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

It might seem like a distant memory now, but it's worth remembering that every major federal party ran in 2021 on a platform that included a consumer carbon tax.

Nearly every single Liberal, NDP and Conservative MP who currently sits in the House of Commons — up to and including Pierre Poilievre, who now says Canada needs a "carbon tax election" so he can "axe the tax" — won their seat while carrying a commitment to apply a price on carbon. 

The carbon tax had survived both a provincial legal challenge and Doug Ford's stickers. The Conservative platform in 2021 stated, "We recognize that the most efficient way to reduce our emissions is to use pricing mechanisms."

But then the Conservative leader whose face was on the cover of that platform, Erin O'Toole, was deposed by his own caucus. And inflation reached eight per cent. And Poilievre was chosen as O'Toole's successor.

To explain how the carbon tax came to be (nearly) dead less than four years after that election campaign, you could reasonably point to that simple sequence of events: O'Toole lost, inflation rose and Poilievre took over the Conservative Party. For the carbon tax's sake, it also surely didn't help that its loudest proponent — Justin Trudeau — was an increasingly unpopular prime minister leading a government that was nearing the end of its natural life expectancy. 

Despite the claims of the Conservative leader, the carbon tax does not seem to be a significant factor in the rising cost of groceries — the latest research suggests it contributed less than 0.5 per cent to increases in consumer prices since 2019. And because the revenue is rebated to households, many people could actually end up worse off if the carbon tax is repealed. 

As a result, it is tempting to conclude that the carbon tax suffered from a simple failure to properly communicate its merits — and perhaps a larger government advertising effort would've helped. But it was also possible to believe in the fall of 2021 that the fight over the carbon tax was effectively over.

Three weeks into 2025, the fight might be over again — this time because it seems likely that not a single major federal party will campaign in the upcoming federal election on a promise to maintain the consumer carbon tax. 

Trudeau arguably wounded his own policy in 2023 when he exempted home-heating oil. The NDP then started to wobble on the policy last year. And now both Mark Carney and Chrystia Freeland seem to be preparing to move away from the carbon tax as they campaign to replace Trudeau as Liberal leader and prime minister. 

Fans of carbon taxes (or proponents of economist-endorsed climate policy) might lament. But the end of the consumer carbon tax won't necessarily bring an end to carbon pricing in Canada.

The death of the carbon tax might also clarify that the real debate is not whether or not Canada should have a carbon tax, but how Canada is going to reduce its greenhouse gas emissions.

The federal carbon-pricing policy introduced in 2019 has always included two parts: a fuel levy that impacts the price of gas that consumers pay and a trading system for large industrial emitters. When politicians talk about the "carbon tax," they're typically referring to the former. 

But for all the attention heaped on the fuel levy, it's actually the industrial system that is expected to generate the largest emissions reductions between now and 2030 — somewhere between 20 and 48 per cent of total projected reductions, according to an analysis performed by the Canadian Climate Institute. And even Poilievre has stopped short of saying he would repeal the federal rules for large industrial emitters. 

Opposing that policy would almost certainly open Poilievre up to attacks that he was giving a break to "big polluters." It would also make it that much harder for Poilievre to explain how a Conservative government would meet Canada's international emissions targets.