In politics, the beep-beep is never a reassuring sound.
The Trudeau government’s slight retreat on carbon pricing betrays a certain internal panic. Barely four months after the entry into force of its carbon tax in the Atlantic provinces, it is going backwards by suspending the measure for oil heating.
The Liberals have heard the anger of their rural voters. For conservatives, it is seen as an admission of weakness. And an incentive to go further in the demonization of the entire liberal environmental program.
On paper, the decline is not that great. Liberals suspend carbon pricing for fuel oil delivery for three years. In return, they increase the subsidy by 50% to replace fuel oil with a heat pump. We remove a stick and we enlarge the carrot.
Added to this is a buoy.
In Quebec, carbon market revenues are used to finance green policies. But in the federal system, which applies in the majority of other provinces, revenues are redistributed to taxpayers. The less wealthy are currently net winners.
In addition, this check is 10% higher in the regions, where citizens depend more on their car. The Liberals will increase this rural premium, which will increase to 20%.
But why back down so quickly after having fought so hard to sell the carbon tax?
The Liberals explain that the price of fuel oil has jumped 75% in the last year. This is three times more than for gas. This jump hurts all the more as fuel oil is used more by low-income households. Inflation hits them in the face.
However, we can guess that the decision is primarily political and that it comes from the top of the government. If the election were held tomorrow, the Liberals would lose the majority of their seats in the Atlantic. Nearly half of voters there want to see the abolition of carbon pricing.
Justin Trudeau hopes to calm the discontent here, but that is not all. He sees the big picture. The main battle has only just begun, and it will be fought on another front.
His government is aiming for carbon neutrality by 2035 for electricity. He also wants to impose a cap on greenhouse gas (GHG) emissions from oil and gas. In both cases, the regulations are not finalized. And already, the oil lobby and the conservatives – federal and provincial – are going to war.
The Liberal leader tried the same strategy in 2018 by buying the Trans Mountain oil pipeline. He thus hoped to calm the West in order to better digest his carbon tax, which had not yet been adopted.
However, his hand remained outstretched in the void. Above all, the compromise had created new discontents, and history threatens to repeat itself with fuel oil. We see this with the reactions of Mr. Poilievre and the Premier of Alberta, Danielle Smith. They are already intensifying their attacks to demand further setbacks.
New Brunswick Conservative Premier Blaine Higgs claims that carbon pricing is both costly for citizens and ineffective for the environment. His allies repeat the same thing.
Their logic is difficult to follow. If the tax is expensive, it encourages people to reduce consumption. And, therefore, to reduce its pollution.
It’s not a secret or a scandal. On the contrary, increasing the price of gasoline is precisely the goal.
This effect has already been estimated by the Parliamentary Budget Officer. In 2021, it predicted that the expected increase in the price of carbon by 2030 – from $50 to $170 per tonne – would reduce GHGs by 96 megatonnes1.
What if we abolished the tax? That too would have a price. One ton of carbon causes an estimated $261 in environmental damage, and this figure will only increase over time.
So the question is who should pay.
Carbon pricing affects individuals and businesses.
For individuals, it is equivalent to a tax on gasoline and gas. Every year its cost increases. In 2030, on average, Canadian households will receive less than they pay.
In dollars, the bill will be smaller for people with modest incomes. But this amount will eat up a larger proportion of their income2. However, nothing prevents us from compensating by helping them in other ways.
While generally supporting carbon pricing, the New Democrats call for a GST holiday on heating and an end to fossil fuel subsidies – the Liberals only attack aid deemed “ineffective”, while generously funding technology uncertain about carbon capture.
Those who want to eliminate the carbon tax must take a stand. Or they propose another GHG reduction plan. Or they honestly admit not wanting to do anything to counter climate change, even though seven of the eight planetary limits have been reached3 and that ecosystems are dangerously approaching several tipping points4.
If Mr. Trudeau wants to appease Atlantic residents who are struggling to pay their bills, his decline is understandable. But if he believes that the compromise will help digest his other environmental reforms, he will be disappointed. Because among his rivals, the smell of blood only whets the appetite.