas prices will increase by about 3 cents a litre in July when the federal government imposes its backstopped price on carbon in P.E.I.
A representative from the office of Premier Dennis King has confirmed the province intends to maintain a cut in provincial gas taxes, introduced in 2019 to offset the impact of carbon pricing.
In a Nov. 29 email, Adam Ross, principal secretary in King’s office, confirmed the province is “not removing the 3-cent subsidy on gasoline that is currently in place.”
The decision will mean that gas prices will increase by about 3 cents a litre in July when the federal government imposes its backstopped price on carbon in P.E.I.
The 2019 tax cut, which the previous Liberal government of Wade Maclauchlan put in place, lowered the price of gas by about 3.4 cents per litre.
This provincial gas tax cut has been maintained since, with the province using funds obtained from carbon taxes to finance it.
Without it, drivers would likely see a 6.6-cent a litre increase in the price of gas in July 2023 as opposed to a 3.3cent per litre increase.
But the provincially financed gas tax cut will mean a hit for government coffers. Between April 2019 and April 2021, the province spent $23.8 million of the $35.9 million of carbon levy revenue it received to compensate for the reduction in the provincial gas tax.
The federal backstop will mean that almost all the revenue from the steadily increasing carbon levy will be returned to households in the form of rebate cheques.
The average single individual will receive quarterly cheques of $120 while the average family of four will receive a $240 cheque as of July 2023.
The federal government has argued increasing the price on carbon will produce a "price signal" that encourages consumers to pursue low-emitting activity, such as taking transit more often.
The King government has maintained that the province remains reliant on fossil fuels for home heating and that rural transit alternatives to driving are not yet available for most Islanders.
A representative of the Federal Department of Environment and Climate Change Canada raised no issues with the province's maintenance of the 2019 gas tax cut.
“The federal government does not have the jurisdiction to impose restrictions on provincial taxation policy, and therefore provinces can set their policies as they wish,” said Oliver Anderson, director of communications with ECCC in an email to Saltwire Network on Nov. 30.