Hard Things Are Hard

Carbon pricing was at the core of Canada's climate action plan until it became a political albatross. In her memoir, Run Like A Girl, ex-environment minister Catherine McKenna tells how that happened.

Environment and Climate Change Canada, 2015/flickr

Catherine McKenna was MP for Ottawa Centre from 2015 to 2021 and Canada’s Minister of Environment and Climate Change from 2015 to 2019. During that time, “hard things are hard” was one of her favourite phrases. It’s also the title of this excerpt from her political memoir, Run Like A Girl, where she gives an insider’s view of how Canada’s consumer carbon price went from a useful tool in the country’s toolbox of climate solutions to a political albatross.

An escalating price on carbon pollution was at the heart of our government’s climate plan. It was the most efficient way to reduce significant emissions. And, contrary to popular belief, it was a conservative approach.

Rather than requiring people or business to reduce their emissions by a set amount through more expensive regulations, it relied on market forces to drive change. In other words, rather than paying the carbon price, you could choose to take steps to reduce your emissions (e.g., by making your home more energy efficient, taking public transit, buying a more energy efficient car or using cleaner industrial processes). As a result, I thought it would appeal to Conservatives.

It wasn’t just theory. It worked in many other places. By 2018, close to 50 countries and 25 regions had carbon pricing or were implementing it. And it wasn’t a new idea. Under President George H. W. Bush, the United States implemented cap-and-trade to combat acid rain by putting a price on sulphur dioxide emissions and allowing companies to decide how to reduce their pollution. Those who did more than required could sell their allowances to other companies. This created an incentive for many companies to upgrade their facilities to reduce pollution. The result was that sulphur dioxide emissions went down faster than predicted and at a much lower cost than projected. It was very effective at tackling the problem in an innovative and flexible way.

But there was a catch. While we had announced Canada’s carbon pricing system, we had to resolve what would happen to the money collected by the federal government in provinces that refused to implement their own consumer carbon pricing system. Would we keep it to use for green initiatives, give it back to the province, or rebate taxpayers?

One of the best pieces of advice came from a Republican, George Shultz, former U.S. secretary of state under Ronald Reagan. When I met him in California, he convinced me that the key to gaining public support for consumer carbon pricing was to make it revenue-neutral. This would mean that all money collected would be returned to the public in a transparent way. This approach, he argued, would create an incentive for people to reduce their emissions in order to save money. It would also help make the whole thing more palatable. I agreed. Our modelling also showed that this would be a progressive approach—80% of Canadians would get more back than they paid, especially low- and middle-income Canadians. So, to me, this was a win, economically, politically, and environmentally.

But pushing this idea internally wasn’t easy. Some people, particularly in the Prime Minister’s Office, wanted to invest any new revenue in green projects. I argued that if we went down that path, people would see it as a tax grab and challenge how we spent the money. Finance Minister Bill Morneau was on my side, but I needed the prime minister’s approval. The challenge was that after months of repeated requests, the finance minister and I simply couldn’t get a meeting with him. This was a flagship government policy, yet getting half an hour to discuss it seemed impossible.

In the end, the revenue neutral option prevailed largely because Liberal MPs spoke out in a caucus meeting and urged the prime minister to give the money back to people. Thanks to their support, I was able to convince the prime minister of the merits of our plan. It was a big win for our team.

However, there were still significant hurdles, many of our own making.

I had expected carbon pricing revenues would be returned to people through clear, quarterly rebate cheques (or automatic deposits) from the Canada Revenue Agency (CRA). But when I pushed for this, I was told by public servants it wasn’t possible. Instead, the money would have to be returned when people filed their taxes. This meant it would be a once-a-year payment lumped together with other benefits and deductions. In other words, it would be hard for people to see. (Incredibly, it was only after COVID, when it was clear that the Canada Revenue Agency could do a lot of things that didn’t seem possible before, that they finally agreed to move to quarterly automatic deposits.)

Speaking of unclear, there was also the debate of what to call the payments. A number of different names were discussed, which of course had to make sense in both official languages. To me, calling it a rebate seemed like a no-brainer. Unfortunately, the Department of Justice flagged a legal risk and insisted we go with the less-than-ideal “Climate Action Incentive.” Years later, shortly before the policy was cancelled, the payments were ultimately renamed the “Canada Carbon Rebate.”

Then we hit another stumbling block. A number of the major banks refused to clearly label the quarterly deposits when they went into people’s accounts. For many, it was labeled as CanGov or CanRevenue or something equally cryptic. People couldn’t make the connection with our climate policy. Unbelievably, the government refused to compel the banks to label it properly. This was after my time but I was furious.

I also knew we needed a massive public education campaign about carbon pricing. But we hit another roadblock with officials arguing that such advertising would be too “political.” I pushed back hard, without success. It was partly our government’s fault. We had introduced strict restrictions on government advertising when we were elected. We didn’t want to see a repeat of the massive use of tax dollars by the Harper government to advertise the Economic Action Plan.

In retrospect, our restrictions backfired. I wasn’t sure how providing factual information about a carbon rebate that Canadians needed to apply for when they did their taxes qualified as political. The consequence was that most Canadians never heard the facts about how carbon pricing worked and didn’t appreciate that the majority of people who paid the price received more money back than they paid. Instead, they were fed misleading statements or outright lies by Conservative politicians like Pierre Poilievre, who repeatedly called the carbon price a “job-killing tax” that needed to be “axed.”

Out of options, I reached out to H&R Block. I noticed they had signs in their windows advertising the “Climate Action Incentive” which they would help their customers claim when preparing their taxes. This could be a great opportunity. I asked our MPs to visit an H&R Block office in their riding with a family from their constituency to film a video with an H&R block employee explaining the Climate Action Incentive to the family, including how much money they could expect to get back. This campaign was cheap, simple, truthful, and focused on people, not politicians. But at best, it only reached thousands, not millions.

It didn’t help that journalists constantly framed carbon pricing as costly and the enemy of affordability. Remember: for most people, carbon pricing made life a little more affordable because they got more money back than they paid. But Conservative politicians were gleeful in their lies. Let’s be real. Carbon pricing did not drive inflation or the affordability crisis in Canada. The exorbitant prices charged by fossil fuel companies did.

Another serious problem was the flawed analysis by the Parliamentary Budget Officer (PBO) on carbon pricing. This was seized on by Conservative politicians. The PBO concluded that the consumer carbon pricing would raise costs in the short term, mainly through higher prices for energy and transportation. But they screwed up. The PBO’s original analysis also included the pricing system that applied to heavy emitters in its calculations. The PBO also failed to account for any benefits from reduced emissions, and it did not estimate the cost of alternative policies.

Instead, it simply compared doing nothing to tackle climate change versus carbon pricing, as if doing nothing was an option. Had the analysis compared carbon pricing to other policies, like regulations or subsidies, it would have shown clearly that carbon pricing is the most cost-effective way to cut emissions. Period.

The PBO also ignored the high cost of inaction and overlooked the long-term benefits of reducing emissions, such as fewer extreme weather events and lower health care costs. Nor did it consider how carbon pricing revenue would help offset costs, especially for low- and middle-income households. It was flagrant malpractice, but the damage was done.

By the time I left the Environment portfolio after the 2019 election, you could see that momentum on carbon pricing was being lost. This was a fight that you had to keep fighting. Because the price rises every year, you had to keep defending it, over and over. But the government’s efforts were half-hearted. And while environmental organizations should be applauded for supporting carbon pricing at the outset, once it was in place many of them moved on from defending the policy to demanding that the government do more.

Incredibly, the most damaging attack on carbon pricing was self-inflicted and happened two years after I’d left politics. In October 2023, the prime minister announced a pause on carbon pricing for heating oil. I was stunned. This wasn’t just a policy shift—it was a blatant, politically motivated move designed to shore up support in Atlantic Canada, where heating oil is common. With the Liberal Party’s Atlantic caucus standing behind him, the prime minister argued that the decision was necessary to address affordability, especially in the face of rising energy costs.

When I saw him standing behind a podium with a sign that read, “Making Life More Affordable,” I spit out my coffee. As I told journalists when I spoke out against the decision, the reason heating oil—and gas—cost so much wasn’t because of carbon pricing, again where all the money is returned to people, but because [fossil] energy companies were jacking up prices. If the prime minister really cared about affordability, why not introduce a real solution to high energy costs, like giving every Canadian a free heat pump to get off fossil fuels? It could have even supported Canadian manufacturers in the process.

The announcement was beyond cynical. It was stupid. It created confusion and resentment outside of Atlantic Canada. People in other provinces where the federal pricing system applied asked, “Why are we still paying the carbon tax on natural gas while Atlantic Canada gets a pass?” The “pause” played into the hands of critics. It also undermined the government’s climate goals and sent the message that action on climate change could be delayed whenever it became politically convenient.

The government’s cynicism discouraged Canadians who were genuinely committed to ambitious action on climate change. Defenders of carbon pricing, who saw it as a necessary tool for reducing emissions, felt crushed.

Mark Carney, Justin Trudeau’s successor as prime minister, would eventually kill the consumer carbon price, arguing that it had become too divisive an issue especially when Canadians needed to be united against Trump’s tariffs and sovereignty threats. It was a tough pill to swallow. However, by that point, especially after the cynical “pause” on heating oil, carbon pricing had suffered a serious blow. It had become a distraction and was impeding action on almost every other front. And if Liberals lost the election because of it, we stood to lose all of our hard fought progress on climate of which the carbon price was only one part.

In the end, Canada lost a climate policy that worked to reduce emissions in the most cost effective way, ensured that most families were better off (especially middle- and low-income ones), while creating an incentive for people to save even more money by choosing more energy efficient options, and which provided an opportunity for businesses to innovate and develop clean solutions. Losing a policy which leads to one of the most significant reductions in Canada’s emissions makes hitting the country’s climate target even harder.

But let’s consider this one battle lost and not the war. Progressive politicians need to be much tougher and more strategic if we’re going to do big things that matter, especially on climate. Hard things are hard.

Run Like A Girl was published by Sutherland House. Chapter republished by permission of the author.

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