Carney’s commitment to dealing with climate change is undoubtedly heartfelt, his backgrounder claims climate policy “brings Canadians together, makes our economy more competitive and grows jobs today and in the future.” But does it, asks Jack Mintz. (Credit: Darryl Dyck/The Canadian Press files)
It was curious that in the heat of Friday’s furor over the Trump tariffs, Liberal leadership contender Mark Carney issued his plan for change on the consumer carbon tax. Typically, a Friday release, especially on a busy news weekend, is designed to avoid notice.
I doubt that was Carney’s intention. His document is an important policy announcement that has significant appeal to leftish Liberal party environmentalists. For the broader public, the headline that Carney promises to “axe the consumer carbon tax” was important to get out.
But Carney isn’t axing the consumer carbon tax. He is replacing one tax with another. The fuel charge — erroneously labelled the consumer tax even though low-emitting businesses pay it, too — will be replaced by a more complex scheme. Big emitters will pay consumers to lower their carbon footprint in a new consumer carbon credit market. It is an administrative nightmare compared to the existing fuel charge, even with the current system’s rebates to consumers and small businesses.
As Carney points out, the carbon credit market is already over-supplied. In Alberta, for example, the carbon credit price was $47/tonne in November, much less than the official $80/tonne carbon price. Adding a consumer credit market will increase supply to an already saturated market. To deal with this problem, Carney promises much stricter emission standards than are currently in place. With more emissions subject to tax, carbon credits get soaked up, eventually raising fuel prices. Though it is not officially a tax, the scheme will have the same effect on consumers and businesses as the fuel charge, a.k.a., “the carbon tax.”
Carney’s scheme will require a bigger bureaucracy — beyond the 9,000 employees already at Environment and Climate Change Canada — to make sure credits are paying for real reductions in carbon footprints (such as buying heat pumps or electric cars). It will also line the pockets of financial traders like Goldman Sachs, where Carney once worked, who will charge high fees for credit transactions.
It is such an awful idea compared with the current “consumer tax” that I suspect Carney will drop it should he win the election.
Carney will also introduce a “carbon border adjustment mechanism,” a tariff or quota on the carbon content of imports. The aim is to protect Canadian emitters from competitors in countries with inadequate carbon pricing, though it won’t help Canadian companies compete in export markets. For the next four years at least, the U.S. certainly won’t be going in this direction so a new “Canada carbon tariff” could easily provoke U.S. retaliation. After last week’s fiasco, do we really want to juice the trade war even more?
Carney promises to speed up regulatory approvals — but only for clean energy projects. Oilsand plants, refineries and pipelines and LNG plants won’t qualify. He’ll also add an efficiency mandate for low-temperature industrial heat. He’ll strengthen regulations for oil and methane gas and he will introduce new climate-risk disclosure regulations and investment guidelines for financial institutions — ideas that come from his Net Zero Banking Alliance, which is currently bleeding members. If he tries to apply it to the Canada Pension Plan, too, not a millisecond will pass before Alberta Premier Danielle Smith declares: “Alberta Pension Plan!”
Of course, no Liberal plan would miss out on budget-busting subsidies. Carney will provide new incentives for: home retrofits, heat pumps for low-income families, investment tax credits and slush funds for green energy, and reinstated $5,000 grants for electric cars.
No price tag is provided for the mushrooming spending and bureaucracy, and there’s no cull of the 149 separate federal programs listed in Environment and Climate Change Canada’s 2023 progress report. To name just a few, the oil and gas cap, low-carbon fuel regulation, the EV mandate and the plethora of tax credits all remain in place.
Carney’s commitment to dealing with climate change is undoubtedly heartfelt. His backgrounder claims climate policy “brings Canadians together, makes our economy more competitive and grows jobs today and in the future.” But does it?
The challenge is that oil and gas provide enormous wealth, not only to the producing provinces and nearby First Nations, but to the federal government and other provinces. Extracting non-conventional oil is Canada’s most productive industry. Value-added per hour worked is 13 times what it is in manufacturing. And most analysts agree that oil and natural gas will be required for decades yet, even as consumers shift to alternative energy sources. Yet Carney wants to shut it down.
Whatever energy transition does or doesn’t take place over the next few decades should be based on simple, non-distortionary policies that don’t prevent Canadians and their firms from being economically competitive. The Trudeau government has undermined Canada’s growth by zealously blocking oil and gas development, with the result that we are wholly dependent on U.S. demand. While Canada has been serving as the world’s climate boy scout, China has used its cheap, reliable coal-powered electricity to fuel a dominant position in the world markets for EVs and renewable energy.
As for climate policy bringing Canadians together, there is little evidence of that. A plan that kills off Canadian oil and gas while other countries continue to produce it will never win over westerners — or Newfoundlanders. Anyone who doesn’t understand that probably is “just like Justin.”
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