In a bold move to defy the federal government’s signature climate policy, Saskatchewan has ceased collecting the carbon tax on home heating fuels. Starting January 1 this year, both natural gas and electricity are effectively exempt in the province.

This move was not made in isolation, and while other provinces have not followed suit, they have more options to do so than they might think.

This is all in response to the federal government’s earlier decision to exempt home heating oil from its own carbon tax, a transparently political move to curry favour in Atlantic Canada, where this fuel is predominantly used. It was a puzzling decision. The exemption—championed by Liberal MPs from the region—undermines the government’s own climate policy and encourages this kind of provincial action. Providing it selectively is also very unpopular.

Critics argue that it is unfair to exempt one type of home heating fuel but not others, especially when doing so is driven more by electoral ambitions than by a coherent policy rationale.

“If this is a painful tax going into winter for Atlantic Canadians, it’s a painful tax going into winter for everyone,” observed Alberta’s Premier Danielle Smith. “This is not partisan. All premiers are united in their call for fair treatment of all heating fuels, and many want to go further.”

However, only Saskatchewan responded with action: its Crown Corporation (SaskEnergy), which is responsible for distributing natural gas, simply stopped collecting the tax.^{1There’s a more complicated approach to insult those who use electricity for home heating, which I won’t even try to explain.}

Other premiers, like Alberta’s Premier Smith, have expressed a desire to follow Saskatchewan’s lead, but Smith notes that the lack of a provincially owned and controlled energy distributor makes that tough.

But in a notable turn of events, Saskatchewan announced plans to potentially use funds from either its general revenue or SaskEnergy to cover the federal carbon tax.

How could that work? Federal law mandates fuel distributors pay the carbon tax. This is normally passed on to consumers, of course, but it doesn’t have to be. Much like when some retail store pays the GST on your behalf during a promotion event, SaskEnergy or the Saskatchewan government could simply pay the carbon tax on behalf of consumers.

The financial implications of this strategy for the government are not yet entirely clear, but I estimate it could cost Saskatchewan around $250 to $300 million in 2024–2025. That’s not a trivial amount—it exceeds the provincial budget’s projected surplus for next year.

Despite the fiscal costs, this development illustrates an intriguing possibility for other provinces: simply use their own revenues to cancel the carbon tax on consumers. No Crown corporation required.

Take Alberta. The province boasts a fiscal capacity that far surpasses any other in Canada, providing it with significant financial flexibility. Its projected surplus this year is over $5.5 billion, and over $2.1 billion next year—even despite large spending increases. So, Alberta could conceivably adopt a policy where it provides bill credits equal to the carbon tax charges on all utility bills within the province.^{2Alberta already provided universal utility bill credits to households in the province as one of its affordability measures recently, but these were lump-sum and unrelated to the value of carbon taxes paid.} It would pay utility companies, who would then be required to pass the subsidy forward to consumers.

The legality of this is even cleaner than what Saskatchewan is doing. Fuel distributors would still collect and pay the tax to the federal government. But consumers would see the tax perfectly balanced by a credit on the same bill. This would, in effect, cancel out the carbon tax because it would be paid on their behalf.

The approach could also extend to gasoline taxes at the pump or any other type of fuel covered by the federal system. One can envisage a system where drops in provincial fuel excise taxes precisely counterbalance the federal retail carbon tax. The provincial tax could even evolve into a subsidy if necessary; again, effectively neutralizing the federal carbon charge.

There would obviously be some administrative and logistical challenges to overcome, but it could be done.

Importantly, this wouldn’t result in financial gains for the federal government at the expense of provincial budgets. All revenues collected, after all, are returned to consumers and other groups within each province.^{3Each year, households receive a quarterly rebate directly deposited into their bank accounts that totals 90 percent of all carbon tax proceeds raised in their province.}

None of this would be cheap. For Alberta, I reckon the cost in 2024 would be between $3 and $3.5 billion. Saskatchewan might face around $900 million, Manitoba about $700 million, and even Ontario could adopt this policy at an approximate cost of $6 to $7 billion. Clearly, these figures are substantial, and most provinces may not be financially equipped to undertake such a policy. Even Alberta, which is relatively better positioned, would find it challenging, though not impossible.

But there are options to limit the cost.

Provinces might consider a more focused policy, targeting only the carbon charge on home heating fuels. Or, though I haven’t worked this out in detail, a province could temporarily adjust the value of certain tax credits, like the basic personal amount, to effectively claw back much of the value of the rebate too.

None of this is particularly wise policy, to be absolutely clear. It’s all pretty silly. But the federal government has now opened the door to these kinds of provincial countermeasures.

My point is that Saskatchewan’s most recent admission that public funds may be used to cover the cost of the carbon tax for consumers provides an example to other provinces for how to follow suit.

The absence of a Crown Corporation is not an impediment. The provinces beyond Saskatchewan have more options than they might think. And what provinces decide to do next will shape fiscal and economic policy in Canada for years to come.

One of the most popular articles that I’ve written for The Hub was published barely a week after we officially launched. In response to the Trudeau government’s 2021 budget, which set out a series of left-wing priorities including universal childcare, a $15 minimum wage, a new luxury tax, and various identity politics measures, I wrote that the government’s ambitious plan “signal[ed] the rise of a new, confident progressivism that has set its sights on the commanding heights of policy and governance.” 

I also warned however that “there are no permanent intellectual victories…because a combination of new generations, new challenges and unexpected events are bound to threaten previous intellectual advances.” My basic point was that although progressivism seemed to be on the ascendancy, the history of political ideas is a dynamic one in which the prevailing intellectual winds can change abruptly. 

What a difference a few years make. Today the Trudeau government is well behind the Conservatives in national polling and its political future is highly in doubt. But even more importantly the progressive intellectual momentum that has undergirded its policy agenda is now itself facing a serious ideological threat. Its biggest challenge isn’t a resurgent conservatism per se. It’s progressivism’s own record that’s the problem. 

On a number of big-picture issues—economic stagnation, global isolation, national attenuation, and urban disorder—the government’s ideological agenda has failed according to its own terms. The promise of progressivism has run into the powerful headwinds of reality. 

The Trudeau government’s overemphasis on equity isn’t a new path to economic growth. Its feminist foreign policy isn’t a substitute for hard power. Disproportionately targeting the country’s richest province isn’t a source of national unity. Decriminalizing drugs and generally adopting a sociological view of criminality isn’t how we secure safe communities. We’ve witnessed the full unfolding of progressive ideas into public policy and Canadians are generally dissatisfied. 

The disappointment was on display this past November in Montreal where leading progressive thinkers and politicians from around the world convened to assess the state of their global political movement. The conference’s message and mood were understandably less assured than in previous years. 

The Global Progress Action Summit, which drew high-profile figures such as current British Labour Party leader Keir Starmer and his predecessor Tony Blair, former Obama Administration national security adviser Ben Rhodes, former British and Canadian central banker Mark Carney, and Canadian Prime Minister Justin Trudeau, has in past years seen progressives come to Canada in search of ideas and inspiration. This time however felt different. The conference was marked by a tacit sense that the vision of a new, durable political consensus has failed to materialize. Progressive aspirations have instead been met by a powerful combination of uncompromising facts and mounting public opposition. 

Canada has been at the centre of progressive politics for nearly a decade. One may even argue that it has served as a laboratory for the experimentation of progressive ideas in practice. Due to a combination of ideological and institutional factors, the Trudeau government has been the fullest expression of progressives’ ambitions to translate their ideas and values into a governing agenda. 

Justin Trudeau was first elected prime minister in October 2015, just over a year before Donald Trump’s shocking victory over Hilary Clinton. Although it was a destabilizing time for global progressives, the newly-elected Canadian prime minister offered hope. His personal mix of charisma and pedigree, as well as his team of well-connected policy wonks, led progressives around the world to invest a lot in him. He was seen by many as the “progressive heir” to Barack Obama who publicly endorsed him in his two subsequent election campaigns. 

Prime Minister Trudeau was well positioned to go far beyond President Obama’s more constrained progressive agenda. Canada is generally more left–wing than the United States, so he started with a political centre of gravity tilted in his favour. He also had a large parliamentary majority, so he faced far fewer institutional constraints to pass and implement his policy priorities. And after nearly a decade of Conservative government, Canadians wanted change and the then-43-year-old prime minister was keen to give it to them. 

He and his team conceived of their mandate as about more than merely swapping out the incumbent government for a new one that would enact policy changes on the margins. They had a conscious self-image as a realignment government. They sought to challenge many of the prevailing policymaking assumptions in Ottawa, including among Trudeau’s own Liberal Party. As I’ve previously written:  “[The Trudeau government] has a strong theory of the case about the role of markets and the state and the proper goals of government policy…The problem has never been that it lacks ideas.”

This set of conditions can find a historical parallel. As The Hub’s new managing editor, Harrison Lowman, reminded us this week, our current political moment has striking similarities to the early 1980s. The prime minister’s father then led a government that was animated by its own ideological ambitions. He was cool, smart, and determined to do things differently. Progressivism appeared to be on the ascendancy. 

Yet its manifestly poor outcomes—including Canada’s isolation around the world, rising threats to national unity, the onset of a national malaise, and a sustained period of economic stagnation—had the opposite effect. They eventually ushered in a conservative policy revolution led by Progressive Conservative Prime Minister Brian Mulroney which included free trade, privatization, and comprehensive tax reform. 

As we enter 2024, one gets the sense that we may be on the cusp of another rightward shift. That the Trudeau government’s failings as a standard bearer for progressivism will itself produce an ideological chain reaction. If so, it could represent a huge opportunity for conservative statecraft. The onus is on the Conservatives therefore to prepare as Mulroney and his team did for it.