In a climate-policy retreat over the treatment of coal, federal Liberals are proposing to loosen emission standards for power plants that burn the fuel, effectively lowering carbon taxes on each tonne of greenhouse gas released from coal-burning stations, like NB Power's Belledune, next year to less than $1.

That could mean significant benefits for New Brunswick consumers, eliminating the need for power rate increases to pay for carbon taxes.

But it also undermines federal claims made as recently as last week that major greenhouse gas polluters, like Belledune, would pay the most under Canada's new carbon pricing scheme

Federal Environment Minister Catherine McKenna's office explained a federal commitment to ban coal generating stations in 2030 makes heavy carbon taxes on coal unnecessary given the costs it would impose on electricity customers.

"A price on pollution is one way to reduce pollution from the electricity sector — but it's not the only way," wrote Caroline Theriault, McKenna's press secretary, in an email to CBC News.

"One of the most important measures to reduce pollution from electricity is our commitment to phase out traditional coal power by 2030, all while ensuring a just transition for coal workers and communities through the Just Transition Taskforce."

The proposed exemption for coal is so large it will eliminate most of the carbon taxes New Brunswick's biggest greenhouse gas emitter, NB Power, was warned it would be facing just six months ago.

It would also allow it to continue releasing most of the greenhouse gases it currently produces at its coal-fired generating station in Belledune for free.

According to federal records, the Belledune generating station, which burns a combination of coal and petroleum coke, emits 838 tonnes of greenhouse gases for every gigawatt hour of electricity it produces.

The new federal proposal would exempt 800 tonnes of that from carbon taxes.

That will allow 95.5 per cent of Belledune's greenhouse gas emissions to pass through its giant 168-metre smoke stack for free and will slash NB Power's carbon tax bill at Belledune next year to $2.5 million.

That is an effective carbon tax rate for Belledune next year — which emits up to 2.8 million tonnes of greenhouse gasses annually — of just 91 cents per tonne.

Stunning change in carbon tax fortunes

It's a stunning change in the carbon tax fortunes of NB Power.

Belledune was the second largest source of greenhouse gases in Atlantic Canada in 2016, behind the Irving Oil Ltd. refinery in Saint John. Last week, federal officials were indicating it would be operations like Belledune hit hardest by national carbon taxes.

"Pollution is not free and we all have to pay for it," said federal Liberal cabinet minister Ginette Petitpas Taylor last week at an event announcing how New Brunswick families would be shielded from carbon taxes by federal rebates.

"We certainly want to make sure that the big polluters, the big emitters, are the ones that are paying and not New Brunswick families."

Last year, NB Power sketched out scenarios for what a full carbon tax applied to its fossil fuel-burning generating stations would cost it and customers.

It included a worst case 22 per cent, carbon-driven rate hike over nine years, most of it caused by emissions at Belledune.

Change could slow down transition to other fuels

Dale Beugin, the executive director of the Ecofiscal Commission, an environmental and economic think tank, said he believes the new proposal on coal will mean no carbon tax power rate increases at all will now be required in New Brunswick.

But he said he is concerned treating coal too generously will slow down the transition to other fuels.
"I do worry that the coal-specific standard undermines incentives to switch to gas, though the coal phase out may address that concern over time," said Beugin.
Last spring, Ottawa proposed that all fossil fuel-burning generating stations be treated the same with the first 420 tonnes of greenhouse gases per gigawatt hour of electricity produced exempt from carbon taxes and everything above that subject to a charge.

That gave natural gas an enormous cost advantage over coal and oil that was designed to encourage fuel switching at plants.

But that plan was abandoned in favour of new, fuel-specific limits that are tougher on natural gas and looser on coal and oil.

Now, natural gas stations face carbon taxes on emissions above 370 tonnes, oil on emissions above 550 tonnes and coal above 800 tonnes, a major concession to coal plants.

New Brunswick Green Party Leader David Coon said that tells him, lobbyists had their way with the first proposal.

"The price business is so open to being gamed and influenced by lobbying and that's exactly what's been happening," said Coon

"We need to have legally binding caps that are ratcheted down over time on emissions."

Federal officials say the new emission and carbon tax standards for fossil fuel generators are proposals only and could still be adjusted further.