Did Prime Minister Trudeau flinch on the federal carbon price backstop?

As I argued in a recent opinion column, pan-Canadian carbon pricing (or even provincial carbon pricing), until recently seen as inevitable, now looks less so.

Obstacles have been piling up over the last year, with four provincial governments (Ontario, Saskatchewan, Prince Edward Island and New Brunswick) all rejecting the federal government’s pricing scheme. United Conservative Party (UCP) leader Jason Kenney (who seeks to unseat Alberta Premier Rachel Notley) has robustly attacked the federal backstop. And Andrew Scheer, leader of the federal Conservative Party, wants a non-tax plan to meet the Paris climate target. Ontario Premier Doug Ford recently upped the ante, planning a separate constitutional challenge, in addition to joining with Saskatchewan Premier Scott Moe’s legal challenge.

And it seems Ottawa might be listening. The federal government has announced it’s softening the tax to accommodate emission-intensive industries. When introduced, the government initially proposed taxing companies for emissions exceeding 70 per cent of the average emission intensity for that sector. Under the new announcement, the tax will only apply to emissions that exceed 80 per cent of the industrial average for that sector, and in certain sectors, the tax will only apply to emissions exceeding 90 per cent of the industrial average for that sector. The latter industries include cement, iron and steel manufacturing, lime production and nitrogen fertilizer production.

Some have argued this represents more of a tweak than a step down. Trevor Tombe, an economist at the University of Calgary, tweeted that “The headline is… incorrect. The large emitter system was always going to feature subsidies, just like Alberta. Today details around the size of certain subsidies was announced. There is no policy change by govt here. Certainly not walking back the CTax(sic).”

It may be a tweak, but many will see it as the first crack in response to widespread public and provincial rejection of federal carbon pricing. Either way, tweak or retreat, this step will not be greeted well by those committed to Canada’s Paris climate target. Environmental advocates such as Dale Marshall with the Environmental Defense Fund are slamming the move, arguing that it “kowtows” to Canadian industry that “always whines about these kinds of regulations,” and constitutes a “bad strategy.”

Bad strategy or not, Prime Minister Trudeau undoubtedly sees 2019 fast approaching, and a potential wave of popular resistance to the federalization of carbon controls. Expect more “tweaks” to come.