By Nia Williams and Steve Scherer
Ottawa (Reuters) – Canadian Prime Minister Justin Trudeau is sending mixed messages on climate policy, environment experts say, after he diluted his signature carbon tax policy to ease cost-of-living burdens in a region that has been a stronghold for his party.
Experts say Trudeau’s carbon pricing scheme, known as the carbon tax, works well and cannot be easily replaced. But after he offered a three-year exemption on heating oil to appease voters on the Atlantic coast, the policy is under siege.
Provincial leaders across Canada are asking for relief for households using natural gas for heating. Even the left-leaning New Democrats, who support Trudeau’s government in parliament and have previously defended the carbon tax, are calling for the exemption.
Richard Brooks, climate finance director at environmental campaign group Stand.earth, said Trudeau’s government is sending unclear signals on climate.
“We’d like to see the Liberals take a clear position that they are going to be climate leaders and use all tools available,” Brooke said.
Canada is likely to miss its 2030 emissions-reduction target and the government has been criticised for being slow to incentivize clean energy investments.
Trudeau’s government also bought the Trans Mountain oil pipeline, which is undergoing a major expansion, while allowing Canadian oil and gas production to hit record levels, Brooks added.
Analysts said the carbon tax carve-out is another example of inconsistent policy.
“It’s a slippery slope,” said Chris Severson-Baker, executive director of the Pembina Institute think tank. “If (the government) is constantly changing and exempting things, it creates more uncertainty.”
The Liberal government said a spike in heating oil’s price justified targeted relief for rural and low-income households.
Canada’s opposition Conservative leader Pierre Poilievre has long wanted to “axe” the tax, arguing it is an unfair cost for consumers. Poilievre would clobber Trudeau if an election were held today, polls show. However, a vote is not due until 2025.
Shachi Kurl, president of pollster Angus Reid Institute, said the Liberals cannot afford to alienate Atlantic voters and expect to win the next election. Liberals hold three-quarters of the region’s parliamentary seats.
“Whenever you get into economically uncertain and shaky times at the household level, climate issues always become part of the tension around what takes precedent,” Kurl said.
CARBON TAX REBATE
The carbon tax is intended to discourage use of fossil fuels and accelerate a switch to clean energy, but the recent carve-out underlines how fragile climate policy is in the face of pressing political calculations.
Federal Natural Resources Minister Jonathan Wilkinson admitted his government had not properly explained how the carbon price rebate system worked, making it an easy target for Poilievre.
“We need to do a better job of ensuring that we are communicating that to Canadians,” Wilkinson told Reuters this month. Roughly three quarters of Canadians receive more in rebates than they pay in carbon taxes, but many voters believe they are worse off due to the policy.
In September, Bank of Canada governor Tiff Macklem said the carbon tax contributes about 0.15 percentage points to the inflation rate, which was 3.8% that month. If the current price of C$65 a ton were eliminated, it would lower inflation by 0.6 percentage points for one year.
Trudeau has promised no more carve-outs, but the fact that there was one already means others could follow, said Robert Asselin, senior vice president of policy at the Business Council of Canada.
The Business Council supports carbon pricing because “it provides businesses a predictable framework for investments going forward,” Asselin said. “And it’s the most efficient way to reduce emissions. That’s just basic economics.”
(Reporting by Nia Williams and Steve Scherer in Ottawa; Editing by Josie Kao)
