MLAs threaten carbon tax revolt that would send NWT to federal backstop

Regular MLAs lined up on Monday to say they will oppose the NWT’s latest carbon tax legislation, a move that would send the territory to the federal backstop by default.

Unless the territory passes legislation updating its carbon tax to meet new federal benchmarks, the territory’s own-brand carbon tax will be replaced by a federal version.

Regular MLAs and territorial ministers agree that the changes being contemplated are not great. However, ministers say the NWT has been given no choice by the federal government.

The biggest change is a federal move to stop provinces and territories offering rebates that fully offset the tax. Ottawa says that takes away any incentive for things to change and emissions to decrease.

What’s going on? Read more about why the carbon tax is changing

In the NWT, the rebate purge means scrapping a home heating rebate that shields residents from any impact of the carbon tax on their heating costs. Right now, you never see the carbon tax on your home heating fuel as it’s all given back in a rebate the moment it’s sold to you. Ottawa is banning that kind of manoeuvre from April.

The territorial government has asked the federal government to reconsider that ban, stressing the importance of a home heating rebate in the NWT, where many communities are seen as having little to no current choice regarding the fuel they use.

“The federal government has provided no indication of a willingness to provide flexibility,” NWT finance minister Caroline Wawzonek told MLAs at a public hearing on Monday.

“We face a stark choice: either we amend our legislation or the federal government will do it for us, and our current flexibility to influence carbon pricing in the NWT will disappear.”

Even so, regular MLAs Jackie Jacobson, Kevin O’Reilly, Frieda Martselos and Richard Edjericon all said on Monday they would oppose the NWT bill that tries to change its carbon tax to meet the new federal demands.

Kam Lake MLA Caitlin Cleveland said the federal government was being “tone deaf,” to which Wawzonek responded that she, too, was frustrated by the actions of her federal counterparts.

Ottawa should be empowering northern communities to change, Wawzonek said, not reducing their financial capacity to do so.

The office of federal environment and climate change minister Steven Guilbeault did not immediately respond to a request for an interview with the minister on the subject.

What can replace the rebate?

What happens if MLAs vote down the NWT’s latest carbon tax bill isn’t clear. Wawzonek said the federal government had “not clearly stated” what the backstop would look like.

The Yukon and Nunavut already have a federally administered carbon tax. However, the NWT has – since a carbon tax was first introduced – had its own version of the carbon tax, one that meets federal guidelines but includes measures that the territory believes helps to protect residents from the financial impact.

Until now, the centre of that protection was the home heating rebate, a big reason for the NWT devising its own carbon tax in the first place.

Even with that stripped out, Wawzonek said having a carbon tax administered by the NWT allows the territory to retain control of the revenue and create measures to limit the impact. (The GNWT says it has inspected the Yukon and Nunavut models and still prefers its own.)

For example, Wawzonek said, the NWT may yet be able to introduce a three-tiered system that uses cost-of-living payments to mimic some of the help that the home heating rebate previously offered.

If you live in a higher-cost area, like an Arctic coastal community, you would get a higher payment each year to help you deal with the carbon tax’s impact. If you live in a lower-cost area, like the South Slave, your payment wouldn’t be quite as high.

This would not be a perfect system. The home heating rebate simply gave everyone back the tax they would have spent on their own heating, so everyone got back what they put in. But without that option beyond April, the NWT would instead issue payments to everyone who files their taxes in the territory. That will include a lot of people who never bought any heating fuel in the first place, so some people will actually make money from the cost-of-living payments.

Meanwhile, the proposed payments are – to a degree – based on a household of two parents and two children. That means a household of that size will get back, through all four cost-of-living payments, roughly what it probably spent on heating fuel. But if you live alone, you’ll get just one payment and it may well not offset the extra amount you have to pay.

Municipal governments, too, are concerned, the NWT Association of Communities told MLAs on Monday. They will face the same extra heating fuel costs but without any cost-of-living payments coming back the other way.

“We have people living alone who will be paying more out of pocket,” said Cleveland.

“We have municipalities where there’s no revenue-sharing option for them and so, in an already underfunded system, they will be paying more. We have NGOs struggling to keep the lights on post-Covid who will be paying more. “

Wawzonek said that in the absence of any fresh dialogue with the federal government, the cost-of-living payment system was the best the territory could do – and a reason to keep the NWT’s version of the tax.

The federal backstop, she said, probably would not go to the same effort to invent cost-of-living payments that adequately compensate people in different areas of the NWT.

As other MLAs said they’d oppose her bill, Wawzonek responded: “Us not moving forward on this won’t take the federal government’s carbon tax away.”

But Katrina Nokleby, the Great Slave MLA, said she was prepared to gamble on the backstop.

Nokleby, a former NWT infrastructure minister who has been sharply critical of GNWT procurement and construction practices, said: “To me, this looks like it is about control – about the GNWT wanting to have the revenue so they can decide where things are better.

“The minister is telling us that revenue would then be used to ease the burden on our small communities, [but] I don’t always trust our government that the money will go into those areas.

“I would support the alternative over the GNWT, because at least then people are going to get something … Maybe don’t spend $3 million a kilometre on a road that goes nowhere. There’s some money that could be used to take care of our people.”

Embracing the tax

Nokleby did, though, make clear that “it is good we are making promises around emissions,” in a debate that focused mostly on economic consequences of the carbon tax rather than environmental goals.

Multiple times, MLAs said the carbon tax as proposed would hold the NWT’s tiny population unfairly to account for emissions that it barely creates.

“I find it frustrating that, in a territory that is responsible for less than one percent of greenhouse gas emissions across the country, we are expected to support this program as it is,” Cleveland said.

But Craig Scott, the former executive director of advocacy group Ecology North, urged MLAs to change that view.

“We need to refrain from the discussion that the NWT is just a small place and we shouldn’t be responsible for our emissions. If we say that, every jurisdiction on the entire planet could say the same thing,” Scott said during a presentation to politicians at Monday’s hearing.

“The carbon tax works. It’s elegant, it’s effective, it’s market-based. It escalates, so people know that in the future they’re going to have to pay more for carbon, which is causing the planet harm.”

Asking residents to embrace the tax and its intent, Scott said shifting to cleaner energy in the NWT “might take 10 or 20 years but, if we don’t start today, it’s not going to happen.”

He said the NWT government should focus on electrifying heating in the South Slave, providing highly efficient wood stoves in forested regions like the Tłı̨chǫ, and moving Inuvialuit communities to wood-pellet heating using grain silos and converted oil storage – with money brought in from the carbon tax funding such efforts.

Not everyone was as convinced of wood pellets’ benefit to Arctic coastal communities.

Inuvik MLA Lesa Semmler said: “I have constituents who can’t even find bags of pellets to put into their stoves. You’re asking us to use forms other than diesel fuel, but they’re not available in our communities.

“What’s the point of putting a wood stove in when they have no wood? Pellet stoves, with the amount it’s going to cost to ship pellets up there?”

Even the idea of varying the NWT’s cost-of-living payments by region – an attempt to fairly compensate residents of far northern communities – received opposition.

“I don’t believe in regional variance because everybody is affected by this, the whole territory,” said Martselos, the Thebacha MLA, who represents the South Slave town of Fort Smith and nearby communities.

“You can’t choose one over the other. I believe in equality.”

O’Reilly and Jacobson each said Wawzonek should withdraw the bill. Each time, Wawzonek said it represented a better option than the backstop.

It’s not clear if any time remains for significant changes to the bill before it reaches the NWT legislature when MLAs next sit in February and March.

A minimum of eight regular MLAs would have to vote against the bill to defeat it, given the seven members of cabinet invariably vote en-bloc to support government legislation.