Steel pipe to be used in the oil pipeline construction of Kinder Morgan Canada's Trans Mountain Expansion Project sit on rail cars at a stockpile site in Kamloops, British Columbia, Canada May 29, 2018. REUTERS/Dennis Owen
Steel pipe to be used in the oil pipeline construction of Kinder Morgan Canada's Trans Mountain Expansion Project © Reuters

At a public meeting in the small industrial city of Cambridge, Ontario this month, Canada’s prime minister was challenged to reconcile his government’s decision last year to buy the struggling Trans Mountain pipeline with his commitment to fight climate change.

Justin Trudeau’s response — that he would “protect the environment at the same time as we grow the economy” — was met by jeers.

Canadians have heard this pitch many times. But experts say Mr Trudeau’s balancing act between pipelines and the environment has largely failed. The issue now threatens the survival of his Liberal government as it seeks re-election in October.

When Mr Trudeau came to power in 2015, he promised to accomplish two things Stephen Harper, his Conservative predecessor, had failed to achieve during his decade in power: to address climate change by putting a price on carbon emissions, and help Alberta get more of its crude oil to non-US markets.

He fused those two objectives into a grand bargain. While environmentalists and many indigenous groups had worked hard to block pipelines in the past, Mr Trudeau gambled that putting a price on carbon would provide a political licence for his government to approve new pipelines. The approval of new pipelines should, in turn, quell opposition to a carbon tax.

From the start Mr Trudeau’s grand bargain was more of a grand contradiction.

“A lot of people wondered how these two things made sense together, because you’re sucking and blowing at the same time,” said Chris Ragan, an economist and chair of Canada’s Ecofiscal Commission, a non-partisan organisation that supports pricing carbon.

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“There was a sense they were trying to buy the sin of pipelines with the virtue of carbon pricing, but both were in the national interest and should have been kept completely independent of each other.”

Mr Trudeau’s carbon plan suffered its latest setback this month when Jason Kenney’s United Conservative party was elected in Alberta. He has promised to kill the previous provincial government’s carbon tax and take a hard line with environmental groups and other provinces to get pipelines built.

“That bargain . . . ended on election day,” Mr Kenney told CTV News after his victory. “The notion of social licence is a sham.”

If Mr Kenney does cancel his province’s carbon tax, the federal government’s national carbon tax and rebate plan will kick in. Created as a backstop for provinces that do not implement their own carbon tax, the national plan currently applies to four provinces: Saskatchewan, Manitoba, Ontario and New Brunswick.

A report released Thursday by the Parliamentary Budget Officer, Canada’s federal budget watchdog, estimates the federal fuel charge and taxes on large industrial emitters will generate $24bn in revenue over the next five years as the levy on carbon rises from $20 per tonne to $50 per tonne. However, rebates will return 90 per cent of that money to households, with the PBO analysis confirming the federal government’s claim that all but the wealthiest of households will get back more from carbon tax rebates than they will pay in the first place.

An anti-pipeline protestor raps into a megaphone outside a convention centre where Trudeau and his cabinet are meeting in Nanaimo, British Columbia, Canada, August 22, 2018. REUTERS/Julie Gordon - RC1B21E2EEB0
Anti-pipeline protesters outside a convention centre where Justin Trudeau and his cabinet were meeting in Nanaimo, British Columbia, Canada, in August 2018 © Reuters

Yet even that measure hangs in the balance. Last week the Ontario and federal governments faced off in court over the federal carbon plan. Ontario’s centre-right government led by Doug Ford considers the federal levy on carbon to be unconstitutional, claiming it will give Ottawa control over everything from how people heat and cool their homes to how often they drive.

Federal lawyers called those claims “alarmist” and argued the federal carbon plan was a necessary response to potentially catastrophic climate change.

A decision from that case, and another court challenge by Saskatchewan, is not expected for several months. Even so, Manitoba, another province led by a centre-right government, launched its own court challenge against Mr Trudeau’s national carbon plan on Thursday.

In the meantime, Ontario’s Ford government has been running radio ads in heavy rotation warning its residents they will pay more “for heating your home, for driving your kids to school, and for groceries” while making no mention of the rebates.

“The carbon tax has become a very important cudgel for conservative politicians and Justin Trudeau is public enemy number one,” said Shachi Kurl, executive director of the Angus Reid Institute polling firm. “It exhorts voters who are angry over these issues, particularly those aged 55 plus, and we know they have a higher propensity to vote.”

Nor have the Liberals done a good job communicating the carbon tax, said Mr Ragan.

“You can’t do that on a 10-word bumper sticker, but you can say it’s a job-killing carbon tax and that’s only four words,” said Mr Ragan.

The problem for Mr Trudeau is that implementing carbon taxes has not led to any more pipelines than existed before he came to power.

In 2016, weeks after first revealing his carbon plan, the Trudeau government gave the go-ahead to the politically divisive Trans Mountain pipeline expansion project — running from near Edmonton, Alberta to suburban Vancouver in British Columbia — as well as the Line 3 pipeline replacement project, running from Alberta to Wisconsin. Mr Trudeau called Alberta’s carbon plan and its cap on oil patch emissions a “vital element” of his decision.

With legal challenges from BC threatening to derail the Trans Mountain project last year, the federal government purchased it from Kinder Morgan Canada Ltd for $4.4bn to keep the initiative alive. But then Canada’s Federal Court of Appeal rejected the government’s approval, saying Ottawa had failed to properly engage with indigenous groups, leaving the project in limbo.

The tussle between carbon taxes and pipelines has put Mr Trudeau’s political future at stake. Part of Mr Trudeau’s appeal to young voters in 2015 was his commitment to act on climate change, and many have been put off by the Trudeau government’s support for pipelines. The risk for Mr Trudeau is that those voters stay home in October.

“Right now the potency of the angry, anti-carbon pricing vote may carry a heavier weight than the potency of a pro-carbon vote, simply because the way opinion on this issue splits along generational lines,” said Ms Kurl.

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