So what if we axe the carbon tax?
Though Liberal leadership perceived frontrunner Mark Carney vows to ditch the government's carbon tax, it wouldn't be the end of the world. The former carbon-pricing advocate who was also the governor of the Bank of Canada and Bank of England, would have to devise a credible replacement. Photo by House of Lords/Flickr (CC BY-NC-ND 2.0)
Most of Canada’s prime ministerial hopefuls have succumbed to the anti-carbon tax zeitgeist. Liberal Party leadership frontrunner Mark Carney made it very official last Friday. His main rival within his own party, and others across the aisle, have also signalled they would “axe the tax.”
While this might sound like bad news for the climate, it might not be the end of the world.
Though that’s only if the political parties put forward alternative plans to meet the country’s climate targets.
Fortunately, there are numerous and more direct ways for Canada to bring down its national emissions, which would also make life more affordable for its residents.
The limitation of the national consumer price on carbon is that it leaves climate progress to the invisible hand of the market and individual lifestyle choices. But the slightly higher cost of fuel doesn’t significantly decrease our use of gasoline for vehicles or gas and oil for home heating, because most of us are stuck with these options.
If we really want to move away from pumping gasoline into vehicles and burning oil and gas to heat homes, then we need to modernize the transportation system and the way we heat buildings.
That requires proactive and mandatory policies, like requiring that all new buildings come equipped with non-emitting heating systems from the start. Rather than using antiquated and polluting oil or gas furnaces, we can adopt advanced, clean, and more efficient technologies like electric heat pumps to heat the air and water.
For homes that have already been built, the government should require all existing buildings to slowly transition to clean heating sources. This must come with a public funding and installation program that is more ambitious than the current rebate initiative, while making such retrofits accessible and affordable for everyone.
Implement these policies and you’ve addressed the third-largest source of Canada’s emissions.
As for transportation, the country’s second largest emitter, the next government ought to maintain and strengthen its rule requiring all new light-duty vehicles to be zero-emission by 2035. At the same time, it needs to orchestrate a country-wide effort to add electric vehicle (EV) charging stations from coast to coast, making driving electric feasible. Most importantly, Canada must invest heavily in electric public transportation that would make local and long-distance travel more reachable, affordable, reliable, quick, and green.
Luckily, all of these measures would also help lower the cost of living. Heat pumps are much more efficient than gas and oil furnaces and use electricity as an input, leading to lower monthly energy bills for both heating and air conditioning. Driving an EV costs a fraction of the amount needed for gas-guzzling ones. Studies show that homes that switch to electricity for transportation and heating can decrease their bills by over $500 a month.
These electric options raise the question of how to meet increased electricity demand without increasing emissions. We have solutions for that, too.
Tighten clean electricity regulations, so no new gas or coal plants can be built. Prioritize the mass construction of renewables, like wind and solar, which are now the cheapest new source of electricity generation with among the lowest and most stable electricity rates. Simply pair these with existing battery technologies that ensure the energy can be deployed at any time, including during peak demand hours. Add to this, local small-scale electricity generation and household grid integration that allow residents to feed energy into the grid, and we’ll be set to cleanly electrify both heating and transportation for decades to come.
Collectively switching to fossil fuel alternatives like solar, wind, EVs, and heat pumps should slowly decrease the demand for oil, gas, and coal. But let’s face it — fossil fuel companies won’t soon stop extracting these products voluntarily. And they represent by far the largest source of pollution in Canada.
To address this elephant in the country, we need to force fossil fuel companies to gradually wind down production. Yes, keep and increase the carbon tax on industry, which gives companies an incentive to incorporate green measures. But again, this reliance on market forces isn’t enough, especially given the scale of the industry’s emissions.
Canada’s next government must proceed with an oil and gas emissions cap that sets pollution limits on the sector. It should make eliminating fossil fuel subsidies a priority and refuse to approve new export pipelines that would make it impossible for Canada to meet its climate targets. We can create more well-paying jobs in the clean energy sector.
These are the kinds of robust policies that would propel us toward a green economy, slash the country’s emissions, and reduce living expenditures for residents.
Rather than lamenting the axing of the consumer carbon price, let’s demand that all of the parties put forward credible plans for Canada to meet its climate commitments. In this time of overlapping crises, we can address both climate and affordability with bold government action.
Lana Goldberg is a Toronto-based climate advocate with Stand.earth’s SAFE Cities campaign and is an expert on energy and building policies in Canada.
February 6th 2025
Comments
Goldberg: "The limitation of the national consumer price on carbon is that it leaves climate progress to the invisible hand of the market and individual lifestyle choices. But the slightly higher cost of fuel doesn’t significantly decrease our use of gasoline for vehicles or gas and oil for home heating, because most of us are stuck with these options."
Carbon pricing proponents do not suggest that it be used alone. No one makes that argument.
Carbon pricing is one tool in the toolbox. An important tool, to be sure. But hardly sufficient. We need to use all the appropriate tools in our climate toolbox.
The rationale for carbon pricing remains inarguable.
Global warming represents the greatest market failure in history. Fossil fuel producers and consumers use the sky as a free dump. What's the solution? Carbon pricing. Price unsustainable systems out of existence.
Goldberg argues for the end of fossil fuel subsidies. The global failure to price carbon properly is the biggest fossil fuel subsidy of all.
The main drawback of carbon pricing is that it is too slow.
Since the carbon price must increase gradually, not overnight, it takes time for carbon pricing to realize its full effect.
So we need to use all the other tools in our toolbox as well. Not an argument for leaving carbon pricing in the toolbox unused.
Goldberg: "But the slightly higher cost of fuel doesn’t significantly decrease our use of gasoline for vehicles or gas and oil for home heating, because most of us are stuck with these options."
No longer true, if it ever was. We are not stuck with gas furnaces and (ICE) cars. Surprising to hear this right-wing obstructionist talking point from a " climate advocate".
As the author points out herself, heat pumps, including cold-weather models, are widely available. Better construction and insulation options to reduce heat loss have always existed.
For urban dwellers, options to the private automobile have always been available. Car buyers can always choose a smaller vehicle over a larger model, though Canadians' actual preference has been the opposite. People are also free to live closer to their place of work and amenities.
Many Canadians drive everywhere they go in single-passenger vehicles in sprawled cities. Idle at drive-thrus. Live far from work and school. Long commutes in bumper-to-bumper traffic. Lights and computers are left on in office towers and homes. Live in big houses stuffed with things they don't need. Shop till they drop. Single-use disposables. Fly around the world for vacations. Holiday in huge RVs. Eat a heavy meat diet. Throw out 40% of their food.
Canada has the worst vehicle fuel economy in the world. Canada's vehicles have the highest average fuel consumption and CO2 emissions per km driven (IEA). Canada's vehicles are also the largest and the second heaviest in the world.
Canadians produce more garbage per capita than 16 other OECD nations.
Canada is one of the biggest food wasters on the planet.
The emissions intensity of Canada's buildings, transportation, and agriculture are all well above the G20 average.
"Canada produces more greenhouse gas emissions than any other G20 country, new report says" (Toronto Star)
Canadians have countless opportunities to reduce discretionary fossil-fuel use and waste.
A cap-and-trade system is guaranteed to reduce greenhouse gas emissions, unlike a carbon tax which might or might not. Barry Saxifrage’s charts show that Canada, with a carbon tax, has the worst outcomes. https://www.nationalobserver.com/2024/11/18/analysis/canada-emissions-G…
From this one can argue that a carbon tax is the least effective way of reducing greenhouse gas emissions.
False argument.
Barry Saxifrage’s article does not mention carbon pricing or Canada's carbon "tax".
European nations have reduced their emissions since 1990, whereas Canada's have increased. But the increase in Canada's emissions occurred before Canada introduced its carbon pricing scheme for backstop provinces.
Canada's nominal emissions have decreased since the Liberals introduced carbon pricing in 2019.
Some 20 European nations have implemented carbon taxes on top of the EU's emissions trading system (ETSs). Including France, Switzerland, the Netherlands, Denmark, Sweden, Norway, Finland, and Ukraine.
The EU is also implementing a Carbon Border Adjustment Mechanism (CBAM) on imports coming from outside the EU. Elsewhere, this is known as a Border Carbon Adjustment Tax (BCA).
World Bank: State and Trends of Carbon Pricing Dashboard
https://carbonpricingdashboard.worldbank.org/
Collectively, Canadians have chosen highly energy-intensive and wasteful lifestyles, without paying the environmental, climate, and health costs.
Carbon pricing is the most efficient tool to discourage energy-extravagant behaviors and make sustainable options more appealing.
Canada has failed to reduce its emissions in the absence of carbon pricing primarily on account of a massive increase in oil & gas production.
ECCC " Greenhouse gas emissions": "From 1990 to 2022: an increase in emissions was observed for the oil and gas (+83%), transport (+33%), buildings (+23%) and agriculture sectors (+39%).
"Between 1990 and 2022, the increase in total GHG emissions observed was mostly due to a 83% (99 Mt CO2 eq) increase in emissions from the oil and gas sector and a 33% (38 Mt CO2 eq) increase from the transport sector."
https://www.canada.ca/en/environment-climate-change/services/environmen…
Alberta's O&G production has been subject to carbon pricing since 2007. By design this system is weak and ineffective. Not a failure of carbon pricing per se, but a deliberate failure in its design and application.
Canada's industrial carbon pricing systems are the Swiss cheese of carbon policy.
Large emitters are subject to output-based pricing systems (OBPS), which price a fraction of total emissions, which effectively means a low carbon price on total emissions.
Federal and provincial carbon pricing schemes for large industrial emitters shield them from carbon pricing. The purpose of the OBPS and its provincial counterparts is not to expose heavy emitters to the carbon price, but to shield them from it, so they can remain competitive in global markets. Large industrial emitters, including in AB's oilsands, effectively pay a fraction of consumer rates. Under Alberta's Technology Innovation and Emissions Reduction Regulation (TIER) pricing regime, major O&G companies pay pennies on the dollar in carbon costs.
In Alberta, TIER dollars are effectively recycled back to industry to fund carbon capture technology and research. Projects industry should be paying for in the first place.
Federal and provincial carbon pricing systems do not impair large industrial emitters' profits — or reduce their emissions.
"Canada's biggest emitters are paying the lowest carbon tax rate" (Corporate Knights, 2022)
"Oil and gas producers pay among the lowest average carbon costs of any sector…
"There's a patchwork of OBPS policies across the country, and some provinces have implemented 'weak' or 'non-existent' systems that have let many big polluters off the hook."
"...Ottawa and most provincial governments grant heavy exemptions to a number of sectors, including O&G, chemicals, cement, steel and mining.
"But generous exemptions mean that how much of a firm's actual emissions are taxed varies widely by province, and, on average, companies end up paying for only 16% of the carbon actually produced.
"[In 2020, Suncor's] average carbon cost was roughly $2.10 per tonne, about one-14th of the full carbon price."
"The impact of a carbon price is greatly lessened by the relatively small proportion of emissions that are actually covered by the price.
"The federal OBPS and AB's TIER system levy the carbon price on roughly 10% of a large emitter's GHGs. At a $50 marginal price, producers pay less than $1 per tonne of CO2 equivalent on their total production." (Corporate Knights)
"Canada needs to make Big Oil pay their fair share" (Corporate Knights, 2022)
As the PBO pointed out (May 2024), the industrial carbon price applies only to 20% of emissions maximum. 80% of emissions are exempt. For some industries, only 5-10% of emissions are exposed to the carbon price (90-95% exempt). (CBC, 2024)
"Federal watchdog warns Canada's 2030 emissions target may not be achievable' (CBC, Apr 26, 2022)
"There's a patchwork of OBPS policies across the country, the commissioner said, and some provinces have implemented 'weak' or 'non-existent' systems that have let many big polluters off the hook.
"He said the federal government must insist on minimal national standards so that the provinces with their own OBPS policies … collect a sufficient amount of taxes from these emitters. As it stands, the cost to industries varies widely between provinces, DeMarco said.
"The commissioner said the current weakness of the industrial system is undermining the 'polluter pays' principle of carbon pricing."
Yes to support the focus of this article and especially the point about small-scale and local electricity generation. We need as many local grids as possible to have more resilience in future.
Yes! Thank-you for this summary of some excellent options, Lana Goldberg. I agree. There are so many measures our governments can implement that will be more effective than the carbon tax. Notice, though, that none of the Liberal leadership candidates, so far, are expressing their support for them. They seem to be stuck in the narrow framework of market-based approaches to environmental regulation. The NDP hasn't yet put forward its climate plan (unbelievably). The Greens' proposals get almost no media attention. We badly need political leadership to mobilize support for real solutions to the climate crisis.