In Defense of the Carbon Tax
Leader of the federal opposition Pierre Poilievre holding an “Axe the Tax” event at the Toronto Congress Centre March 2024. Steve Russell via Toronto Star.
By Anuj Krishnan ‘27
If you have at all tuned in to Canadian media recently, there is one issue above all that has taken the national spotlight: the carbon tax. Amidst a cost-of-living crisis, housing crisis, and sluggish growth, the Liberal government’s April 1, 2024 carbon tax increase has become a political flashpoint for Pierre Poilievre and his federal Conservative’s cross-country campaign to “axe the tax.” He is joined at the hip with seven provincial premiers who have all spoken out against the tax, alleging that it makes life less affordable for Canadians. Voters also appear disgruntled; recent polling reveals that close to half of Canadians (46%) believe the tax is ineffective at combating climate change, which is its stated purpose. But the Liberal government has remained steadfast in its continued support of the carbon tax despite the political showdown, with Prime Minister Trudeau remaining adamant that “[his job] is not to be popular…[but] do the right things for Canadians.” Alongside this, members of his government are accusing the Conservatives of spreading misinformation. As the war-of-words and accusations only seem to intensify, therein raises the need to reevaluate the carbon tax, the government’s failing messaging, and our current political moment.
Carbon pricing is not new to Canada. In fact, Alberta, the traditional stronghold of Canadian conservatism, was actually the first jurisdiction in North America to price carbon, followed by the British Columbian Liberals (conservative), and Quebec in 2008. The federal Liberals campaigned in 2015 on the promise of federal carbon pricing, and upon signing the Paris Accords later that year, the stage was set for the introduction of a carbon tax. The 2019 Greenhouse Gas Pollution Pricing Act (GGPPA) set the floor price of carbon at $20 CAD per tonne in 2019 and after amendment will increase by $15 CAD per year until it reaches $170 CAD a tonne by 2030. The legislation allows provinces to design their own pricing systems—as Quebec and British Columbia have done. Where minimum stringency standards are not met, the federal system is implemented. The Canadian carbon tax refers to two different pricing systems: (1) consumer pricing and (2) pollution pricing for industry, the latter of which, while less known and less controversial, drives three times the emissions reductions as consumer pricing. Altogether the two pricing regimes are projected to reduce Canada’s emissions by up to 50% by 2030 and represent the "largest contributors to emissions reductions." The tried and tested economic calculus of the tax rests on the power of its carbon price increases to shift individual consumption decisions and firm production responses, spurring innovation in new sustainable technologies and the adoption of existing low-carbon technologies.
Beyond misconceptions about the tax structure itself, the current moment’s controversy lies in misunderstandings about the rebates with which it is associated. The tax was designed to be revenue neutral, with all direct proceeds returning to Canadians in the form of quarterly rebates. In January 2024, 12 million Canadians received a rebate, while Statistics Canada modeling revealed that 94% of low-income households received more in rebates than they paid in taxes, the number 55% for high income households in the 2023 tax year. Overall, 80% of Canadian households receive more than they pay in. Nevertheless, Poilievre and his allies routinely claim that the tax will cost households across Canada more than they ever get back, citing a Parliamentary Budget Office report whose subpar methodology, comparing the economic effects of the carbon tax to the cost of nothing to fight climate change, has been summarily discredited (1) (2). “Axing the tax” will not improve affordability as Poilievre loves to claim, but will instead hurt the lowest-income Canadians who have the most to net from federal rebates while hampering emission reductions necessary for Canada’s climate targets.
So then what is the fuss? Why are Canadians actively supporting a platform and a man who opposes a policy “that is putting money in their pockets and contributing…to address[ing] climate change?” For one, Canadians do not seem to register the money that is entering their bank accounts. Angus Reid polling has revealed that a quarter of Canadians eligible for rebates reply that they have not seen one in the past year. A further 54% believe that they paid more in taxes than the rebate amount. One possible explanation arises from the vague naming of the rebates and inconsistencies in how banks labelled them. The rebate was previously called the “Climate Action Incentive Payment” and appeared in deposits under nondescript names like "CANADA FED" or "DN CANADA FED/FED" or "EFT Deposit from CANADA.” In this context, it is unsurprising that taxpayers felt robbed, as they did not even register the rebate they were receiving. The Liberal government attempted to correct their messaging debacle in February 2024, working with banking institutions to unify the rebate under the moniker “Canada Carbon Rebate,” which was a first step, but too little, too late. Tack on the new rules and oversight that limit self-congratulatory or self-praising government advertising which were introduced by the Liberals in 2016 in a rebuke to the boastful advertising of Stephen Harper’s government, the current administration is restrained in its ability to accurately inform and sell the carbon tax to Canadians.
Opposing any federal tax—especially in the midst of a cost-of-living crisis—is right up the Conservative alley and polls well, but the misinformation employed by the Conservatives is a disservice to Canadians and the national discourse. Yes, the merits and specifics of a carbon tax may remain up for debate, and there is criticism to be had (Trudeau’s carbon tax exemption on furnace oil heating that benefited predominantly Atlantic Canadians), but the international consensus is overwhelmingly in favor of carbon taxes in consideration of both economics and climate impact. Outright lying about rebates and riling up the public against any climate policy—forget the carbon tax—is creating a wedge issue out of climate change and allowing misinformation to seep further into Canadian discourse. This rhetoric is also predominantly targeted towards Prairie provinces that have the most to gain by innovating and building for a low-carbon future so as not to be left behind. The Prairie protests we have seen against the carbon tax, which represent a malaise of the current moment, also illustrate the unparalleled impact that blatant lies are having on the political decision making of ordinary voters and political parties. This is new for Canada and a dangerous development.
It is unfortunate that the carbon tax is not magic, solving the existential problem of climate change in an instant, but no climate policy is. The positive consequences of a carbon tax also do not mirror the four-year elections cycles voters are so accustomed to when evaluating the success of governments, and neither are they obvious. The benefits of the carbon tax are spurring innovations in universities and industries and shaping everyday decisions of Canadians across the country, but not instantaneously. With an upcoming federal election in fall 2025, it is no doubt Poilievre and his Conservatives have attempted and will continue to use the carbon tax to galvanize and swing voters, perpetuating falsehoods and hurting Canada’s fight against climate change. What is expedient for the next election is not so for our collective future, and Trudeau and his government need to emphasize that unabashedly. It is his government’s legacy and Canada’s prosperity in the crossfires.