Did Trudeau just undermine his signature climate policy, or save it?

While announcing a package of measures to respond to concerns about the cost of energy in Atlantic Canada on Thursday — a package that quickly triggered both supporters of climate action and foes of the Liberal government — Prime Minister Justin Trudeau called it "an important moment where we're adjusting policies so that they have the right outcome."

The best outcome for the planet (and for Trudeau's government) would be a significant reduction in Canada's greenhouse gas emissions. Ideally, that would be achieved quickly, efficiently and fairly, minimizing the cost and disruption to Canadians and the economy.

On paper, economists generally agree that imposing a price on carbon has to be an integral part of any plan to cut emissions. In practice, the Trudeau government's carbon tax was being blamed for significant unhappiness in the Atlantic provinces, where the federal policy was introduced earlier this year to replace a patchwork of inconsistent provincial policies.

When that unhappiness persisted, Liberal MPs from Newfoundland, Prince Edward Island, Nova Scotia and New Brunswick publicly called on the government to do something.

And so, on Thursday afternoon, Trudeau stood in front of a dozen of those MPs to announce a series of adjustments. Whether they'll lead to the outcome he wants is both a political and a policy question — one that might not be answered until the next election.

Two of the measures announced the prime minister are hard to argue with. While all Canadians who live in provinces covered by the federal carbon tax receive a rebate, a "top-up" is added to the rebates for residents in rural areas — accounting for the fact that rural residents have less access to things like public transit.

That supplement will now be doubled. Meanwhile, new programs will be launched in Atlantic Canada to make it easier for people to afford the installation of heat pumps.

But the Trudeau government will also be exempting home heating oil — a significant source of energy in Atlantic Canada — from the federal carbon tax for the next three years. It's on this point that questions about the "right outcome" emerge.

The three-year exemption introduces inconsistency to a policy that works best when it's consistent. As Dale Beugin and Christoper Ragan, two proponents of carbon pricing, wrote last week, "the more policy certainty there is regarding the carbon price and its future path, the more effective the carbon price will be at driving the long-term low-carbon investments required for reducing emissions."

The superior alternative, Beugin and Ragan argued, would be to boost rebates and subsidies to alleviate concerns about the cost.

When the federal government was setting a national price on carbon between 2016 and 2019, it allowed for a certain amount of inconsistency across provincial systems. Heating oil was, for example, exempted from the carbon tax in Newfoundland and P.E.I. Perfection was not allowed to become the enemy of the good. 

But the Liberals had been moving to eliminate those imperfections. And this new exemption — although temporary — inevitably will provoke questions about whether other individuals or concerns should be entitled to special treatment.

On cue, the premiers of Alberta, Saskatchewan and Ontario — three politicians who have loudly opposed federal climate policy — publicly demanded on Thursday that an exemption be given to those who heat their homes with natural gas.

Conservative Leader Pierre Poilievre — another loud opponent of Liberal climate action — went further, arguing that the government's moves this week were an implicit admission that the carbon tax is a terrible burden on Canadians and that the country would be better off without it.