Ottawa exempting home heating oil from carbon tax for 3 years, Trudeau says

The government is creating a carve-out for the carbon tax on home heating oil, Prime Minister Justin Trudeau said Thursday.

The government will exempt home heating oil from the tax for three years, double the rural supplement in the rebate program and offer new programs Trudeau said will help rural Canadians switch to electric heat pumps.

“This is an important moment where we’re adjusting policies so that they have the right outcome. We are doubling down on our fight against climate change and keeping true to the principles that we’re supporting Canadians while we fight climate change,” Trudeau told a press conference.

While the exemption applies nationwide, Trudeau said the policy will help Atlantic Canada in particular. Thirty per cent of homeowners in the region still use furnace oil to heat their homes.

“We’ve heard clearly from Atlantic Canadians through our amazing Atlantic MPs that since the federal pollution price came into force … certain features of that pollution price needed adjusting to work for everyone,” he said, surrounded by a number of Liberal MPs from the region.

The federal carbon tax applies in provinces and territories that don’t have carbon pricing systems that Ottawa considers sufficient to lower greenhouse gas emissions. Households in those provinces receive a rebate to offset the tax.

The federal carbon tax took effect in the Atlantic provinces in July, after Ottawa deemed the provincial alternatives insufficient.

Trudeau said the pause is meant to give rural Canadians more time to switch to alternative sources like electric heat pumps.

Last year, the government earmarked $250 million for provinces and territories to help low-income households make the switch from fossil fuels to other sources. On Thursday, Trudeau said his government would be boosting that grant for lower-income households in Atlantic Canada to make the switch away from fossil fuels easier.

“We are switching to heat pumps off home heating oil as a region in Atlantic Canada and as a country,” he said.

The government already gives a supplement to residents of rural and small communities that increases the rebates in their province by 10 per cent to account for increased energy needs and reduced access to transportation options. That top-up will rise to 20 per cent in April.

The carbon tax is currently priced at $65 per tonne of emissions and is set to rise by $15 every year until 2030.

Trudeau’s announcement comes as his Liberal Party polls well behind the Conservatives under leader Pierre Poilievre.

Poilievre has used the carbon tax as a line of attack against the Liberals. His latest “axe the tax” rally is set for Thursday night in Windsor, N.S.

Just last year, the Conservatives put forward a non-binding motion to remove the carbon tax from home heating fuel. Most Liberal MPs voted against it.

The Conservative leader quickly took to social media to accuse Trudeau of backing down.

“After plummeting in the polls, a flailing, desperate Trudeau is now flipping and flopping on the carbon tax,” Poilievre posted on X, formerly Twitter.

NDP MPs Laurel Collins and Charlie Angus issued a joint statement on Thursday accusing the prime minister of only being concerned about his party’s political fortunes in Atlantic Canada. They criticized Trudeau for not going further by removing the GST on home heating fuel and investing in cleaner energy sources.

“If Trudeau had made the investments needed in energy efficiency, electrification and clean power years ago instead of handing over billions to big oil, Canadians would already see lower energy bills,” they said in their statement.

But Trudeau also has been facing pressure from provincial premiers and some of his own MPs to do something about the rising cost of fuel.

The tax has been a source of anxiety for Atlantic Liberal MPs in particular.

Liberal MPs like Kody Blois of Nova Scotia and Ken McDonald of Newfoundland and Labrador pressed the prime minister for a rural carbon tax carve-out at the Liberal national caucus retreat in September.

McDonald has voted twice in favour of Conservative motions calling on the government to repeal the tax.

“Everywhere I go, people come up to me and say … ‘We’re losing faith in the Liberal Party,” McDonald said in an interview with the CBC’s Power & Politics earlier this month.

The Liberals have enjoyed healthy support in Atlantic Canada since 2015, but McDonald warned the party would lose seats in the next federal election if the government didn’t do something on the carbon tax.

Asked if Thursday’s announcement was meant to prevent the Liberals from losing seats in Atlantic Canada, Trudeau said Canadians in other provinces will also benefit.

“People across the country are going to benefit from the suspension of the price on pollution on home heating oil and benefit from the programs we’re putting in place,” he said.

In an interview with CBC News Network’s Power & Politics, Blois insisted that Thursday’s announcement isn’t a watering-down of the Liberals’ climate policy.

“This is about adjusting a national policy to ensure there is equity across the country,” Blois told host David Cochrane. “This is not a step back on climate whatsoever.”

Blois, who chairs the Liberal Atlantic Caucus, credited his Atlantic colleagues for making the policy change happen.

In May, the four Atlantic premiers urged the federal government to delay a new clean fuel standard that took effect in July. They argued the standard would only put upward pressure on the cost of fuel.

Last year, Newfoundland and Labrador Premier Andrew Furey, a Liberal, wrote a letter to the federal government calling for an exemption for home heating oil.

Furey welcomed Trudeau’s announcement on Thursday, saying it was a “good day” for his province.

“I am glad the prime minister has listened and recognizes the impacts of carbon tax on our region, as he has taken a positive step towards helping Atlantic Canadians with affordability,” Furey said in a media statement.

New Brunswick Premier Blaine Higgs said Thursday’s announcement was a “good move” but added he would like Ottawa to consider other adjustments.

“I’m hopeful that what comes out of this is really to have an evaluation of the entire carbon tax program and say, ‘Is this achieving what it was intended to achieve?'” he said in a separate interview on Power & Politics.

Higgs’s comments were echoed by Nova Scotia Premier Tim Houston, who said he’d like the federal government to also remove the tax on gasoline.

“The fact that it’s on fuel is a real harmful thing and it hurts a lot of people, but [the exemption on home heating oil] is a first step,” Houston said.

 

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