The NWT government, which is understood to have had no heads-up from Ottawa that this change was happening, is now scrambling to figure out what the change means.
“We are aware of the federal announcement. We are reaching out to ECCC to see how this change in their carbon tax approach will affect residents of the Northwest Territories,” NWT Department of Finance spokesperson Todd Sasaki said by phone on Thursday afternoon, using an initialism for the federal agency Environment and Climate Change Canada.
“Basically, we’re looking for clarity on what they define as rural,” Sasaki said.
The territory hopes to have more certainty by the middle of next week.
Home heating costs are a huge issue in the NWT and would be one of the first carbon tax aspects that any territorial government would try to dial back. Many residents live in punishingly cold climates with little or no alternative to highly polluting fuels.
A complicating factor is that the territory plays by Ottawa’s carbon tax rules but, unlike most of Canada, uses its own version of the carbon tax designed to meet those rules. (Most other provinces and territories just use the federal version – or have it imposed on them.)
A source of frustration for the GNWT in the past has been that each time Ottawa changes the carbon tax rules, the territory has found clarity hard to come by. Finance minister Caroline Wawzonek has also repeatedly criticized the federal government for, in her view, failing to listen to concerns of the territory’s residents and politicians about the tax’s impact in the North.
If the latest federal change requires a change in NWT legislation, that’ll be tricky. (That’s not necessarily the case, and staff are working to understand the ramifications.)
Right now, the NWT does not even have a set of politicians, let alone politicians who agree, as the territory is in the middle of an election period. Theoretically, the next set of 19 MLAs wouldn’t be in a position to pass any legislation till February at the earliest.
However, given the federal carbon tax is being adjusted to lessen the burden on rural residents, it’s highly likely the NWT will find whichever is the most efficient and straightforward means of falling into line with that.
What’s changing elsewhere
So, what are the actual changes to the federal tax?
On Thursday, Trudeau said his government had been persuaded by Atlantic Canada’s Liberal MPs that parts of the carbon tax “needed adjusting to work for everyone.” (Wawzonek has previously said both she and her Atlantic counterparts were told no when they asked for a carbon tax exemption on heating fuels in 2022.)
Places that use the federal tax – the Prime Minister’s Office listed everywhere in Canada except the NWT, British Columbia and Quebec – will see rebate payments increase for rural residents and a three-year “pause” to carbon tax on home heating oil in rural areas.
The federal government says it wants residents to use that time to move to more environmentally friendly heating methods. It recommends heat pumps, which are being tested in both the NWT and Yukon to assess the ability of recent heat pump technology to work in Arctic winter conditions.
Ottawa is also promising more cash incentives to help people switch from home heating oil to heat pumps. How that will apply to the North is not yet clear.
The carbon tax has been a political issue since the moment it was announced.
On Thursday, Conservative leader Pierre Poilievre characterized Trudeau as having “panicked” in the face of Poilievre’s “axe the tax” campaign. Poilievre pointed out that a Conservative motion last year had sought to exempt home heating fuel from the carbon tax, but was defeated.