Northern premiers' carbon tax fears allayed for now

The territorial premiers won a major concession from the federal government Friday, with the inclusion of specific language mentioning the North's energy needs in the premiers' declaration on "clean growth and climate change."

Whether that means a specific exemption from a national carbon pricing scheme is less clear. The declaration includes several specific references to "Indigenous, remote and northern communities," including an explicit promise from the federal government to invest in renewable energy systems to help wean the North off its reliance on diesel fuel.

"Transition to a low carbon economy by adopting a broad range of domestic measures, including carbon pricing mechanisms, adapted to each province's and territory's specific circumstances, in particular the realities of Canada's Indigenous peoples and Arctic and sub-Arctic regions," the declaration reads. 

Parsing that statement, it would seem the First Ministers have committed to nothing in terms of carbon pricing, while simultaneously ruling nothing out. 

'We need flexibility'

Still, Yukon Premier Darrell Pasloski, who was the most vocal of the three Northern premiers in opposing carbon pricing, left Vancouver pleased with the declaration and told CBC's A New Day "we won't be putting a carbon tax into place in Yukon."

What Pasloski wants is more help for Yukon to continue what it's already doing. 

"We need flexibility to combat climate change in a way that makes sense for Yukon and doesn't impact our fragile northern economy," he said.

"We are already investing in building retrofits, biomass energy generation, hydro expansion and a range of other carbon reduction efforts."

All three territories fear a carbon tax because of the presumed impact on their tiny economies. Nunavut is almost completely reliant on diesel for electricity, as are many of the N.W.T.'s smaller communities and a handful of communities in Yukon that aren't connected to the territory's hydro grid.

Outside of Whitehorse and Yellowknife, there is no public transit. Fuel-hungry aviation is the only transportation option for many remote communities. And then there's the simple fact that it is really cold in the North.

"Half the emissions in some of our remote communities just comes from heating fuel because this is above the treeline [and] there's no opportunity for alternative heating sources," says Kelly Bluck, director of fiscal policy with the N.W.T Department of Finance.

"So if you're going to be putting a carbon tax on that taxes heating fuel, then taxpayers in those remote communities are burdened higher than anyone else in the country."

The N.W.T. has in the past studied the possibility of bringing in a carbon tax on its own, but then rejected the idea reasoning that existing high energy costs essentially functioned as a carbon tax on their own.

Bluck acknowledges that it is possible to take the sting out of carbon pricing by increasing personal tax credits for lower income earners as British Columbia does. But she said even that doesn't help families deal with the immediate up-front costs.

"You will always have winners and losers in that case, because it's sort of a blunt instrument," she said.

And, Bluck said, a national carbon tax could also mean a greater fiscal burden for the territorial governments. Both the N.W.T. and Nunavut heavily subsidize electrical rates in diesel communities, to the tune of $20 million (or much more if water levels are low) and more than $40 million, respectively, per year.

Upgrades

Pasloski has talked up the benefits of retrofitting Yukon buildings to make them more energy efficient, while the N.W.T. is pursuing more alternative electricity generation. Nunavut, meanwhile, has undertaken some upgrades to its diesel generators to make them more efficient, but has effectively mothballed a long-proposed hydroelectric dam near Iqaluit because the capital cost is simply too high.

Calls for Ottawa to step in and do something about this have been around for a while. Last year, a Senate report offered a potential blueprint to increase energy efficiency in the North. Among the recommendations: pony up cash for new electrical infrastructure and offer both direct funding and loan guarantees to help pay for energy megaprojects. 

The working groups created by this week's declaration to study the various elements of Canada's way forward on climate change will report back in October. Until then, Northern residents won't really know what's going to happen to their energy bills.

But if the federal government follows through on its promise to spend heavily on renewable energy in the North, plans that have spent years on the drawing board could find themselves suddenly springing to life.