Volts podcast: Gerald Butts and Catherine McKenna on Canada's carbon tax

In this episode, Gerald Butts and Catherine McKenna discuss their
experiences passing a carbon tax in Canada, as advisor to prime
minister Justin Trudeau and minister of the environment
respectively. In particular, we focus on a key feature of the
Canadian tax: all the revenue collected goes back to the province
from which it was collected, mostly as per-capita dividends.
Butts and McKenna believe that feature was central to selling the
public on the policy.


Full transcript of Volts podcast featuring Gerald Butts and
Catherine McKenna, February 16, 2022


(PDF version)


David Roberts:


In 2015, after nearly a decade of conservative rule, Justin
Trudeau and his Liberal Party won a majority of seats in the
Canadian parliament and control of the federal government. Part
of Trudeau’s election platform was a carbon tax.


The proposed tax had a few key features. First, it would only be
imposed on provinces that did not have their own pricing system
that met a few minimum requirements. And second, all the money
collected from a province would be returned to that province as
carbon dividends.


After years of vigorous advocacy and negotiations, Trudeau’s
liberals got the tax passed through parliament. It was
implemented in early 2019, just before another federal election
that became widely seen as a national referendum on the tax.


Liberals won again. The carbon tax was affirmed. It’s going to
stick — and rise to a whopping $170 a ton by 2030.


This is a startling success story for climate policy that was
largely overlooked in the US. We, uh, had some other stuff going
on. But it’s worth taking a closer look at how Canada pulled it
off.


Two people at the core of the tax pitch were Gerald Butts, who
was principal secretary to the prime minister from 2015 to 2019
and Trudeau’s closest personal advisor, and Catherine McKenna,
who was the minister of environment and climate change during the
same period.


Butts and McKenna were in the trenches and they have the scars to
show for it. Both of them noticed the piece I published on Volts
in January on carbon tax refunds — and they objected to the
conclusion that dividends did not make the carbon tax more
popular in Canada.


So I had them on the pod! We talked about how the carbon tax was
conceived, what enabled it to secure majority support (yes, they
say, refunds were important), and where the politics of carbon
pricing stand as we move into the 2020s. Not only were my spirits
lifted — it’s nice to know there’s a sane country out there
somewhere — I learned an enormous amount. I think you will too.


Without further ado, Catherine McKenna and Gerald Butts, welcome
to Volts. Thanks for coming.


Catherine McKenna:


Very happy to be on.


Gerald Butts:  


It's great to be here.


David Roberts:   


When Justin Trudeau announced his candidacy [for prime minister
of Canada] in 2015, the carbon tax was part of his initial pitch.
How far back does the carbon tax idea go? Who got it in Trudeau’s
ear? How long had it been bouncing around up there before it made
its debut on the national stage? 


Gerald Butts:  


The first time it was a real issue in Canada was during the
federal election campaign in 2008. Important for the context of
the story, for reasons I'll go into later, is that the Liberal
Party proposed something called the Green Shift, which was an
elaborate take on a carbon tax, under the leadership of Stéphane
Dion. But it was easily caricatured as a regional wealth
redistribution program, because the revenue from the tax was paid
into the consolidated revenue fund at the federal government, and
it was redistributed by the federal government to programs of its
own choosing, not all of which were environmentally
related. 


To me, there were a lot of reasons beyond the Green Shift that
the Liberal Party lost the election in 2008, but that was the
fundamental flaw in the policy.


David Roberts:   


The idea is that you're just taking wealth from carbon-intensive
provinces and redistributing it elsewhere.


Gerald Butts:  


Absolutely. That, of course, has a history in this country that
goes back to when the current Prime Minister Trudeau’s father was
prime minister and he created the National Energy Program. 


The conservative government in 2008, under Stephen Harper —
which, to be diplomatic, was not inclined to climate action —
easily caricatured this as the second coming of the National
Energy Program in Western Canada in particular, and made it out
to be that the Liberal Party was after Western money to pay for
Eastern programs, which is always death in politics in
Canada. 


When we designed our program, there were lots of people within
the party who thought we should stay a million miles away from
it, because they were convinced that they lost the election in
2008 because of carbon taxes. We were very careful to make sure
that any of the revenue collected went back to the province from
which it originated. That, I think, was what unlocked the
political constituency for carbon pricing in Canada.


David Roberts:   


So that design — money goes back to the province from which it is
gathered — was there from the very beginning, as you were working
it out. 


Catherine McKenna:  


I came in as first minister of climate change and was given this
mandate, and it was very clear that was going to be the hardest
thing to land as part of our climate plan. For the first time
ever, we went to Paris, we worked really hard to get an ambitious
Paris agreement, but then we had to go home and do the
work. 


I was stuck with the unenviable task of meeting with provinces
and territories all the time and going through interminable
discussion on carbon pricing. There was not a lot of appetite,
and everyone would bring all the reasons not to do it. We needed
to think hard about how we were going to land it. 


It's important to know there were some provinces that had
pricing. At that time, Alberta had a progressive government that
had brought in a price on pollution. Quebec was in a
cap-and-trade system with California, as was Ontario, and BC had
a direct price carbon tax. 


So we came to the table with that. Gerry and I spent a lot of
time talking about the design. There were a lot of people who at
first shied away, didn't want to do it, but when they decided
maybe we could do it, they still thought it was okay to take the
money and distribute it as the government saw fit. And I knew I
couldn't land it, I knew there was no way. As liberals, as
progressives, people believe the worst — that you're going to
take this money and you're going to have your special things you
want to do, which might be really dumb in the perspective of
others. 


It was pretty clear, but it was a fight internally, too. Saying
all the money was going to go back in a transparent way was just
critically important to me. I knew I couldn't land it otherwise.
It was still very hard, we had to do good comms, but it was
critically important that we could talk to people and say,
“you're going to get more money back.”


David Roberts:   


How did it play in the 2015 election, Trudeau’s big triumph? I'm
curious how central the carbon tax was in his campaign and in the
election generally.


Gerald Butts:  


There were bigger forces in 2015, to be brutally honest. The
cornerpiece of our 2015 election campaign was something called
the Canada child benefit, which was a progressive benefit given
according to family income to people directly in cash. That's
what we ran on in 2015: the middle class has been screwed by 25
years of supply-side economics and we're going to do something
about it because we know you're hurting. Everything else built
out from there. 


In 2015, climate helped us consolidate a progressive community
behind the Liberal Party. This is an important piece of the
context in Canada. There are a variety of options on the left,
one of which is the center left, one of which is the Green Party,
which has diminished its political viability over time as the
Liberal Party has absorbed progressive environmental
policy. 


Everybody wanted to get rid of Stephen Harper in 2015, and there
was a debate over whether it was going to be us or the NDP. We
put a more progressive policy platform together than they had,
and climate was a huge part of that. I have no doubt that it
helped consolidate the progressive community and has kept it
there through some difficult times. 


David Roberts:   


The Canadian carbon tax is designed as a backstop, which means
provinces with their own carbon pricing systems that meet certain
minimum thresholds are left alone, and only provinces that don't
have a sufficient price have this imposed on them. Was that
structure also part of it from the very beginning?


Gerald Butts:  


Definitely. There are two things that Americans can be forgiven
for not thinking deeply about when it comes to Canadian politics
— probably more than two, but for the purposes of this
discussion, there are two. 


One of them is, all of the revenue collected from the carbon
price in Canada goes back to the provinces. None of it is spent
on federal programming. There were lots of provincial governments
who opposed it on ideological grounds but said they were in favor
of it in public. But that's that's what we did, and some people,
as Catherine said, were not in favor of it. That's the first
thing. 


The second thing is, we were coming into power at a time when the
four largest provinces already had carbon pricing schemes in
place. They were acting in the absence of federal leadership
during the Harper years. Had there been no carbon pricing
anywhere in Canada, it would have been easy to put a uniform
system in place. But we had to create this concept of
equivalency, because we didn't want to punish the governments
that had led on climate action at the subnational level in
Canada. 


Those two things are really important contextual pieces of the
Canadian politics of the time to understand.


David Roberts:   


Was there a lot of debate over what the backstop levels are?
Because what you choose as your bottom line effectively chooses
which provinces are going to get overridden. What was that
process like? What are the minimums?


Gerald Butts:  


Catherine could speak to that better than I can. But from my
perspective, conceptually, this is why a carbon price was
important in the first place, because there would have been
nothing to use as a benchmark and nothing to uniformly compare
across the country as equivalency. When we say equivalency, what
we really mean is an equivalent carbon price through some mix of
policy measures at the provincial level.


David Roberts:   


Catherine, how was that hashed out? If you're putting together a
baseline that provinces have to meet, you can imagine a baseline
being quite elaborate and complicated, or you can imagine a very
simple one. Was that done in dialogue with the provinces?


Catherine McKenna:  


At the end of the day, hard things are hard. I sat in so many
meetings and we went nowhere. We didn't know where the four
provinces that had a price were at. Cabinet ultimately decided
we're going to start at $10, because that meant the system that
existed would be acceptable for the four provinces.


Now, two of those provinces changed governments, so we lost the
pricing that they had, but it showed resilience. This is the way
we decided it made sense. 


It was a lot of design work. This is an across-the-board carbon
price with all these different jurisdictions, and then we have an
output-based pricing system for major emitters as the backstop,
and also there's a benchmark on that. Environmentalists would
probably love us to go into details. I won't go into details of
the design, but in the end, one day, you have to just announce
it. You have to do it. 


The provinces were trying to delay. This was in 2016. In 2015,
Paris Agreement; 2016, we have some major challenges with you
folks, and we're trying to land carbon pricing, but it was clear
it wasn't going to happen. Gerry and I had a conversation and I
said, “I can't land this on my own. I need the prime minister to
be totally with me on this.” 


I was at a meeting of my provincial and territorial counterparts.
It was quite a useless discussion, going around the table again,
people restating their positions like they do,  negotiations
are maybe going backwards. And I said, “you know what, it's been
a great discussion, you might want to tune in to the House of
Commons because the prime minister is just announcing now that
there's going to be a price across the country and it’s starting
at $10 and going to $50 in 2022.” (Obviously, I'd talked to some
of the key provinces to reassure them that their system was going
to be acceptable as long as they continued to go up. Stringency
is really important.)


A number of people stormed off. All hell broke loose at the
table. It was quite a lot of drama. But that's when it got real.
We had many discussions, but suddenly, front page of newspapers:
“there's going to be a carbon tax across Canada.” 


That’s the interesting part of this article, which suggests that
even giving all the money back can't save a carbon tax. We've
been through two elections, and it's held. In the last election,
the Conservative Party, which has been extremely difficult, even
brought in a weird system that was a fig leaf, maybe, of a carbon
tax. In 2019, the majority of Canadians supported a party that
had a price on pollution. 


So we were able to land it, but there was a lot of drama between
2016, when it was announced, and getting it done in 2019. There
was talk about “technocratic dreams” and “policies can't
transcend politics” — but what's missing in that is people.
Actually, people are reasonable. We have a prime minister who
said this, Jean Chrétien: “Canadians are reasonable, so be
reasonable.”


David Roberts:   


The structure of the tax is that 90 percent of the revenue goes
straight back to households in the province from which the tax
was collected. What about the other 10 percent?


Catherine McKenna:  


That goes to business, indigenous communities, and other
organizations, but in a transparent way.


David Roberts:   


For those of us who are not up on Canadian politics, what does it
take to pass a law in Canada? Presumably Trudeau can't just stand
up and say, “we're doing this now.” It has to be an act of the
legislature. Is that just a single majority vote in parliament,
or is there more to it than that?


Gerald Butts: 


The situation is much more straightforward if you have a majority
government, which we did. We’re a parliamentary democracy,
derivative of the British parliamentary system. If there's a
majority party in the House of Commons that forms the government,
generally they can rely upon passing their own legislation. Our
Senate is not elected and therefore doesn't have the democratic
authority to question the central purpose of any legislation — so
essentially, if it passes through Parliament, it makes it. 


The big caveat is, anybody can litigate any piece of legislation
that goes through Parliament in the courts.


David Roberts:   


Just to be clear: not a supermajority in the parliament — you
just have more votes for than votes against, and the law passes.
Any American listening will be incredulous.


Was there ever a realistic chance that enough members of
parliament from your own coalition would rebel against this? Was
there ever real doubt that if Trudeau put up a real bill it would
pass?


Gerald Butts:  


No. There was doubt that we could manage the politics internally
to get a real bill tabled, and that had to do with the
federal-provincial dynamics at the time. But it also had to do
with the internal management of caucus and cabinet — generally,
the disagreements are behind the scenes. People were jumpy. 


David Roberts:   


I bet they weren't making arguments against their own party in
the Wall Street Journal, though. 


Gerald Butts:  


No, they were not. 


David Roberts:   


The reason I emphasize this is that, in terms of setting a
political context, something that is a fait accompli, definitely
going to happen, brings out a different dynamic than something
that you might be able to block. 


Gerald Butts:  


Once it's tabled, David. This is a really important distinction.
Canada is not this lovely, magical land of unicorns where
everything is easy and progressive. That's not the way it works
up here. A lot of hard work was done behind the scenes. 


Remember the context: we had come from third place, in an almost
extinction-level event for the Liberal Party of Canada, and gone
on to form a government for the first time in the country's
history. It had never happened before. There were lots of people
in that caucus who were veterans of the 2008 election, and
members of staff in senior roles who were like, “do we really
have to do this?”


Frankly, it was Catherine's leadership, along with the finance
minister at the time, Bill Morneau. Finance tends to be the place
where people gather to make things not happen; it's like our own
Congress within the federal government. Bill was clear from the
get-go that he 100 percent stood behind what Catherine wanted to
do, and we were going to make it happen come hell or high water.


Of course, it goes without saying the prime minister was behind
it too. 


David Roberts:   


If you go to a provincial official and say, “all the tax we
collect from your province will be returned directly to the
people of your province, and most of them will come out ahead
financially,” that sounds like a political home run to a sensible
person. So what was all the jumpiness? What were the objections
and counter-arguments?


Catherine McKenna:  


I should make a distinction. Caucus was jumpy; provinces were
angry. They were just … conservatives. 


It was the weirdest thing, because I designed — with the support
of Gerry, Bill Morneau, the Finance Committee, and a bunch of
officials — the most small-c conservative policy you could do. I
remember meeting George Shultz, and that came up; there are
obviously Republicans who supported fee and dividend. 


I wanted to get the politics right, so I gave these folks an
opportunity. I said, “go fill your boots, design your own
policy.” To be clear, if the provinces that didn't already have a
pricing system designed their own, they could keep the revenues.
They didn't even have to give it back to the people. They could
decide they were going to take the money and put it to their pet
projects, that wasn't going to be our problem.


David Roberts:   


If you're going to reject that, you're going to reject any carbon
price. You can't get more flexible than that.


Gerald Butts:  


You put your finger right on it. That was precisely our
objective. Political context at the time: there were a bunch of
conservatives running around Canada saying, “we believe that
climate change is happening and it's a bad thing and we should do
something about it … but not a tax.”


Our objective was to take all of the objections that have been
leveled against previous attempts — be it regional
redistribution, tax grab by the government, some nefarious global
plot sponsored by the left and George Soros, whatever nutbar
theory people wanted to level at it — and say, “no, this is a
simple thing. We're going to collect the revenue, and we're going
to give it back. If you're against that, you're against
everything.”


David Roberts:   


To my question, then, what were their purported objections to
this seemingly very reasonable policy?


Catherine McKenna:  


Well, they just lied. It's not a very nice thing to say, but they
did. They were so opposed to liberals that they just said it was
a cash grab. 


I looked at your article and I said, “this is not the narrative.”
It was so important to deal with the lies, to spend a lot of time
selling that all the money was going back.


Take Ontario — very important province politically, it's the
largest province by population. To be able to say, “this is the
amount of money that the average family's going to get back,
which is more than you're going to pay” was super important. It
was decisive. 


David Roberts:   


In terms of public opinion, you mean?


Gerald Butts:  


Part of my objection to the article is the definition of public
opinion. If you ask someone their views on something in a poll,
and it's a theoretical prospect, they're going to have one
opinion of it. But when they go to decide which political tribe
they belong to at the ballot box, that's where the rubber hits
the road. 


I never like to have fights with environmentalists, especially in
public, but this is a really important thing — the authors of the
study were looking at publicly available data. I can tell you
from what we were doing internally, within the government, that
there was a 25-point difference among voters in support for a
carbon tax and a carbon tax with a rebate. Twenty-five
points. 


David Roberts:   


Let me back up one second. These conservatives are saying in
public, “it's a cash grab, it's going to hurt families, blah blah
blah,” all the predictable things conservatives say. But
presumably, they're not dumb, they knew what you were telling
them, that they're going to get all the money back. So what are
they saying to you in private? 


Catherine McKenna:  


They're saying the same things. I couldn’t even believe it.


I would say that to them and then they immediately go to a
microphone and they're like, “I just told the minister that this
is a cash grab.” It was not super fun, because it was a fight a
minute. It ended up becoming a real security issue for me,
because people hear things from politicians, and you can inflame
people if they think you're going to take money and people are
just trying to pay the bills. So I'd have to rush to the mic,
too, because they didn't care. 


I remember, in a conservative province where they have a
provincial sales tax and generally people don't like taxes, I got
someone to do the math for the premier. I said, “you could get
rid of your provincial sales tax; you can bring this in. Here's
your sales pitch!” And he was still against it.


This is why it's so important, us telling this side of the story.
They thought it was a winner to rile people up and lie, saying
“you're going to pay more money and you can't understand this
anyway.” They would have ministers go fill up their tank and take
a picture of them at the gas station, then say, “this is going to
cost an average family this much by 2022,” but they wouldn't talk
about how you're going to get more money back. It literally was a
comms war. We would be on the airwaves, I had to be out getting
pounded.


David Roberts:   


You became the face of the whole thing for a while. I imagine
that was unpleasant.


Catherine McKenna:  


I'm Irish, I’m a competitive swimmer, I can take it. I didn't
love it, that's for sure, but I believed in it. I believed that
we needed to take serious climate action, and I felt like I could
not lose it. I felt personal responsibility, which was a heavy
weight, and I was very worried.


We had this output-based pricing system, which is very complex,
because you have to look at particular sectors — cement, aluminum
— and design in a way that you're not sending these companies
offshore. It took a while; we literally brought it in in 2019,
which is the year of the election. 


The reality is, to paraphrase David Axelrod, hard things are
hard, and you're always going to take flak, so go do the really
hard things that matter. We could have done a crappy, wimpier
version, and they didn't care — these guys were going to be out
there. (And by the way, it was all guys, a bunch of guys calling
themselves the resistance to Justin Trudeau. And Catherine
McKenna, I suppose.)


It was a fight worth fighting, but we had to enlist people, and
not just environmentalists. (I will give a shout out to our good
friend Kat. We all are big fans of Katharine Hayhoe.) Of course
we had environmentalists putting out the message. But we got
young people, and it was good because at that time you had Greta,
and young people marching in the streets. We got doctors, there
was a whole campaign of doctors to support us. I got Arnold
Schwarzenegger to do a video — as a Republican, he brought this
in in a bipartisan way. 


We were just doing whatever we could so that Canadians could hear
the message. There was some emphasis on how Canadians didn't know
exactly how much money they're getting back. That doesn't matter.
Like Gerry said, the fact that you asked them, “do you know
exactly how much money you got back?” — that wasn't the thing. In
the end, we were able to make carbon pricing a necessary part of
a serious climate plan where it wasn't the exact amount you got
back that mattered. 


David Roberts:   


One thing I really despair about in the States is our abysmal
media situation. Basically, our right wing has captured a large
portion of the population and facts don't penetrate at all. I
know you have some terrible Murdoch-sponsored media up there,
too, but do you feel like when you put a coordinated effort into
it you were able to get over the heads of that media machine and
reach the public?


Catherine McKenna:  


We have media that fought this the whole time, but it actually
goes to our broader strategy. We had to get to real people. As
many op-eds as you put in the papers, how many people are reading
them? We did them, but I didn't wake up every day thinking about
op-eds. I spent a lot of time looking for clips for social media.
In the election, the Liberal Party did a lot of social media to
reach regular people. 


A really interesting thing happened that was surprising to me,
but important. I had pushed to have a check back every month. I
wanted someone to arrive at your door and hand you a big fat
check. That would be the best, but we couldn't do it. 


But helpfully, we got a lot of free advertising from accountants,
because at tax time they would literally advertise “come get your
climate action incentive.” (We put a lot of effort into “climate
action incentive,” what we wanted to call this thing you’re
getting back. It had to be about climate, it definitely couldn't
say tax rebate!) 


So you had all of these accountants and accounting firms saying,
“We’ll do your taxes, get your climate action incentive, you're
going to get this much back in the province.” I would go there
and do events, we had local members of parliament doing events to
promote it. At tax time people like money back. So that's the
good news. 


I spent all my time trying to think about who I could get to sell
it.


Gerald Butts:  


Again, we are not the land of unicorns up here. Two-thirds of our
daily newspapers are owned by an American hedge fund, the same
one that owns American media, i.e. the National Enquirer. They
had no shame in how they opposed the carbon price — they printed
lie after lie after lie about it.


But it didn't work, because one thing we do have going for us in
this country, at least so far, is that we're not tribal when it
comes to our partisan affiliation. Most Canadians have voted for
different parties at different points in their lives. Some people
even vote for different parties at different orders of government
simultaneously. I think that's a good thing. Partisan adhesion is
not as sticky in Canada as it is in many places.


David Roberts:   


Do you explain that just by reference to the fact that it's a
parliamentary system and there are multiple parties, so there's
not this constant binary forced on everything?


Gerald Butts:  


No. It's part of it, for sure. What explains it more is that we
have more or less built and maintained an excellent public
education system that 93 percent of Canadians send their kids to.
You're looking for the secret sauce in Canadian policy and why
everything from immigration to climate action is possible here?
It's because of that basic fact that everybody goes to school
together.


David Roberts:   


Carbon pricing was run on in 2015, passed in 2018, and then
elections in 2019, so there was no getting around this being at
the heart of the election. I was just reading an account of the
2019 election which basically said the big winner was the carbon
tax. Two-thirds of voters voted for a party that supported the
carbon tax.


If you’re a liberal and a fan of the carbon tax and involved in
doing it, you have incentive to play up the extent to which the
election was a referendum on the carbon tax, but was it really?
Were there other bigger forces, or was it really mainly about the
tax this time?


Gerald Butts:  


It was the showdown at the OK Corral about climate in Canada, for
sure. There were other things, some of which it's still too soon
for me to remember. You may remember a certain story that came
out about the prime minister in the middle of the campaign — that
took over the news cycle for a few days. 


The conservatives had been elected in major provinces (not that
there are any minor provinces, coming from Nova Scotia) — they
had the governments of Ontario, Alberta, more or less Quebec. And
everybody, including of course the leadership of the Conservative
Party federally, was saying “we are going to scrap the tax.”
There were probably two or three things that decided the 2019
election, but there's no doubt in my mind that that was number
one.


Greta Thunberg drew I can't remember how many hundreds of
thousands of people to the streets in the middle of Montreal,
literally in the middle of the campaign. The prime minister
marched in the rally.


And more importantly for this discussion, there's no way we win
that fight without the rebate.


David Roberts:   


So the fact that the money goes back to citizens did play a big
role in the debate.


Gerald Butts:  


It was decisive.


Catherine McKenna:  


It was key. You could call it out. It was a reasonable policy.
They could just say it was a tax grab, and the response had to
be, “it's not, and by the way, this is what you get back.” In a
way it's kind of good in elections when you have one issue — it
doesn't feel good, at the time I was very nervous — but it was
good, it focused the mind.


Carbon pricing also became, like, do you want to act on climate?
Because the conservatives were so against it.


David Roberts:   


To what extent was public support about the details of this
policy, and to what extent did it just become a proxy battle of,
“we care about climate change and they don't?”


Gerald Butts:  


It's a great question, David, because this wasn't a detail of the
policy — this was the policy, the price and rebate. The
difference of one side saying “it's a tax grab” and the other
side having to say, “well, look at all the things we're going to
spend the money on,” and one side saying “it's a tax grab,” and
the other side saying “they're lying to you” — when it's a
live-action, kinetic political battle, one of those arguments is
winnable, and the other one is not.


David Roberts:   


I feel the need to insert here, just to make myself feel better:
not that there's anything wrong with the federal government
taxing people and spending money on public purposes.


Gerald Butts:  


Absolutely. Our universal public healthcare system and the public
education system that I just alluded to would be impossible
without those things.


David Roberts:   


So you win in 2019 on the carbon tax. Is the feeling in Canadian
politics now that the main issue is settled, we're just arguing
over the details? Or are your right wingers like our right
wingers here in the US, that never give up? Are they still after
it, or is this a settled question in Canadian politics? 


Catherine McKenna:  


I think the Canadian public bought into a price on pollution —
that's what we call it, not the carbon tax. But the conservatives
apparently are going to kill themselves over this again. It's
kind of funny, the number of stories that have been written about
the conservatives tying themselves in knots over this, and
conservatives themselves, the more reasonable ones who want to
get elected, saying “you do this again, you're going to lose
again, can you learn some lessons?” 


It's going to happen, but I don't think that means it's a lost
policy. I think that the conservatives are a lost cause. 


Having said that, you always have to be vigilant. You can’t take
it for granted. As the price goes up, you have to continuously
emphasize you're getting more money back, but you also need to do
the other things: make sure that your economy is growing and
you're creating jobs and you're showing that you're taking real
climate action. It's part of a bigger piece. 


Gerald Butts:  


Yeah, I don't think it's settled. I had hoped it would be settled
in the last election. The conservatives had a weird policy that
nobody believed they would ever really implement, that they would
go to a first ministers’ meeting and say, ”hey, we tried, and now
we're going to get rid of the old plan.” I don't think they ever
had any intention of implementing it. It was, by my view as
someone who has spent a lot of time in government in this
country, unimplementable. But that's for them to answer. 


You mentioned the forces of the right wing in the United States —
they're the same forces. Catherine and I are both phoning into
this lovely discussion from Ottawa where we have MAGA flags and
Confederate flags flying on Parliament Hill.


David Roberts:   


I want to hit on the Supreme Court case. Several provinces sued
over the tax; the substance of the lawsuit was that this is an
unconstitutional power grab by the federal government over things
that ought to be provincial, and the Supreme Court ruled in March
of last year that, no, it's constitutional. Pretty much settled
that. How nervous were you about that? Was that case a big deal,
or was it a frivolous lawsuit? 


Gerald Butts:  


It was a pretty huge deal.


Catherine McKenna:  


We definitely needed to win or else it was going to be really
bad. 


We are a federation, so we had to demonstrate the reasonableness
that the environment is joint jurisdiction between the federal
government and the provinces. By saying, “you can do a direct
price or you can do cap and trade and design it how you want but
you have to meet the benchmark,” we knew that was going to be
important, legally. We didn't just say, “okay everyone, too bad,
whatever your system is, we're getting rid of it” or “you have to
design it just like this.” We were reasonable. That was
important. 


But also, the Supreme Court said climate change is a threat of
the highest order to the country and indeed to the world. That
was critically important, because it was going to be ridiculous
at the most basic level if the federal government couldn't attack
greenhouse gas emissions within the country. How are you going to
have a climate plan? We couldn't comply with the Paris Agreement!
If you have a target and you can’t actually reduce emissions
because provinces get to do whatever they want and they can
continue to slowly [increase emissions], that was going to be a
huge problem. 


But the Supreme Court was very reasonable and they actually
recognized that pollution doesn't know any borders. We had
tailored it in a way that it was narrow, and that was important
because they did look at, is the federal government going to come
in? This was some of the arguments by conservative provinces,
that we're going to regulate everything. We'd have these
conservative premiers saying, “they're going to regulate how
often you can drive your car.” We had to be careful. 


It was also a very important decision because it does now make it
clear that the federal government can take action to regulate
greenhouse gas emissions in potentially broader areas where it's
in the national interest. I didn't really think we had a chance
of losing. 


David Roberts:   


You were pretty confident in the case and in the court itself.
What's the situation with partisanship on the Supreme Court in
Canada? 


Catherine McKenna:  


It's not a thing. Stephen Harper probably tried to put people
that might have been conservative. But the legal profession is
different here. How we appoint judges is different. 


David Roberts:   


And the court is trusted by the public as a neutral arbiter. That
must be nice.


Gerald Butts:  


As the prime minister said many, many moons ago when he kicked
off his leadership campaign in 2012, this country did not happen
by accident, and it will not continue without effort. It is a
constant struggle, David.


Catherine McKenna:  


The Supreme Court — I wouldn't overstate it. Which sounds like a
funny thing to say, it was obviously critically important that it
be found constitutional. But at the end of the day, a new
government can always change policy. 


That’s why you can't get distracted in some ways by some things.
That was really important, because otherwise, you'd have to go
back to the drawing table, or win a majority, or get new
legislation. But end of the day, you have to convince regular
people. 


Maybe 2019 was unusual, because it was such a significant issue,
though fought on a variety of different fronts. But I actually
think Canadians have come a long way, not just on carbon pricing,
but on climate. The town of Lytton literally exploded, it just
burned down. We're seeing massive floods, forest fires, droughts,
our Arctic is thawing. That doesn't mean that a particular policy
will be resilient, but if you talk about it as a reasonable
person, and it is well designed — it has to be well-designed
policy, you can’t sell something that sucks to the regular person
— but we are in a different place from where Canadians were at in
2015.


Gerald Butts:  


And we're at a different place than where Canadians were in 2011.
Canada did not look much different on climate change; in fact, in
some ways, the Obama administration looked way better than the
Harper administration did on climate change.


I guess that's the point, David, of this whole discussion, and
why it raised our Canadian version of Irish when we read this
study. People can change things in democracies. Sometimes the
cards are stacked against you, and sometimes it feels like
nothing good can ever happen, but if people put their whole heart
and soul into it, they can make change happen. That is possible.
It's still possible.


David Roberts:   


Well, we’ll have to agree to disagree about that. When people
talk about the difference between the US and Canada on this
issue, there's a lot of hand-waving about public opinion and
who's sensible and who’s not, but to me, in the end, it all comes
back to structures and procedures. You [Canadians] can have a
majority that wants a policy, and that will result in the policy
passing. We [Americans] have a majority that wants a policy, and
we have a situation where 30 percent of the population can elect
senators that can go literally block anything. So I think it's
less the intangible stuff and more prosaic: we have really stupid
rules, and kind of a stupid Constitution. 


I don't know how you get around that. We've done the work trying
to change public opinion, it has changed, and we've come up with
good policies — we did all the things we’re supposed to do, and
now we're facing a situation where one dude from West Virginia,
who partly owns coal plants, is literally deciding what and
whether we do anything at all on climate change. It’s absolutely
absurd.


Gerald Butts:  


That, to me, is one of the central differences between the
Canadian and American political systems: the centrality of money.
It's insane to me how much money — I remember David Axelrod asked
me how much money we were going to spend in the 2015 campaign,
and I said “it's probably going to be around $35-40 million.” It
ended up being $42 million, in the longest election campaign in
modern Canadian history. David said, “I spent more than that in
the Democratic primary in Florida.”


David Roberts:   


One of the things that fee and dividend proponents are constantly
saying is that it's very important that the rebates be visible,
that people know they're getting them. They all are advocating
this idea of sending the big Ed McMahon check to the door every
month. 


But Canada went with a tax rebate that, unless you're pretty on
the ball, would be very easy to not notice. That's the research
that was written up in that paper — lots of people just aren't
noticing it.


So why bury it in tax rebates? What prompted the decision to
shift this summer to mailing checks? Do you anticipate mailing
checks to make a big difference?


Catherine McKenna:  


I don’t know why we weren't allowed to. I actually said, “I'll
deliver it. I'll go to every Canadian and bring it.” For whatever
reason, the bureaucratic system could not do these mailed-out
checks. We weren't able to win that. We’ve won it now, in the
sense that we recognize that this is important.


Some of it was that people didn't know how much they got. Half of
the people didn't know they got a check. To the extent people
cared, they would be able to hear the conservatives say, “it's a
tax grab,” and then they'd hear me and others saying “actually
you’re going to get more money back.” It was very important, I
can't emphasize enough. We could not have won if we had said,
“actually, you know what, we put it into general revenue and
we're going to do this green thing where we're going to give it
to green stuff in different places, and I don't know what your
provinces get.” That's not sellable. 


I don't want to be too depressed about the situation in the
United States because we did live under Donald Trump — being the
environment minister, it was hard for us. I actually went to
Miami and Houston and hung out with the mayors there and did
videos for Canadians to say, “but look, these guys are doing
stuff on climate!” You’ll always have the states and cities and
businesses that are acting. 


You’ve got to be crafty. We could have done the easy thing. It
didn't really occur to me, because I wasn't going to back down on
it, but people did want us to not do this, including internally.
Some people will just wait out the clock. But we were
crafty. 


I know it's much harder in the United States. Comms matters,
designing things in a way that can uphold a constitutional
challenge matters. I get your Supreme Court, you have challenges,
working with states, litigating everything and knowing that it's
going to be in place while it's litigated. You have to be crafty,
too. I'm hopeful that the US is able to land things.


I'm going to be at Columbia with Jason Bordoff, working on carbon
pricing and border carbon adjustments. Maybe the enticement of
border carbon adjustments will help on the pricing. The IMF is
working on a minimum price floor. So there's action. I'm a
realistic optimist or an optimistic realist some days, but I
don't want to give up on you guys doing things.


David Roberts:   


One of the things that's not publicly appreciated in these
discussions about carbon taxes, because they're so big
politically, is that, especially at the level that they're being
talked about, they're macroeconomically not that big a deal. If
you look at macroeconomic assessments, it's like 1 percent GDP
one way or the other, with a lot of uncertainty.


I can understand completely why dividends serve as a great
political argument, and also that people in practice maybe aren't
that aware of them, because the amount you're paying in tax is
not yet very big and the amount you're getting back is not yet
very big. The actual amount of money, as opposed to the political
symbolism of it all, is relatively modest. 


That said, the tax is about to go way up, to the point that we’ll
pretty soon be at levels that Canadians will start noticing the
costs, and maybe start noticing the checks back, too. The amounts
on both ends are going to get bigger. Is there a next test of the
tax?


Gerald Butts:  


I think there’s going to be an annual test. You're right that
people are going to feel $170 a ton a lot more than they feel
$50. There's no way you'd maintain a political consensus for it
if that money weren't being rebated to people, because while
you're right at even $170 a ton, at the maybe $3 trillion the
Canadian economy will be at the time, it is not that much. But
for individual families, it is a lot. 


David Roberts:   


Are you pretty confident that the checks will increase the
salience of the dividends? Has there been any testing or polling
on that, or is it just gut common sense?


Gerald Butts:  


I can't speak to that, because that policy was announced after I
joined the private sector, but I suspect that was the reasoning.
There's no reason to believe it won't be the case, but it's going
to require a continuous commitment to communication. Of course,
2030 is sooner than it used to be. But it's still a couple of
election cycles away, and anything can happen.


David Roberts:   


Well, thank you guys so much for doing this thing in the first
place, which, despite your admonitions, still has unicorn vibes
to me. Catherine, I wish you all the best in joining the fight
down here in the US; we could use some new energy and optimism.
Thanks to you both for coming on today. It was really fun. 


Catherine McKenna:


It was great.


Gerald Butts:  


It was  a real pleasure.


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