Trudeau Faces Rising Political Pressure to Abandon a Key Climate Policy

(Bloomberg) -- Prime Minister Justin Trudeau’s signature environmental policy – an escalating tax on pollution – is increasingly under attack, as higher living costs erode public support for a measure the government sees as essential to curbing Canada’s emissions.

The carbon policy includes a tax on large industrial emitters and a levy on consumers. The price per metric ton is the same for both and rises annually before reaching C$170 ($126) in 2030. Currently, it’s at C$65 per metric ton, which adds about 14 Canadian cents to a liter of gasoline — equal to about 40 US cents per gallon. 

To ease the financial hit, the government takes most of that money and sends it back to households in quarterly rebate checks. Most receive more in rebates than they pay in carbon taxes. But many people are nevertheless angry about the effect of the tax on their heating and gasoline costs. 

“The heightened focus on cost of living and inflation, the pressure people are feeling on their pocketbook, has brought this back to the forefront,” said Dan Arnold, a former Liberal pollster who now works for Pollara Strategic Insights. 

After an initial barrage of opposition from conservative politicians when the policy was introduced in 2018, the debate quieted. But in recent weeks, seven provincial premiers have asked the government not to go ahead with a scheduled increase on April 1. Saskatchewan has refused to collect the carbon tax, and Pierre Poilievre, leader of the national Conservative Party, pledged to force a vote of non-confidence in the government on Thursday over the issue.

Poilievre’s motion is highly unlikely to succeed — Trudeau’s Liberals have a deal with the opposition New Democratic Party under which the latter supports the government on key parliamentary votes. Regardless, if Poilievre maintains his double-digit lead in opinion polls through an election that’s expected next year, the days of a consumer carbon tax may be numbered.

Conservative Attacks

Canada’s emissions are similar to the US’s on a per capita basis, partly because of a massive expansion of oil and gas extraction in recent decades. Trudeau’s government has set an ambitious target of cutting emissions to at least 40% below 2005 levels by 2030. 

A carbon tax is crucial to meeting that goal, according to a new report by the Canadian Climate Institute — but the tax on industrial users will play a bigger role than the consumer levy, it said. 

Poilievre has been “very diligent and focused” in framing the carbon tax as a policy that hurts households financially, especially as the rebates are not very well-known, Arnold said. That’s despite government efforts to rebrand those payments as “Canada Carbon Rebates” instead of “Climate Action Incentives.”  

Trudeau also opened the door to further criticism of the policy in October when he announced an exemption for home heating oil, a fuel primarily used in Atlantic Canada – where his poll numbers were sinking. The move sparked outcry from other provincial premiers over regional unfairness, and appeared to lend credibility to the argument that the tax was making life less affordable.

Poilievre hasn’t released a detailed climate platform. He has made it clear he would cancel the consumer carbon tax, but his position on the industrial carbon price is vague. He has endorsed nuclear energy, carbon capture and storage projects and critical minerals exploration. At the same time, he wants to boost fossil fuel production and opposes the government’s electric-vehicle mandates.

Canada is already on track to miss its 2030 emissions goal. It would be hard to bring in an alternative to the carbon tax and still achieve its target, said Kathryn Harrison, a political scientist at the University of British Columbia who specializes in environmental policy.

“Those who would like to believe there’s some other climate policy that can achieve the same goals without political pushback, I think, tend to underestimate how slow regulation is and how often we see business win concessions at the implementation stage,” she said. 

“I think there’s some wishful thinking going on here.”

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