The carbon tax is (nearly) dead. Now what?

The rise and fall of the consumer carbon tax in Canada has been a rollercoaster journey, with major federal parties initially running on platforms that included the tax, only for it to now be on the brink of extinction. Nearly every Liberal, NDP, and Conservative MP elected in 2021 supported the carbon tax, but recent political developments have led to its potential demise.

The Conservative platform in 2021 acknowledged the efficiency of using pricing mechanisms to reduce emissions, but the ousting of Erin O’Toole as leader and the rise of Pierre Poilievre have shifted the party’s stance on the carbon tax. Inflation has also played a role in shaping the current political landscape, with the carbon tax becoming a target for criticism despite its minimal impact on consumer prices.

The decision by Justin Trudeau to exempt home-heating oil from the carbon tax further weakened its position, leading to doubts about its effectiveness. The NDP also began to waver on the policy, and now Liberal leadership candidates Mark Carney and Chrystia Freeland are considering moving away from the carbon tax as they vie to replace Trudeau.

While the fate of the consumer carbon tax hangs in the balance, it’s important to note that carbon pricing in Canada may still continue through the industrial pricing system, which is expected to drive significant emissions reductions. Poilievre has refrained from advocating for the repeal of rules for large industrial emitters, recognizing the importance of addressing emissions from the industrial sector.

Looking ahead, the debate over carbon pricing in Canada may shift towards finding alternative solutions to reduce greenhouse gas emissions. Carney has highlighted the need to focus on reducing emissions from industries, which account for the majority of Canada’s emissions. Transportation remains a key sector for emissions reduction, highlighting the ongoing challenge of transitioning to a low-carbon economy.

As the political landscape evolves, it’s crucial for parties to consider how they will address the gap left by the potential removal of the carbon tax. While the carbon tax may not have been perfect, it has raised the bar for climate policy in Canada and contributed to significant emissions reductions. The challenge now lies in finding alternative policies that are effective, economically efficient, and socially equitable in tackling climate change.