With their carbon-price surprise, the Liberals finally show the courage of their climate-change convictions

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Justin Trudeau’s Liberals have boldly, if belatedly, picked a lane on the road to meeting Canada’s climate-change targets.

For five years since their Paris Agreement commitment to cut greenhouse-gas emissions 30 per cent by 2030, it was never clear how that was supposed to happen – not with the government mostly dabbling in green policies that didn’t add up to nearly enough.

Now, Canadians have a credible answer, courtesy of the climate-policy plan for the next decade that Ottawa released on Friday, and it’s contentious enough that it could easily be a pivotal question in an election next year. Having in their first term introduced a national carbon price too low to have much more than a symbolic impact, the Liberals now intend to raise it sharply enough to really change the ways we behave.

Liberals pitch $15-billion in new spending, hike carbon tax to pass 2030 emissions goals

In an interview just before the new plan’s release, Environment Minister Jonathan Wilkinson took pains to describe it as “comprehensive,” pushing back against focusing on just the pricing component. And the document does include plenty of other policy planks – spending and regulatory promises to support electric vehicles and public transit, low-emissions new buildings and retrofitted older ones, the greening of large industry and development of clean technology.

But those look somewhat supplemental, now that the carbon price is to rise by $15 per tonne each year after 2022 – up from the current $10/tonne annual increases, which most carbon-price advocates were just hoping would be maintained – until it reaches $170/tonne in 2030.That’s not so far off from the $210 a tonne that, according to a report last year by the pro-carbon-pricing Ecofiscal Commission, would be sufficient to hit 2030 emissions-reduction targets absent much other new policy.

The inescapable takeaway from what was announced on Friday is that the Liberals have come down on the side of a market-based solution strong in economic theory, but mostly untested in political practice. And they have done so somewhat at the expense of other, more-interventionist climate-related measures.

The most obvious trade-off in that regard is the Clean Fuel Standard (CFS), the long-promised regulatory policy to lower the carbon intensity of fuels that Canadians consume. The Liberals still plan to proceed with it for liquid fuels (i.e. gasoline for vehicles), which account for about two-thirds of emissions reductions that the CFS is supposed to produce.

But they’re scrapping its planned application to gaseous and solid fuels, mostly affecting building heating. It’s effectively a concession to an oil-and-gas sector that has lobbied hard against the CFS, and Mr. Wilkinson implied that it could be done because of what the higher carbon price will achieve.

More implicit, but also more sweeping in its implications, is that the Liberals appear to be eschewing massive postpandemic spending as their primary means of transitioning to a cleaner economy.

They are hardly skipping that kind of investment altogether. Some was announced earlier, including billions of dollars in green financing from the Canada Infrastructure Bank, and $2.6-billion for modest home energy retrofits pledged in the recent fall economic statement.

Additional spending is layered into this new plan, such as a $1.5-billion fund to support low-carbon fuel development, another $1.5-billion to retrofit or rebuild energy-inefficient buildings, such as community centres, and extensions of EV incentives and infrastructure programs. There will likely be more in the budget next spring.

Still, it’s a far cry from the calls by environmental groups for the government to commit in excess of $50-billion – or in some cases more than $100-billion – toward a green economic recovery. And the plan’s relatively restrained tone on future spending, coupled with the market mechanism that is its centrepiece, shouldn’t leave those groups holding their breath.

All this presumes Mr. Trudeau’s minority government is actually able to see through its carbon-price intentions.

The Liberals have smartly attached to the proposed hikes a shift from annual to quarterly rebates, which could help build public recognition that most households aren’t losing money in the equation. And they have amplified their recent talk of carbon border adjustments – tariffs on goods from places without comparable pricing policies – which could help assuage Canadian industries’ concerns about competitive disadvantage.

But for starters, the carbon price even in its current form needs to survive constitutional challenges from Alberta, Ontario and Saskatchewan, on which the Supreme Court is likely to rule early in 2021.

Ottawa also has to attempt some manner of fresh consultations with the provinces, as promised before the past election prior to any future carbon-price increases. The premiers of the provinces challenging the existing policy aren’t exactly going to be receptive. They’re likely to chafe at plans to reopen provincial equivalency agreements on industrial carbon pricing (which is different from the fuel price paid by consumers) that they only recently signed. They may have some company from other premiers who feel blindsided by Friday’s news.

And then there’s the matter of the next federal campaign.

Clearly, the Liberals believe this can be a winning issue for them against a Conservative Party that might once have championed such market-based policy itself. That much was evident in the interview with Mr. Wilkinson, when he questioned Conservative Leader Erin O’Toole’s seriousness in supporting emissions-reduction targets if he continues opposing the carbon price (and the Clean Fuel Standard).

But there is still very big political risk in campaigning on a policy that would ultimately add roughly 40 cents a litre at the gas pumps; that requires trust in government that revenues are actually being returned; that demands faith in economic theory at a time populism might more easily triumph.

That’s part of the reason why this surprise move is to the Liberals’ credit. They’ve long insisted that they care deeply about making Canada a leader in the climate fight. Finally, they seem to have the courage of their convictions.