By Canadian Press

What will new fuel standards do to gas prices? The Baloney Meter weighs in

Jul 11, 2019 | 10:07 AM

OTTAWA — “Your secret fuel tax will undoubtedly increase the cost of gasoline by at least another four cents a litre, a fact you continue to hide.”  — Conservative Leader Andrew Scheer in a letter to Prime Minister Justin Trudeau

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Conservative Leader Andrew Scheer looked this week to play off the sensitivity Canadians have to changes in gas prices, warning of an increase “by at least another four cents a litre” because of planned standards to make fuels cleaner.

The implication in his letter to Prime Minister Justin Trudeau is that overall costs for consumers would go up as a result of the standard, which is a few years from coming into force and separate from the carbon tax.

Do Scheer’s extra cents make sense, or is the price being pumped up?

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The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of “no baloney” to “full of baloney” (complete methodology below).

Spoiler alert: This one earns a rating of “some baloney.” Here’s why.

The facts

The Liberals launched consultations in late 2016 about developing a clean-fuel standard that would set limits on carbon emissions from the burning of fossil fuels, a measure known as carbon intensity. Among the options to meet the standard for producers is to include more ethanol or biofuels in gas at the pumps.

Gas prices are a combination of the cost of crude oil, refining and transportation, government taxes, and retailer mark-up. Mixing ethanol is an additional cost because of separate purchase, transport and infrastructure requirements, such as holding tanks at pumps.

A cost-benefit analysis released by Environment Canada in February acknowledged the costs of implementing the standard to reduce carbon intensity “would likely be passed” on to consumers, but didn’t estimate how much those might be.

In April, the Canadian Chamber of Commerce estimated an increase of 1.5 cents per litre by 2025, which the report noted was a conservative estimate.

Like the earlier federal report, the organization acknowledged clearer calculations would come once the final regulatory text is released.

Simon Jefferies, a spokesman for Scheer, said the Conservatives spoke with stakeholder organizations and policy experts to come up with the estimate, and relied on a study by Navius Research Inc. done for Clean Energy Canada, a think-tank at Simon Fraser University.

That study for Clean Energy Canada estimated an increase of five cents per litre by 2030.

The experts

Dan Woynillowicz from Clean Energy Canada said modelling in the study cited by the Conservatives took into account the effects that policies like increasing fuel-efficiency standards in vehicles would have on household budgets. The overall result? Consumers come out ahead because of savings elsewhere.

To look at the per-litre cost in isolation, he said, is “a false way to look at it.”

“While they (consumers) might face higher per-litre costs for gasoline, they will be driving a much more fuel-efficient vehicle, and so the benefits of that outweigh those additional costs in terms of what they’re left with at the end of the month,” Woynillowicz said.

It’s the other side of the balance sheet that Mark Jaccard points to.

“If a politician focuses only on the increase in the price of gasoline and does not point out that this lowers the price of zero-emission alternatives that we must be quickly switching to — like Norway, Sweden, California, Brazil, China — (that politician) should score at the maximum on the baloney meter,” said Jaccard, a professor of resource and environmental management at Simon Fraser, in an email.

British Columbia provides an example. Dan McTeague, a former MP turned gas-price analyst at GasPriceWisdom.com, estimates the province’s fuel standard increased prices by between eight and 15 cent per litre.

“That doesn’t necessarily mean you can transpose that, but … I thought the four cents that Scheer provided was low,” McTeague said.

Woynillowicz said federal regulations wouldn’t prescribe how fuel providers must comply, allowing them to come up with most cost-effective way, including through a credit-trading market, similar to a cap-and-trade system, which would reduce consumer costs for renewable energy sources.

If companies decide to buy credits, then the price effect would likely be around four cents per litre, McTeague said. If companies opt for more ethanol in their gas blends, then the price per litre will likely be higher, he said. But much relies on the regulations themselves, McTeague said, meaning “the devil is in the details.”

The verdict

There’s general agreement that gas prices would rise with clean-fuel standards. Less clear is by how much. Scheer’s statement also doesn’t take into account the net effect on consumers who could see prices drop in other energy-consumption areas. Missing important details needed for a fuller understanding of the issue leads to a finding of “some baloney.”

Methodology

The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:

No baloney — the statement is completely accurate

A little baloney — the statement is mostly accurate but more information is required

Some baloney — the statement is partly accurate but important details are missing

A lot of baloney — the statement is mostly inaccurate but contains elements of truth

Full of baloney — the statement is completely inaccurate

Jordan Press, The Canadian Press