The Parliamentary Budget Officer (PBO) today released a distributional analysis of the Clean Fuel Regulations (CFR). The CFR, which are a part of the federal government’s climate plan, require suppliers to gradually reduce the carbon intensity of the gasoline and diesel fuels they produce and sell for use in Canada starting July 1, 2023.
Environment and Climate Change Canada (ECCC) estimates that the CFR will increase the price of gasoline and diesel in 2030—the year in which the CFR reach full stringency—by up to 17 cents per litre and 16 cents per litre, respectively. ECCC also estimates that the CFR will decrease real GDP in Canada by up to 0.3 per cent (or up to $9.0 billion) in 2030.
Based on ECCC’s economic impact estimates, the PBO’s report finds that relative to household disposable income the CFR is broadly regressive.
“Since 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, on average the Clean Fuel Regulations will have a greater impact on these households,” says PBO Yves Giroux.
The PBO estimates that at the national level, in 2030, the cost of the CFR to households ranges from $231 (or 0.62 per cent of disposable income) for lower income households to $1,008 (or0.35 per cent of disposable income) for higher income households.
“At the provincial level, households in Saskatchewan, Alberta, and Newfoundland and Labrador will have the highest cost, which reflects the higher fossil fuel intensity of their economies,” adds Mr. Giroux. “In contrast, the cost will be lowest in British Columbia due, in part, to revenues generated from existing provincial regulations.”
The PBO’s estimates are based, in part, on data provided by ECCC from their upper bound fuel price scenario. Consequently, the PBO’s estimates should be regarded as upper bound estimates.
Visit the PBO’s Climate Plans and Targets Hub to see all our work on this topic.