The Decibel - Premiers attack Trudeau after carbon tax carve-out

Episode Date: November 2, 2023

Last week, Justin Trudeau announced an exemption for the carbon price on home-heating oil. The majority of homes that use home-heating oil are in Atlantic Canada. Premiers in other provinces, like Saskatchewan and Alberta, say that’s not fair – and are demanding carve-outs for heating fuel in their provinces too.Marieke Walsh is a senior political reporter for the Globe. She’s on the show to talk about why Trudeau would soften his signature climate policy and what political machinations are at play behind the scenes.Questions? Comments? Ideas? Email us at [e-mail]

Last week, Prime Minister Justin Trudeau announced a carbon pricing exemption for some Canadians. Carbon pricing is one of the key parts of the Liberals' climate change plan. It raises the cost of energy sources that create more carbon. That incentivizes people and businesses to move to more environmentally friendly options. But this new carve-out means that some people will be getting a break on a high-emitting energy source, which is leading to calls for more exemptions across the country. Marika Walsh is a senior politics reporter for The Globe. She's here to talk about why the government is doing this

and what the consequences could be. I'm Maina Karaman-Wilms, and this is The Decibel from The Globe and Mail. Marika, thanks so much for being here today. Thanks for having me on, Mainika. So last week, Trudeau announced some changes to the government's climate plans. What exactly did he announce? So he announced three things in what they're framing or spinning as an energy affordability package.

The first is that for the next three years, or actually a bit more than three years, home heating oil users will not have to pay the carbon price on home heating oil. On top of that, they also announced that they would double the rural rebate top up for households in provinces where the federal carbon price applies. So that's the East Coast provinces that would give free heat pumps to low and median income families who are using home heating oil in an effort to get them to switch to a more environmentally friendly heating source for their homes. Okay, right. So this is focused on home heating oil, which is kind of one of the dirtier forms of energy here, even more expensive and less efficient than natural gas.

So you said there's three pillars here, but really people seem to be focused on this exemption around home heating oil. Can you tell us a little bit more about that? Why is this an issue? Because it strikes to the core of everything that the liberal government has been saying about climate change, about the carbon price and about how it works reversal it is on a marquee policy, not just in the government's climate file, but arguably in the government's entire tenure and record in government. So this is huge for the prime minister. And this is significant change in such a significant area of their policy focus from the last eight years.

But it's also something that has been so politically sensitive from the start. And by making this change and by tying the change to affordability, the government's detractors and critics say that the government has proven their point, has proven why the carbon price is not fair for households, that it does affect affordability, which is what the government has for years said it doesn't do because the households that pay the carbon price also get a rebate on it. Which is generally true, right? Like in Ontario, we're getting money back from the carbon price. Is that not at play here? Like wouldn't people in the Atlantic provinces also be getting money back? Yeah, and they are getting money back, which is the point of the

critics that if the rebate is sufficient, if the rebate is enough, then why are you also exempting home heating oil from the carbon price? Moreover, climate scientists, economists are saying the change sends really mixed signals. The whole point of a carbon tax is to increase the price of things that are more carbon emitting and therefore more polluting and bad for the environment or contributing more to climate change. And by increasing the price on those things, the goal is to change behavior to get households and businesses to invest in lower emitting heat sources or other technologies that would then reduce overall emissions. And so the incentive to make the change from home heating oil, they say, has been removed

because they're no longer paying a price on it. The government has gone to great lengths to try and dispute that in the last several days, but certainly they are struggling to explain their position to conservative premiers who are very upset, as well as, frankly, to in a way that is rational or explainable or justifiable from the perspective of climate experts who've been studying this policy outside government for so long. We'll talk a little bit about those critics, but I guess we should just focus on what the government is saying here, Marika. Like, what does Trudeau and his government say is the reason for why they wanted to do this? You mentioned affordability, but how have they explained that? How they've explained it is that heating oil is both more expensive than natural gas and also more emitting. And the prime minister on Tuesday said that it also is generally used by more low-income families. And so if you combine all those things together,

he says that the government has more incentive or more imperative to get as much of that heating oil out of the system. But because it's used by what the government says are tends to be more low income families, they don't have the means to make those big investments up front. And so that is, for example, the explanation for this new heat pump program. But again, when a carbon price is about pricing pollution, it's hard to understand why removing the price on a heavier emitting fuel makes sense in the climate policy field. But the government says because it's a three-year pause, they are giving people time to adjust before bringing it back in. Heating oil is disproportionately used in Atlantic Canada. About 30% of households there use home heating oil compared to, for example, about 2% in Ontario. However, in the prairies, it's almost a negligible number of people that do use that type of heating oil.

Yeah, it's interesting because I think in Ontario, like we barely ever hear about home heating oil, but it sounds like proportionally this is a much bigger issue in Atlantic Canada then. It's a huge issue in Atlantic Canada. And it's something that the Liberal MPs who have a stronghold in that region have been trying to get the government to address for quite some time now, have been pushing the government to make changes because they're hearing from constituents who are upset about the carbon price, which the federal version of it was only imposed this July on the East Coast because until then they had provincial programs that had more car routes and exemptions. And so they're really only feeling the pinch now.

They're feeling the pinch at the same time that the Conservatives launched a massive ad campaign out East criticizing the carbon tax. The Axe the Tax campaign started around the same time. Wow, what a crowd. Great to be back here. The incredible common sense people of Nova Scotia. Who's ready to axe the tax? And premiers on the East Coast were also calling on the federal government to make these changes.

Now, for months and months and months and months, the federal government said, no, we're not doing that. We're not exempting the carbon price from heating oil. Well, you know, because it is supposed to be sort of a broad price. It's not supposed to have sort of little carve outs that, as the Green Party leader called, make it a Swiss cheese policy. And so that is sort of the pressure campaign and the perspective from the East Coast. But how it plays out in the rest of Canada is why we're seeing this political firestorm now, because it does favor households on the East Coast, not just with the carve out of home heating oil, but also because the pilot program for free heat pumps is so far only available on the East Coast.

OK, so it's really, really focused then on these Atlantic provinces. So it sounds like there's there's a bit of politics at play here, Marika. How important is Atlantic Canada to the federal liberals? I would say there's a lot of politics at play, Manika. But just to sort of paint a picture of how political this is, the people who were standing behind the prime minister when he made the announcement last week were his Atlantic liberal MPs. They weren't rural MPs from other parts of the country. They were liberal MPs and cabinet ministers from the East Coast. And we all know that they were the ones lobbying for these changes. The prime minister gave them credit for that.

And so that underscores the politics of it. But what we also know about the politics of it is the polling backdrop. And the polling backdrop explains in part why the liberals made such a major concession on a marquee policy. And that polling backdrop is that the liberals are behind by more than double digits from the conservatives. So, for example, Nanos Research released numbers earlier this week that shows the conservatives at 38 percent nationally and the liberals at 25 percent nationally. So that is major losing territory

for the current government. And moreover, it shows the Liberals trailing in all regions, including Atlantic Canada, which is their only rural stronghold. We'll be back after this message. So Mariko, I want to ask you about Pierre Paglia, the conservative leader. What has he said about this change in policy? What's interesting is that the liberal move last week has, in a way, united parties from different political stripes on the political spectrum against this policy, or at least in criticizing how the policy was rolled out. Since the Liberal government announced the changes last week, there's been a growing snowballing pressure campaign to have that exemption extended to other fuel types, including natural gas. That comes from premiers

in Alberta, Saskatchewan, and Ontario, and it comes from the Conservatives federally as well. And the Prime Minister has so far rebuffed that and things are moving fast. So as of Tuesday afternoon, the Prime Minister had very strongly, flatly rejected any more carve outs. And what the Conservatives announced Wednesday morning in a bid to up the pressure even more on the government is that they will force a vote in the House of Commons on extending the exception to the carbon price to all home heating fuels. And that will put Liberal and NDP MPs in a very tricky spot because it will mean that after the Liberals give one exception to one type of home heating fuel, they will either have to vote with the government line and say nobody else gets that exception,

or they'll have to vote against the Liberal government and side with the opposition. As the pressure campaign on the Liberals has increased in the last few days, the Prime Minister on Tuesday also showed a new sort of counterpoint that they were going to be rolling out. And he compared their changes and their policies that they announced last week to the phase out of coal. And he said they now want to phase out home heating oil, which is so much more heavy in emissions compared to other heating fuels. And he said because of that, it deserves different treatment than other fuels that Canadians use. And moreover, he and people who work in the space on efficiency and home retrofits say that the government's policies to date that help middle income homeowners retrofit their homes and increase their energy efficiency are not accessible to lower income people because they can't afford to make those upfront investments, which can be tens of

thousands of dollars. The premiers, a lot of the premiers have also been quite critical of what's happening here. How have they reacted? The premiers have reacted in a sense, predictably. But I think in another sense, I'm surprised by how emboldened people are since the government made this concession. I think it was clear pretty quickly that the what about me question would become the question for the government to answer. But the premiers have really amped up the pressure. And we've even seen people like B.C.'s David Eby, where there is no federal carbon backstop in that province because B.C. has its own carbon pricing. Why doesn't B.C. have this free heat pump program already when the Atlantic Canadian provinces do?

And so the pressure is coming from allies and opponents alike, I would say. And the more sort of heated criticism and heated anger is coming from the prairies, people like Scott Moe in Saskatchewan. So the prime minister chose to make life more affordable for families in one part of the country while leaving Saskatchewan families out in the cold. How is that fair to families here in our country? Who now says that he will direct the provincial energy utility to stop collecting the carbon price as of January and stop submitting the fees to the federal government if the federal government does not agree to a carve out for natural gas and other home heating fuels. And what's so interesting about this moment

is that the NDP and the opposition benches in the Saskatchewan legislature voted with the Saskatchewan government on that motion. And similarly, not exactly the same, but the NDP and Alberta have also called for the carve out to be extended. And so you see how much pressure this is putting on the federal government, but also on the federal Democrats with Jagmeet Singh. This motion is a

non-binding motion, but symbolically, it really does matter. I just want to ask you, Marika, you mentioned that Saskatchewan actually said they would stop collecting the carbon levy altogether. Can they do that, though? Is that legal? Well, it's not legal, according to the federal carbon pricing law. Whether they can do that, how the government responds, I think, is a different question. The Natural Resources Minister, Jonathan Wilkinson, said on Tuesday that they expect the Saskatchewan government to follow the law, but it certainly sets up a very interesting sort of battle of wills. And it means that this carbon price issue, which in some ways seemed to be more put to bed after the 2019 and 2021 elections, has really rocketed back to the forefront of politics in Ottawa, but also of one of the key sort of wedges between provinces and the federal government. We've talked a lot about the political

critiques here. But Marika, you also mentioned that even people who are proponents of a carbon levy climate change measures are actually having an issue with this as well. So what is I guess, what is the critique on that side? The critique on that side is coming from business groups, from proponents of carbon prices, sort of academics in the university world, but also people like Mark Carney, who is a prominent liberal. He is he's not an MP. And when I call him a prominent liberal, I don't mean liberal on the elected side. I mean, a liberal thinker or somebody who's at the convention, somebody who's speaking at liberal think tank events and trying to influence policy from that side. OK, but he, along with other people, have warned that this carve out creates uncertainty for businesses. And one of the key elements of the carbon price for it to actually have the impact of getting people to invest and make changes is a change to the carbon price that affects home

heating oil for three years and in that time frame is a federal election where the leading party right now in the polls is saying we'll just ax the tax entirely why would you pay that money up front now to make those investments to make those changes to reduce your emissions? And so because of that, because of all the questions it raises as to the future of the carbon tax, some people have told me, you know, they think that it's at its most precarious or most vulnerable position than it's been in since it was introduced. And it's already gone through two federal elections. Yeah. I guess I still wonder then, like, why make the decision to open up carbon pricing here? Why not provide other kinds of incentives? You know, even if they they wanted to help people out with affordability, as they said they they did.

Why not? You know, it's like the carrot and stick thing, right? Like, why not just give people other benefits here instead of opening up carbon pricing? And that question, Manika, is exactly the question that some people I've been speaking with have. They say that it actually would have worked better if they'd kept the carbon price on home heating oil, but given more carrots. So they would have the carrot and stick driving in the same direction instead of in opposite directions, which is happening now. I think it really comes down to how unpopular the carbon price is in Atlantic Canada. When you look at polling data from Abacus data, it really highlights the problem for the Liberals. When the federal carbon price was brought in in July, the Liberals and Conservatives were essentially at a statistical tie with the Liberals at 37% in Atlantic Canada and the Conservatives at 36%. Fast forward to October, that same data shows the Conservatives now hold

a double digit lead over the Liberals in Atlantic Canada. And Abacus data shows from October that the Liberals are at 31% compared to the Conserv conservatives at 42%. And that is a region that is critical to the liberals electoral map and to their success in the next election if they hope to hold on to government. But this change to the carbon price, it's hard to understand other than through the lens of politics. Just lastly here, Marika, where does this go from here? This is since the announcement, there's been lots of reaction. Things don't seem to be dying down anytime soon. So what are you going to be watching for? I think this is one of those things where you are following the bouncing ball in Ottawa because you really don't know how quickly things will move. And it is unpredictable.

You know, we have a 930 story meeting and then at 945, Pierre Polyev is saying there's a vote coming. So we're speaking, you know, Wednesday morning. And it's hard for me to say what's going to happen by the end of today. But what I'll tell you I'm looking for is how liberal MPs and NDP MPs vote on the conservative motion. That motion is expected to come to a vote on Monday. And in particular, how backbench MPs from both of those parties in rural areas that are particularly at risk to the conservatives in the next election, how they vote will be very indicative, very telling, and really important to show both how much power each of those leaders has over their caucus, but also just as a key to what those MPs are thinking. I'll also say that we actually don't yet know where the NDP will come down on this motion. And so how Jagmeet Singh responds to this conservative push and how his party responds will be really important to watch.

Marika, this is really interesting. Thank you so much for taking the time to speak with me today. Thanks so much for having me. That's it for today. I'm Mainika Raman-Wells. Michal Stein helped produce this episode. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Adrian Chung is our senior producer. And Angela Pachenza is our executive editor. Thanks so much for listening, and I'll talk to you tomorrow.