Carney says he’ll dump consumer carbon tax, charge ‘carbon border adjustment’ tariffs on imports

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OTTAWA and HALIFAX — Liberal leadership candidate Mark Carney said he will scrap the “divisive” consumer carbon tax, instead proposing an elaborate plan that includes tariffs on certain items from countries without carbon taxes, making heavy Canadian industrial emitters pay more and offering consumer incentives for purchasing “eco-responsible” items.

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At a media event in Halifax on Friday, Carney said it was time to move on from the much-maligned consumer carbon tax, instead promising to fold a new consumer carbon credit market into the industrial carbon-tax system.

“Since Canada’s current climate policy has become too divisive, it’s time for a new, more effective climate plan that everyone can get behind,” he told a crowd in Halifax.

He said the idea is to remove the carbon tax on consumers, but find a way to replace the carbon “rebate” sent to households with financial incentives for improving energy efficiency in their homes and transportation (such as swapping home heating oil to a heat pump or purchasing an electric vehicle).

He says he wants the new subsidies to be paid for by contributions from large emitters.

“We, in effect, will provide them with more options to reduce emissions, because they will be able to pay for the emission reductions of Canadian households,” he said.

“In the end, what we’re going to see is much bigger incentives for households, and more choice.”

His plan also included promises to boost or revive a host of tax credits or subsidies for home retrofits, energy efficiency improvements and electric vehicle purchases.

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In an interview, tax economist Jack Mintz said Carney was replacing an unpopular but effective carbon tax with something more complex, costly and distortionary.

“It tells us what happens when you drop something simple, like a cap-and-trade system and carbon taxation, for a whole bunch of different mandates, subsidies, etc. I don’t think it’s very workable,” said Mintz, the President’s Fellow at the University of Calgary’s School of Public Policy.

“Carney wants to increase the costs on so-called ‘big polluters,’ that means oil and gas, cement companies, chemical companies, manufacturing and a whole bunch of others. They’re going to end up raising their prices on consumers in order to provide subsidies to (carbon) credits to consumers,” he explained.

Carney also committed to developing a “Carbon Border Adjustment Mechanism” —essentially a tariff — on products in certain sectors imported from countries that don’t have an equivalent industrial carbon levy.

A document released alongside his announcement said the border fees would impact “energy-intensive, trade-exposed sectors, such as steel, chemicals, cement, and aluminum.”

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Carney also promised to “improve” the industrial carbon pricing system by increasing the transparency between provincial and territorial markets and avoiding carbon credit oversupply.

“What that does is it provides a very clear signal to large companies to make the investments now to get their emissions down, to become more competitive,” Carney said.

Energy policy analyst Heather Exner-Pirot said the proposed changes to the output-based pricing system were a positive step.

But the rest of Carney’s plan is essentially adding layers of bureaucracy to Canada’s climate policies and undermining corporate competitiveness, said Exner-Pirot, director of energy, natural resources and environment at the Macdonald-Laurier Institute.

“It’s just the whole philosophical approach of adding on bureaucracy, adding on layers of things that people have to do, instead of looking at removing them. So there’s no philosophical change that I would say industry was looking for,” she said.

“This is a very classically Liberal climate policy,” she added. “There isn’t much to distinguish it from the last few years of Liberal policy except he’s getting rid of the consumer (carbon) tax,” she added.

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She also said that Carbon Border Adjustment Measures aren’t a “crazy” idea and are garnering increased interest with the European Union and some U.S. states, but she questioned if Canada wanted to add obstacles to trade while facing down the barrel of a tariff war with the U.S.

Carney, once a staunch defender of the consumer carbon tax, said the consumer tax has worked as planned but is now hobbled by negative “perception” among the population. He blamed that on “misinformation and lies” from Conservative Leader Pierre Poilievre.

“It’s worked. It has had some impact in terms of reducing our emissions, making things more efficient,” he said of the consumer carbon tax.

“It’s the perceptions of the impact, the negative impacts of the carbon tax on households without fully recognizing the positive impacts the rebate has made,” he added.

“It’s kind of clever,” Poilievre said in a video released after the announcement. “He’s announced that he will pause the carbon tax for a few months right before the election to trick people into re-electing the Liberals. After the election, he will bring in a much bigger carbon tax when he no longer needs your vote, but still needs your money.”

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“He has said that this bigger carbon tax will only apply to businesses. Well that’s how it is now when you fill up your (vehicle’s) tank today” with gasoline, Poilievre added. “Only this time it will be a much bigger tax. and he has admitted there will be no rebate to pay you back the cost.”

Carney got some good news on the eve of his announcement in Halifax. Nova Scotia Liberal MP Jaime Battiste dropped out of the race and announced he would throw his support to Carney.

— With files from Chris Lambie in Halifax

National Post

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