Carbon charges on large N.B. greenhouse gas emitters called 'surprisingly low'

The Irving Oil refinery and a group of other large facilitiesin New Brunswick that released up to 3.84-million tonnes of carbon dioxide in 2019 are being assessed federal carbon charges on less than two per cent of that amount, according to recent figures released by Environment and Climate Change Canada.

"I think it's a very low number," said environmental economist Dave Sawyer, who reviewed the New Brunswick carbon charges.

"It's quite low. Surprisingly low."

National carbon pricing in Canada began in 2019, but emission levels and charges to large industrial and other operationsfor that year have only recently been finalized and publicly released.

Carbon charges in 2019 were set at $20 per tonne of emissions, however,revenue from large New Brunswick facilities for that year, not including N.B. Power generating stations, is listed at $900,000.

That is the price of levying a charge on just 45,000 tonnes of emissions, or 1.2 per cent of what the full group of New Brunswick facilities actually released

It is also equivalent to charging less than 30 cents per tonne on the group's total emissions.

Irving Oil Ltd.'s refinery in Saint John, which has a production capacity of 320,000 barrels per day, is thedominant figure in the group.It had emissions of 2.98-million tonnes of carbon dioxide on its own in 2019, about three-quarters of the total.

However, there is no specific information about how much of the $900,000 carbon bill, if any, belongs to it.

The company did not respond to a request for information about its emissions and assessed charges.

Sawyer,a consultant with EnviroEconomics in Ottawa and an expert on carbon pricing in Canada, said the refinery is too large not to be the cause of the unusually low carbon bill for the group and suggested policy makers should review what is happening.

He said it is possible for the refinery to be emitting less than targets set for it by the federal government and paying no carbon costs as a result, which would raise a question about its targets.

"There's a lot of emissions coming out of there and we're not pricing them," Sawyer said. "On an average cost basis, we're not pricing them.

"There's an open question about whether or not, you know, is that the right benchmark? Do we have the right emission intensity for the facility? Is it over-performing whatever the benchmark is?"

Large facilities are not expected to pay full carbon prices on all of their emissions, but Sawyer and others say pennies on the dollar is also not what is expected.

Nicholas Rivers, an associate professor with the Institute of the Environment at the University of Ottawa, said that on emissions by large facilities above three million tonnes in 2019, carbon charges of between $3 million and $6 million would seem more reasonable than $900,000.

"I would have expected a cost of around $1 to $2 per tonne on net," he wrote in an email.

For consumers and small enterprises, carbon costs are delivered as per-litre charges on fuel they buy. But for larger entities there is something called an "Output-Based Pricing System."

It is open to any facility that emits more than 10,000 tonnes of carbon dioxide or equivalent gases per year. It is mandatory for any facility that emits above 50,000 tonnes.

In New Brunswick in 2019, 22 facilities were eligible to be covered by the system, including several pulp and paper mills, and other manufacturing plants as well as entities as diverse as Moncton's landfill, CFB Gagetown and the University of New Brunswick campus.

Because full carbon charges on large facilities with high emissions would be ruinously expensive for many, especially for exporters facing competitors who are not subject to similar charges, output-based pricing seeks to create a financial incentive to reduce emissions.

Irving Oil unopposed in 2019

In N.B. Power's case, the newly released figures show under output-based pricing three fossil fuel generating stations it operated in 2019, including Belledune, Coleson Cove and Bayside, paid carbon charges of $5.9 million on about 10 per cent of their 2.96-million tonnes of emissions.

Rivers saidthat is what he would expect other large facilities in New Brunswick, and elsewhere, to face.

The federal government ran output-based pricing in New Brunswick in 2019 and 2020. All moneycollected from large emitters in those years is to be returned to the province to fund efficiency improvements.

Beginning in 2021, output-based pricing was taken over by the New Brunswick government.

During the first year of carbon pricing in 2019, Irving Oil executives saidin an appearance before a Senate committee that the company was not opposed to the policy.

Andy Carson, the company's director for growth and strategy,told senators that climate change is "a very, very significant and important issue" and said the company had worked with federal officials developing the current carbon pricing system.

"Our position has never been, 'We disagree with this fundamentally.' It's been much more constructive," he said.

Louise Comeau, New Brunswick Conservation Council's director of energy, climate change and energy solutions, said she is not surprised carbon charges on large New Brunswick emitters eventually amounted to less than $1 million in 2019 on more than three-million tonnes of emissions.

"The system is working as it should, not from an environmental point of view, but from a program design not meant to change much," Comeau said.