In a country that produces massive fossil fuels and where the best-selling vehicle remains the F-150 pickup, Canada’s carbon policy simply isn’t working. Given the partial suspension of the tax announced by the Prime Minister last week, we can frankly speak of a conspiracy on a broad front.
Carbon pricing is simple and can be effective if applied with consistency and conviction, something that has been sorely lacking in Canada for decades.
First, it is important to remember that under Stephen Harper’s government from 2006 to 2015, the country fell far behind in its strategy to reduce greenhouse gas emissions. The Conservatives’ anti-tax rhetoric remains alive in 2023 and continues to have a significant impact on Canadians’ perceptions of the carbon price.
Additionally, Justin Trudeau’s government, in power since 2015, took its time implementing its carbon pricing plan. Negotiations with the provinces have been complicated, some of them have taken legal action and the very gradual increase in the price of carbon has limited its impact on greenhouse gas emissions.
The result is catastrophic: from 1990 to 2021, greenhouse gas emissions in Canada increased by 13.9%, according to the government; by 19%, according to data from the website Our World In Data. It is undeniable that the government’s plan is slow to produce results.
Justin Trudeau’s inconsistency
The carbon tax is a useful economic tool based on a basic concept: price is everything. If it costs too much, you will look for other solutions to avoid paying the tax in question. The eco-tax is based on this logic. Ultimately, the consumer’s goal is not to pay this tax, but to avoid it and change his behavior to avoid such additional costs.
By suspending the heating oil tax for three years, Justin Trudeau is shooting himself in the foot and screwing up his environmental plan.
Carbon pricing is a pillar of a government’s climate plan. By deciding to suspend the application, the premier agrees with his opponents and is stoking the anger of the provinces, which will demand a broader and more comprehensive suspension, as Saskatchewan did with natural gas.
This gesture could have fatal consequences for the CO2 tax. We may even wonder if this is the end of carbon pricing in Canada.
A former Liberal strategist, David Herle, told CTV on Sunday that the Liberals could abandon the idea of a carbon price in the next election. According to him, the suspension of the heating oil tax is just the beginning of future CO2 pricing measures.
Prime Minister Trudeau said in the House of Commons on Tuesday that heating oil costs more than natural gas but that it emits more greenhouse gases. That’s why he says he’s suspending the tax on heating oil to help low-income households, but in reality he’s penalizing those who heat with natural gas, an energy source that produces fewer emissions than heating oil.
This policy amounts to subsidizing heating oil producers. Is the Prime Minister aware of the complete inconsistency of his reasoning?
However, the carbon tax works…
It is important to say that the carbon tax is a credible tool that can work very well. Here are some examples.
In Canada, British Columbia imposed a tax on every ton of carbon dioxide produced by fossil fuels in 2008. The price was introduced in 2008 at US$10 per ton and reached a price of US$30 per ton in 2015.
In this province in the west of the country, greenhouse gas emissions fell by 16.1% during this period. Is this solely due to the CO2 tax? No, definitely not. But this instrument is added to others to form a coherent and effective policy.
Elsewhere in the world, carbon tax advocates can be found in Scandinavia. Sweden introduced a carbon tax in 1991, increasing from around CA$35 per ton to CA$180 per ton today. The Swedish government prides itself on having acted early and gradually to allow the population and businesses to adapt to this reality.
Today, the Swedish eco-tax is part of the country’s climate arsenal. Greenhouse gas emissions fell 37.7% in 2021 compared to 1990. Despite this significant reduction in emissions, Sweden’s GDP increased by 92%.
There has also been a CO2 tax in Denmark since 1992. Part of the money is used to subsidize environmental projects, while another part goes back into industry. Denmark saw its emissions fall by 44.8% from 1990 to 2021.
Multiple consequences
Carbon pricing is not popular. For it to work, it takes political courage. Conservatives have never stopped attacking this tax without proposing a credible plan to reduce greenhouse gas emissions. And after buying a pipeline and approving an oil project in Newfoundland, the Liberals continue to destroy their own environmental plan.
This means three things. First, Canada may not meet its greenhouse gas targets. Secondly, government policy is confusing for businesses and creates uncertainty. Third, Canada is falling behind in innovation, which is already a real problem for the country.