Prime Minister Justin Trudeau makes his way to Question Period in the Foyer of the House of Commons on Oct. 25 in Ottawa.Adrian Wyld/The Canadian Press
Premiers are demanding further exemptions from carbon pricing after Prime Minister Justin Trudeau gave relief to some households in a surprise policy change that experts warn undercuts the government’s climate plan.
After years of refusing to make any such exemptions, Mr. Trudeau late on Thursday said the government would create a special carve-out to the broad-based levy and lift the tax on home-heating oil.
The change favours households in Atlantic Canada – where the Liberals have their only rural stronghold – over those in other regions, because heating oil is disproportionately used on the East Coast.
The Prime Minister acknowledged that the carbon price was adding to affordability concerns and said the exemption was needed alongside an enhanced heat-pump program to ensure more households ditch home-heating oil. By leaving out other heating fuels, such as natural gas, premiers said the Prime Minister is dividing Canadians.
“While this is a step in the right direction, the vast majority of people in Ontario heat their homes and businesses with natural gas and will still have to pay the carbon tax,” said Premier Doug Ford on social media.
“I’m urging the Prime Minister to do what’s right and eliminate the tax altogether.”
What to know about Trudeau’s carbon pricing system and the Atlantic exemption
Fellow conservative premiers in Alberta and Saskatchewan – Danielle Smith and Scott Moe – echoed Mr. Ford.
In social-media posts, Mr. Moe said the Prime Minister’s move was proof that carbon pricing has made life less affordable, while Ms. Smith said it was evidence of “how dysfunctional and divisive Ottawa has become.”
“The federal government has decided that one part of Canada with one type of home heating is worthy of a carbon-tax break, while those living elsewhere using another type of home heating do not,” Ms. Smith said.
Ottawa also drew the ire of Alberta’s opposition NDP, resulting in an unlikely alignment with the governing United Conservatives.
“To apply a carbon price to only some regions and some fuels is totally unacceptable,” NDP Leader Rachel Notley said in a statement.
By late Friday afternoon, the federal government had yet to release any technical or costing information for the new policies, including what impact it will have on emissions, what the revenue impact of the heating-oil exemption is, or how much of the new heat-pump program Ottawa will pay for.
The government is also doubling the rural top-up in the carbon-price rebate for households. That rebate and the heating-oil exemption apply in provinces that are subject to the federal carbon price. In addition to the Atlantic provinces, Ontario, Manitoba, Saskatchewan and Alberta are also subject to the federal version.
For months, the Prime Minister’s own MPs had been calling for changes to the federal system, after it took effect in Atlantic Canada this summer, but Ottawa rebuffed calls for relief. “Climate change won’t wait,” Environment Minister Steven Guilbeault said in June.
Mr. Guilbeault was not available for an interview with The Globe and Mail Friday, but on Thursday, Mr. Trudeau insisted that the changes don’t show a retreat on climate policies.
“It’s actually enhancing our own policy,” he said.
Experts dispute that, saying the carbon-price exemption will lead to fewer people changing their behaviour to reduce their emissions footprint.
Ottawa’s decision runs counter to the very way that carbon pricing works, said Sara Hastings-Simon, an assistant professor at the University of Calgary, who studies the energy transition.
If the core issue is affordability, she said, it would be more effective to retain carbon pricing and institute incentives that accelerate the adoption of low-carbon alternatives, such as heat pumps, so consumers can shift from heating oil and the wild swings of commodity markets.
“Policies do work much better when both of those kind of drivers are in place,” Prof. Hastings-Simon said, pointing to Europe as an example. Heat-pump sales there grew by nearly 40 per cent in 2022, according to the International Energy Agency, because of the combination of various rebate programs and cost pressures through carbon pricing.
Carbon pricing also works better when it’s uniform, said University of Calgary economist Trevor Tombe.
“Any exemptions, whether that is across sectors, regions, fuel types, and so on, makes this policy less effective and less efficient,” he said.
Prof. Tombe said the government hasn’t articulated a convincing policy rationale for the changes, leaving him to conclude that it’s about “pure politics in a region that the governing party cannot under any circumstance afford to lose to make their electoral math work.”
“I’m a supporter of carbon taxes, but it does look like their days are numbered.”
University of British Columbia political-science professor Kathryn Harrison warned that now that the government has opened the door to changes, it will be more difficult to say no to new requests – and will make reimposing the tax on home-heating oil even more difficult.
“Exemptions beget more exemptions. Taxpayers in other regions will say ‘what about us?’ ” she said. “We have seen the scope of some countries’ carbon taxes decline over time because of that slippery slope.”
Janet Brown, a Calgary-based pollster, doesn’t think Ottawa’s policy reversal will widen geographical rifts in Canada. But it will likely be “another proof point for people in Western Canada that the Liberals will move when it will earn them votes in the East.
It’s also “a huge step down” from their message on pricing pollution, Ms. Brown said, and an acknowledgment from the Trudeau government that some Canadians find the switch to lower-carbon alternatives harder than others, based largely on where they live, their income and what fuels are available to them.