The Liberals had a good story to tell. The carbon price carve-out ruined it

If you hadn’t heard that the federal government just made buying a home heat pump even cheaper – and practically free for many low-income Canadians switching from oil heating – you aren’t alone. Instead, the story in the news was that Justin Trudeau’s Liberals had cracked on carbon pricing when they unveiled a three-year carbon-pricing hiatus for home heating oil last week, and long-time critics of the policy were quick to grab their favourite pickaxes.

Ottawa was likewise quick to reject further calls for “carve-outs.” But whether last week’s announcement was a single stumble or a slippery slope, accepting their opponents’ premise – that this was about affordability – represents another kind of misstep: unleashing a political domino effect that’s likely to end with Canadians thinking that carbon pricing, as opposed to fossil fuel inflation, has been the culprit for skyrocketing heating oil prices and surging household costs. In short, the government failed to communicate.

A quick reality check: From 2020 to today, the carbon price on heating oil increased by 12 cents a litre as the average price for heating oil shot up 75 cents. The real drivers of rising home heating oil prices are wars and the Organization of the Petroleum Exporting Countries, not a climate policy that leaves 80 per cent of Canadians under the federal policy better off financially, thanks to quarterly rebates.

Now more than ever, the federal government must show Canadians that climate action and affordability are two sides of the same coin – that, as a government release quietly reminded people last week, households that swap oil heating for cold-climate heat pumps typically save up to $2,500 annually on their energy bills. Instead, Ottawa allowed itself to be consumed by political theatre, which painted this as an admission that Mr. Trudeau’s signature climate policy was making life more expensive for Canadians, just as his Conservative opponents had claimed for years.

The truth is quite the opposite. One could rightly argue that slowing catastrophic climate change is all the financial incentive you need for a policy like carbon pricing, and that economists widely consider it to be the lowest-cost way to reduce emissions.

But missing from this political standoff is this fact: Clean energy is actually one of the best ways to save money at a household level.

Earlier this fall, a Clean Energy Canada study found that Toronto households that ditch fossil fuels in favour of electric vehicles and heat pumps can shave $800 off their monthly energy costs; in Nova Scotia, the savings add up to $940. Those numbers include equipment costs: They assume you buy an electric vehicle instead of a gas car, and a heat pump instead of natural-gas heating and air conditioning.

These results align with 2021 research from the International Energy Agency, which projected that average household energy bills in advanced economies will decline between 2020 and 2050 – and would decline even further with government action (like carbon pricing) to reach net-zero. The Canadian Climate Institute found similar savings specifically for Canadian families.

But that is not the story spinning out of Mr. Trudeau’s announcement. The federal government is now defending a story when it should be telling one.

Turning the ship around won’t be easy, but it is necessary. Ottawa could, for example, pair the three-year carbon-price exemption with a three-year countdown to an outright ban on replacing and installing new oil heating systems. This wouldn’t be seen as a slippery slope; it would be seen as expediting Canada’s phase-out of oil heating, just as we’re phasing out coal power in electricity given its similarly high emissions intensity. And far from paying for climate action, affected families would come out ahead.

The federal government already offers additional money to households switching from oil heating. When matched with provincial funding in Prince Edward Island and Nova Scotia, this makes heat pumps for low-income families completely free while covering most of the cost in other cases. Expanding this effort to all provinces is the right kind of solution because it identifies the right culprit: fossil fuels.

Whether it was well-intended, subsidizing inefficient home heating systems is counterproductive. Helping Canadians access solutions that will ultimately cost them less and cut climate pollution needs to be the headline next time.

Strong signals are critical now. The government must hold the line on carbon pricing, and it must ensure the implementation of its other signature climate policies, many of which are expected to be finalized in the coming months.

And perhaps just as important, the government has to get its story right.

This post is co-authored by Trevor Melanson and first appeared in the Globe and Mail.

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