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Analysis | What would a Canada without carbon prices look like?

Natasha Kumar By Natasha Kumar Mar15,2024

Carbon pricing – the Trudeau government's flagship environmental measure – appears more vulnerable than ever. Putting an end to it, however, would have significant consequences.

Analysis | What would a Canada without a price on carbon look like?

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Pierre Poilievre has made the abolition of the carbon tax a cornerstone of his political program.

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It started from a very bad foot. To the surprise of many, on October 3, 2016, Justin Trudeau took advantage of a debate on the ratification of the Paris Agreement to stand up in the House of Commons and announce that he was imposing a price on carbon.< /p>

The Prime Minister chose not to negotiate with the provinces. They would have less than two years to adopt their own carbon pricing system, failing which Ottawa would impose a tax of $10 per tonne, which would gradually increase.

At the same time, in Montreal, the environment ministers of the provinces and territories, meeting with their federal counterpart Catherine McKenna, heard the news. And they were furious. Saskatchewan, Nova Scotia and Newfoundland and Labrador slammed the door before the end of the meeting.

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Former federal Minister of the Environment Catherine McKenna

Their reaction was a precursor to the standoff that subsequently ensued between Ottawa and the provinces over the carbon tax.

Seven years later late, a majority of provinces still have not digested it.

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Three of them challenged the tax all the way to the Supreme Court of Canada, without success. Since January, Saskatchewan has even stopped collecting it for residential gas heating, thus defying a federal law in a way unprecedented in the country. Furthermore, virtually all provinces where the federal tax applies are demanding that Ottawa suspend the increase from $65 to $80 per tonne of carbon, scheduled for April 1.

Never has the future of carbon pricing in Canada seemed more uncertain. The leader of the Conservative Party of Canada, Pierre Poilievre, promises to put an end to it. He makes it the central theme of his rallies, his attacks and his advertisements. According to him, while inflation is still galloping, an increase in the carbon tax comes at the worst time and only adds to the burden on Canadians.

In a letter he sent to Liberal and New Democratic MPs on Thursday, Mr. Poilievre encouraged them to vote next week in favor of a motion that would aim to freeze the tax. If you spend time in your communities, you will undoubtedly have seen with your own eyes the misery that Canadians face, he writes to convince them, while urging them to listen to their voters.

What doesn't help is that the Liberal government itself carved a hole in its own legislation by exempting heating oil for three years, in order to calm the discontent in the Atlantic. This exception, however, did not allow him to restore his image, while the polls continue to be unfavorable to the Liberals.

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Justin Trudeau's Liberals are well ahead of the Conservatives in voting intentions.

While the Conservatives largely lead in voting intentions, the possibility that federal tariffs will eventually be abolished seems more and more plausible. To do this, a new government would simply have to repeal the Greenhouse Gas Pollution Pricing Act, adopted in 2018.

With a majority in the House of Commons, a government could completely dismantle this law, notes Sébastien Jodoin, associate professor at the Faculty of Law at McGill University. It would be easy in a mechanical sense.

But the consequences would be notable, starting with those on the wallets of several citizens. Ottawa estimates that 80% of Canadians who pay the tax receive a larger refund from the federal government than they pay. If pricing were abolished, they would therefore have less money in their pockets.

The great paradox is that the majority of Canadians in provinces that pay federal tax earn money from it. [Abolishing it] would impoverish Canadians, says Pierre-Olivier Pineau, holder of the Chair of Energy Sector Management at HEC Montreal.

The consequences would also be felt on Canada's greenhouse gas reduction record. However, the effect would not be immediate. In the short term, there would be no big consequences; this tax remains fairly imperceptible since it remains modest, notes Mr. Pineau. However, the impact will become greater over time, as the tax is expected to gradually increase to $170 per tonne of carbon by 2030.

Ottawa also estimates that carbon pricing will reduce emissions in the country by up to a third by 2030.

We will have to find other ways to reach the target if we remove the carbon tax. Even with the tax, it’s not enough.

A quote from Pierre-Olivier Pineau, holder of the Chair of Energy Sector Management at HEC Montreal

However, most economists agree that a price on carbon is a more effective and less costly way to reduce GHG emissions than offering subsidies or adopting regulatory measures. . Canada aims to reduce its emissions by 40% by 2030, compared to 2005 levels.

As Canada banks on the energy transition , companies that have embarked on this path also risk seeing their efforts curbed.

This introduces a lot of uncertainty for all companies that invest in developing low-carbon products, says Mr. Jodoin. Do we still remain with a vision of the economy based on the exploitation of fossil fuels, the exploitation of natural resources, or are we moving towards a more modern economy?

Canadian exporting companies could also suffer from the eventual abolition of carbon pricing. The European Union – which has a carbon market – recently adopted a carbon border adjustment mechanism. Ultimately, this mechanism will impose customs tariffs on carbon-intensive goods imported into Europe. Canada will not be exempt.

Canada's image on the international scene could also take a hit if carbon pricing was deleted.

According to World Bank data, 23% of emissions on the planet are now covered either by a carbon tax or by an emissions trading system (carbon stock market). This proportion was only 7% 10 years ago. No fewer than 46 countries have taken the plunge and others are considering it, notably emerging countries like Vietnam and Turkey.

Internationally, carbon pricing is growing. It is spreading more and more in countries around the world, points out Mr. Pineau. Abolishing it would very clearly go against a global trend and would make Canada look like a somewhat retrograde country when it comes to the fight against climate change.

Certain Canadian provinces – including Quebec – have been pioneers in the implementation of a carbon pricing system in the country. While more and more states around the globe see the virtues and follow in Canada's footsteps, the fate of the carbon price paradoxically appears more uncertain than ever here.

Since 2013, Quebec has established its own cap-and-trade system for greenhouse gas emission rights, which is now linked to that of California. The province is therefore not subject to federal tax. At the last auction in February, emissions rights sold for nearly $57 per ton of carbon. If Canada abolished the federal carbon tax, it would not change anything in Quebec's approach, says the government.

Quebec will continue its efforts in the fight against climate change, regardless of the decisions of the federal government. We also encourage all states to contribute to efforts to combat climate change, writes Amélie Moffet, press secretary to Quebec Minister of the Environment, Benoit Charette, in an email.

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Natasha Kumar

By Natasha Kumar

Natasha Kumar has been a reporter on the news desk since 2018. Before that she wrote about young adolescence and family dynamics for Styles and was the legal affairs correspondent for the Metro desk. Before joining The Times Hub, Natasha Kumar worked as a staff writer at the Village Voice and a freelancer for Newsday, The Wall Street Journal, GQ and Mirabella. To get in touch, contact me through my natasha@thetimeshub.in 1-800-268-7116

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