The Trudeau government is being attacked from all sides over its decision to remove the carbon tax from home heating oil. Fortunately, there is a way forward that addresses the affordability and climate crises: offer free heat pumps and insulation upgrades for anyone who wants them, paid for by a tax on excess oil company profits.
Trudeau’s decision to put a three year pause on carbon pricing for home heating oil led to despair amongst the economist wing of climate advocates, who worry that decision will lead to an unraveling of the whole carbon pricing system.
Only three percent of Canadian homes use oil for heating, so removing the carbon tax on it will have only a tiny impact on carbon pollution on its own. The catch is that many of those homes are located in the Maritime provinces, where the Liberals desperately want to hold on to seats in the next election. And there’s nothing Canada’s political and media elites enjoy more than a good regional bun-fight.
As if on cue, provincial leaders outside the Maritimes immediately began shouting that it wasn’t fair to take the carbon tax off home heating oil and not natural gas (which is the dominant source of heating west of Quebec).
Saskatchewan’s Premier Scott Moe even ordered his provincial utility to stop collecting the carbon tax on natural gas. He acknowledged that this would be illegal, but omitted the part about how it would be officials at the utility, not the Premier, who would have to answer for the crime.
At the federal level, Conservative leader Pierre Poilievre claimed victory for the ‘Axe the Tax’ rallies his party had been hosting across the country (except when the gatherings were canceled due to imminent danger from this summer’s climate-fueled wildfires). Those rallies don’t offer a real solution to the affordability problem, only a fake-populist cover for a defense of the fossil fuel status quo.
Poilievre’s populist spin on his party’s long-standing opposition to climate action ignores an inconvenient truth. The primary driver of rapidly rising home heating costs is not the price on pollution but the high price of oil and gas, as oil companies make record profits due to conflicts in Ukraine and the Middle East.
Twenty five cents of every dollar of inflation over the last two years has gone to oil and gas profits. In 2022, Canada’s biggest oil sands companies alone made $35 billion in profits while returning $29 billion to shareholders in the form of higher dividends and share buy-backs.
The Parliamentary Budget Office just reported that extending the modest surtax currently applied to bank profits to the seven most profitable oil and gas companies would bring in $833 million per year. Even at that modest level, an excess profits tax on oil and gas would buy a lot of insulation and heat pumps.
Modern heat pumps are an economic and environmental wonder. They can heat and cool your home at a fraction of the cost – and with a tiny fraction of the pollution – that comes from using gas or oil-fired furnaces. The new models work in cold climates, which is why they are exploding in popularity in Nordic countries eager to break their reliance on expensive and polluting fossil fuels. Add in some insulation and efficiency upgrades, and Canadians could be spending a lot less every year to keep our homes cozy (Efficiency Canada has an excellent “Efficiency for All” plan that governments could and should steal).
The Prime Minister has indicated he is open to this kind of solution, claiming that he wants to phase out home heating oil the way his government is phasing out coal-fired electricity generators.
That might be mostly political spin right now, but it’s a damned good idea. Not just for oil furnaces, but for everyone who is currently dependent on fossil fuels to keep their home warm in the winter and cool during the ever-more extreme heat waves that result from climate change.
We have the technology to protect Canadians against rising oil and gas heating costs, while protecting the climate. And a way to pay for it.
If oil companies only make billions rather than tens of billions in profit, that is a price many Canadians might be willing to pay.
Update November 9: The federal New Democratic Party introduced a motion calling on the government to make eco-energy retrofits and heat pumps free and easy to access for low-income and middle-class Canadians, while removing the GST on home heating, and pay for it with a tax on excess oil and gas profits. The motion was defeated when the Liberals and Conservatives voted against, but Efficiency Canada’s Brendan Haley did find a silver lining.
