Alberta’s UCP and NDP are accusing the federal government of unbalanced treatment toward provinces after unexpectedly scaling back its carbon pricing strategy on Thursday.
And experts the decision could diminish confidence in the government’s carbon pricing strategy, saying the move undermines incentives for consumers to make climate-friendly investments.
Prime Minister Justin Trudeau announced Thursday Ottawa will be exempting the carbon tax for three years on home heating oil, a decision that largely benefits Atlantic provinces, whose residents disproportionately use it as a source of home heating.
Homes in Alberta predominantly rely on natural gas for heating. Statistics Canada doesn’t carry numbers on how many Alberta homes use home heating oil.
Home heating oil had originally been exempt from the carbon price in Atlantic Canada until July 1, when the federal government introduced the price to the region’s four provinces, saying they were no longer compliant with federal standards.
The decision marks the first time the Trudeau government has made concessions to its carbon pricing strategy.
In a post to X, formerly Twitter, Premier Danielle Smith called for the end of carbon pricing.
“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,” reads post.
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In a statement to Postmedia, Nate Horner, provincial minister of the treasury board and finance, called on the federal government to make carbon tax exemptions for all fuel types.
“I am happy for Canadians in Atlantic Canada for the break they will be receiving from carbon tax on home heating oil, but I am extremely disappointed that Canadians in Alberta, Saskatchewan and other provinces who heat their homes with natural gas have been neglected,” Horner wrote.
“The federal government needs to step up and cancel the carbon tax or make this exception for every province and every fuel type.”
Meanwhile, in a speech Alberta NDP Leader Rachel Notley said she will bring an emergency notice to the Speaker of the House on Monday calling for all “federal actions” to be applied equitably to Canadians. She requested the UCP support the motion.
“To apply a carbon price to some regions, and some fuels, but not all, is totally unacceptable. We must act together as Canadians or this just won’t work,” she said.
As part of the changes, the federal government also announced the carbon price rebate for rural Canadians will double next April from being 10 per cent higher for households outside urban areas to 20 per cent.
The carbon price is intended to encourage people to find low-carbon alternatives by making fossil fuels more expensive.
Climate, taxpayer groups voice frustrations with decision
The Canadian Climate Institute, a federally funded research institute, said in a statement that the home heating oil exemption “introduces uncertainty” to the country’s climate policy.
“It sends the signal to emitters—and investors—that policy can be weakened in the future, diluting the carbon price’s effectiveness in driving the long-term, low-carbon investments required to reduce emissions,” it said.
The Canadian Taxpayers Federation, a federally incorporated non-profit, called on the federal government to end carbon pricing on home heating fuels.
“Albertans are being left out in the cold because Trudeau is refusing to give us the same relief he is giving to Atlantic Canada,” said Kris Sims, CTF Alberta director.
Decision makes it more likely carbon pricing could be eliminated: expert
The federal government’s decision was “shocking to see,” said Trevor Tombe, professor of economics at the University of Calgary, and said it leaves room for credible doubts that the tax will be scaled back in the future, dampening “the incentive to change behaviour today.”
“I think this makes it more likely that the carbon tax itself could be eliminated in the future, because it also undermines the government’s own argument for having it in the first place.”
Tombe said he has been a heavy supporter of carbon pricing because it purports to treat all consumers the same, which this decision casts into question.
“The more we go down the road of having government pick winners and losers in terms of climate policy, economically the more costly it’s going to be — but politically, the greater the frictions are among those who are not the recipient of favourable treatment under the system,” he said.
Given carbon pricing on home heating oils only began in July, Tombe said it’s too soon to understand how effective the policy would have been. He added if the federal government determined Atlantic Canada was facing affordability problems, many different options such as cash transfers or a GST boost were at their disposal.
As well, another appropriate solution would either include broadly changing the carbon pricing rate or exempt home heating fuel altogether, Tombe said.
“This huge about-face is not done because of learning about the effectiveness of the policy … It was because we’re getting into winter and (the Liberals) are politically vulnerable.”
The federal government indeed risks damaging confidence in Alberta if the move is seen as an example of privileging eastern Canada, said Lori Williams, political scientist at Mount Royal University.
Concerns around affordability — a key message Conservative Leader Pierre Poilievre has honed in on amid his party’s growing lead in the polls ahead of the Liberals — likely factored into the decision, she said.
“Carbon taxes are something people are sympathetic to when it doesn’t really hurt. But things are really, really hurting right now,” Williams said, adding the carbon tax isn’t responsible for the rises in gas prices, rises which have largely been due to volatile oil prices.
Williams said the federal government risks calling into question whether carbon pricing is effective despite many studies finding it among the most effective behavioural modification methods available.
“If people start to wonder whether there is a larger justification for the policy, then that could really shift public opinion,” she said.
— With files from The Canadian Press