Ottawa’s New Fuel Regulations Will Increase Cost of Gas 17 Cents per Litre by 2030: PBO

Parliamentary Budget Officer Yves Giroux prepares to appear before the Senate Committee on Official Languages in Ottawa on June 13, 2022. The Canadian Press/Justin Tang

The federal government’s new Clean Fuel Regulations—set to take effect July 1 and reach full stringency in about seven years—will increase the cost of gas nationwide by an average of around 17 cents per litre by 2030 while also decreasing Canada’s GDP, says Parliamentary Budget Officer (PBO) Yves Giroux.

The Clean Fuel Regulations (CFR) set new standards for primary fuel suppliers, meaning producers and importers, and will require them to reduce the carbon intensity of the gasoline and diesel they produce and sell for use in Canada.

These standards will increase every year, thus gradually lowering the limit for carbon intensity of all gasoline and diesel used in Canada over time.

Environment and Climate Change Canada (ECCC) says the new regulations will lead to a decrease of about 15 percent below 2016 levels in the carbon intensity of gasoline and diesel used across Canada by 2030.

Giroux says in “Distributional Analysis of the Clean Fuel Regulations,” published on May 18, that the CFR will lead to the price of gas and diesel increasing by around 17 cents per litre and 16 cents per litre, respectively, by 2030, according to figures he obtained from ECCC.

He further says that ECCC estimated the CFR will decrease Canada’s real GDP by up to 0.3 percent—representing around around $9 billion—in 2030.

The report also says that, at the national level, the CFR’s “use-side” cost (changes in product prices) is “broadly regressive,” meaning it will have a much more significant impact on lower-income households compared to high-income households.

“Lower income households generally spend a larger share of their income on transportation and other energy-intensive goods and services compared to higher income households,” Giroux wrote.

At the same time, he noted that the CFR’s “source-side” cost (changes in factor prices) “is generally progressive,” meaning higher income households will face larger costs as a result of it relative to their disposable income.

Fuel Regulations

Overall, the PBO said the CFR’s national-level average cost to households ranges from around 0.6 percent of lower-income households’ disposable income (around $230) to about 0.35 percent of higher-income households’ disposable income (just over $1,000).

However, Canadians will not feel the CFR’s impacts evenly across the country, Giroux says.

It’s cost by 2030 to the average household will be highest in Saskatchewan, Alberta, and Newfoundland, while British Columbia will feel the CFR’s impacts the least.

The PBO’s report on the incoming fuel regulations brought with it heated debate among MPs in the House of Commons on May 18.

Conservative Leader Pierre Poilievre called thee CFR a “second carbon tax” in a post on Twitter.

“You'll be paying more at the pump and for everything else,” Poilievre wrote, while including some of the PBO’s estimated figures on the matter.

Environment Minister Steven Guilbeault responded by saying the figures were “massive overestimations for a program that is designed to have no immediate effect on prices for Canadians.”

“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 said in a statement.