Former finance minister wonders if Canada should institute emissions cap after Trump victory

Following the re-election of former U.S. president Donald Trump, former finance minister Bill Morneau says the Canadian government should re-evaluate the timing of some cornerstone Liberal policies, such as the oil and gas sector emissions cap, in order to better align with its southern neighbour and its new incoming administration.

“I would question whether putting caps on emissions right now is the right time,” Morneau said in an interview that aired Sunday on CTV’s Question Period, adding he would be “very careful” in thinking about the emissions cap, considering “the context of the broader North American relationship.”

Morneau — who headed up Canada’s finance portfolio during the previous Trump administration and throughout the free trade agreement renegotiations — said a lot has changed geopolitically since Trump’s first term.

“Energy security is going to be critical,” he told host Vassy Kapelos, while also pointing to defence, technology, and the economy, as sectors that will have to be looked at.

“So, as I go through those one by one, we will need to think about how we get to our defence spending targets more rapidly than the government has currently laid out. We're going to need to think about whether we focus on energy security in a way that makes us clearly an important part of the U.S. sector that way,” he added. “And that means we have to ask ourselves, ‘is it really the right time for caps on emissions?’”

Instead, he said, the Canadian government should be looking at other ways to meet its climate goals.

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Trump made several campaign promises that would have significant knock-on effects for Canada. Namely, he has vowed to impose across-the-board tariffs on imports, to reopen America's trilateral free-trade agreement with Canada and Mexico, and to launch a mass deportation operation, raising fears of an exodus to Canada.

Morneau said the issues with which the Canadian government will “inevitably” be faced are “hard policy choices,” but that they’re “the right things to be putting on the table.”

“It's not only about having great relationships, it's also about the substance of what we're actually going to do to be a good partner to the United States,” he said.

Last December, the Canadian government published its framework to cap oil and gas sector emissions at 35 to 38 per cent below 2019 levels by 2030, using a national cap-and-trade system starting in 2026. The government introduced its draft regulations earlier this month.

Trump, meanwhile, has promised to boost America’s fossil fuel production and extract more oil, saying during his speech at the Republican National Convention in July: “Drill, baby, drill.”

“We're going to need to think about what policy initiatives, what substance, can we actually think about that will align with the kinds of things that the new president is going to want to focus on,” Morneau said. “We should be worried, and we need to be on the top of our game and think about what we can do to improve our outcomes.”

When asked whether he believes the Liberals will struggle to reconsider cornerstone policies they say align with their values, such as the emissions cap, Morneau said: “Yes.”

“It will be tough for them to come around to that, but I don't think there's really a choice,” Morneau said, pointing to Trump’s strong mandate after winning not only in Electoral College votes, but with the popular vote.

Prime Minister Justin Trudeau congratulated Trump on his re-election this week and told reporters on Parliament Hill on Wednesday he’s looking forward to working with the president-elect. But bilateral relations were strained during Trump’s first term, as was the relationship between the two leaders themselves.

Morneau’s interview on CTV’s Question Period was part of a panel discussion with former interim Conservative leader Rona Ambrose, who was a member of Canada’s cross-partisan NAFTA advisory council while the trilateral deal was being renegotiated.

Ambrose said she “absolutely” agrees with Morneau that the Canadian government will have to take a different approach with the new Trump administration, adding that if the Liberals have already written the fall economic statement — expected later this month — she would recommend “they rewrite it.”

“We've got two trains coming at us,” she said. “We've got the tariff war that's coming at us from Trump. There's only so much we can control there, and as Bill said, there are things that we can put on the table, and we've got to hit back hard and retaliate with our own tariffs.”

“But the other is within our control, and that's our domestic economic policies,” she also said, pointing to a need to make Canada more competitive.

Trump plans to lower the business tax rate, she added, plus deregulate sectors to make energy more affordable, while Canada is the only country in the world with an emissions cap, making energy more expensive. The Liberals have also increased the capital gains inclusion rate, which Ambrose called “a drain on productivity, and a drain on investment.”

“We've got to become more competitive, and we're not doing that here at home,” she said. “We have a chance to do that, and we're going to continue to be uncompetitive with the U.S. if we don't. So, we have a chance to pivot.”