Carbon tax exemption on home heating oil sets climate policies back, advocates say
Federal government lifts tax on home heating oil, while boosting rebates to encourage shift to heat pumps
The federal government's decision to exempt home heating oil from the carbon tax is being met with consternation by environmental advocates, who argued the change will muddy the country's flagship climate policy.
Under the changes announced Thursday, Ottawa will lift the tax applied to home heating oil for the next three years, double the rural supplement in the tax rebate program and put in place additional incentives to help rural Canadians switch to electric heat pumps.
Advocates said those new incentives should help homeowners make the transition, but the decision to remove the tax from oil heating introduces uncertainty to a policy that should be applied across all sectors.
"It undermines the credibility of Canada's carbon pricing, which really tries to send a broad and robust pricing signal across the economy …to create the incentive to shift away from things that make emissions that produce emissions towards low carbon options like heat pumps," said Dale Beugin, executive vice-president of the Canadian Climate Institute.
Targeting Atlantic Canada
Globally, burning fossil fuels like oil, gas and coal account for more than 75 per cent of the greenhouse gas emissions that are driving climate change, according to the United Nations.
The price on carbon, designed to change people's behaviour to reduce the burning of fossil fuels, consists of a fuel charge collected by the federal government and a rebate made on a quarterly basis that returns 90 per cent of that revenue to Canadian households. (The remaining 10 per cent is directed toward businesses, farmers and Indigenous communities.)
Those who use less fuel will pay less tax, but still get the same rebate as someone who burns a lot of fuel — leaving them financially ahead by comparison.
While the new exemption for home heating oil applies nationwide, the changes are meant to help Atlantic Canada in particular, where 30 per cent of homeowners still use oil to heat their homes.
The federal carbon tax took effect in the Atlantic provinces in July, after Ottawa deemed the provincial alternatives insufficient, and has been the subject of scorn by the region's premiers.
On Friday, Atlantic premiers were quick to welcome Ottawa's retreat, but several of them also pushed for further changes. New Brunswick Premier Blaine Higgs, for instance, said on social media the move didn't go far enough, and he urged Ottawa to cancel the carbon tax altogether.
Saskatchewan Premier Scott Moe and Alberta Premier Danielle Smith said the exemption should also be applied to natural gas, as the majority of people in their provinces use it to heat their homes.
Barriers and incentives
In the long run, Beugin said shifting from oil heating to heat pumps is far more affordable, but the initial cost of getting one installed can be a barrier — though there are already a multitude of programs in place in Atlantic Canada and elsewhere to encourage people to make the shift.
The new incentives include an upfront payment of $250 for low- to median-income households, available to those who heat their homes with oil and sign up for a heat pump through a joint federal-provincial government program. The government also increased the amount of funding homeowners switching from oil can receive for installing a heat pump, from $10,000 to $15,000.
Environment Minister Steven Guilbeault stressed lifting the tax is temporary, to give those struggling to pay their bills a chance to make the change to a greener form of home heating.
"Of course as environment minister, my preference would be to not have to make those accommodations," he said.
"But we live in a world where some people are challenged right now and we have to be able to course correct on some of those measures."
He said there are no plans to make another exemption for those who use natural gas to heir their homes.
Heat pumps taking off
Beugin questioned why additional incentives couldn't have been put in place while keeping the tax in place. He said it's too early to say how the changes will play off one another, and what it will mean for the transition away from fuels that accelerate climate change.
"Those two planks of policy could and should have been complements rather than substitutes for each other," he said.
"You could do both and maintain the integrity of carbon pricing and provide additional support that is needed."
The Pembina Institute, an energy think tank based in Calgary, said incentives already in place for heat pumps have resulted in the Maritimes nearly tripling their use in the last 10 years.
It said the decision to lift the carbon tax was "disappointing."
"The carbon tax should be a vehicle for funding the transition of low-income households to more affordable, low emission heating systems — a win for Canadians and the environment," said Betsy Agar, a program director at the Pembina Institute.
Tom Green, senior climate policy adviser at the David Suzuki Foundation, also said the decision sends the wrong signal.
"An evenly applied national levy, without loopholes, is one of our most effective climate tools," he said.
Climate Action Network Canada, another advocacy group, had a different take.
The group argued that while fuel-switching from oil to heat pumps brings an average of $2,500 in savings for Canadians per year, it requires significant upfront costs that low-income households are not currently able to afford.
"Climate action and affordability must go hand in hand," said Alex Cool-Fergus at Climate Action Network Canada.
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