On April 29, 2025, Mark Carney led Canada’s Liberal Party to a narrow electoral victory, securing a fourth consecutive term for the party. Carney, a former central banker and UN Special Envoy for Climate Action and Finance, now leads Canada’s climate policy.
Carney is now tasked with an urgent balancing act: easing economic pressures while advancing ambitious climate goals — at a time when both inflation and demand for climate action are rising.
Reforming Carbon Pricing: From Consumer Tax to Industrial Focus
One of Carney’s first actions as Prime Minister was to scrap the consumer carbon tax. This tax, introduced in 2019, grew unpopular as living costs rose. The tax, which was set to reach $170 per tonne by 2030, was repealed in an effort to alleviate financial burdens on households.
After its removal, gasoline prices in Canada fell sharply. Average gasoline prices dropped by 8–12 cents per liter nationwide. Some provinces saw drops of more than 10 cents per liter. Many Canadians welcomed this immediate relief. This was especially true in areas where energy costs make up a large part of household expenses.
Carney suggests replacing the consumer tax. He wants to encourage greener choices for consumers and improve carbon pricing for industries. This plan maintains output-based pricing for big polluters. It also adds subsidies for electric vehicles and home upgrades.
The output-based pricing system (OBPS) aims to hold high-emission industries accountable. It also gives flexibility to sectors that face international competition or are trade-exposed.
It uses the same carbon price as the old consumer tax — $65 per tonne of CO₂ now, rising to $170 per tonne by 2030. Instead of charging companies for every tonne of emissions, the government sets performance targets based on how much pollution is normal for their industry.
If a company pollutes more than its target, it must buy carbon credits or pay the carbon price. If it pollutes less, it earns credits that it can sell. This system lets industries avoid paying the full carbon price on all their emissions, but still pushes them to be more efficient.
The government is targeting industrial emitters. This plan focuses on the biggest sources of greenhouse gases. It also reduces the financial burden on everyday Canadians.
Carney’s plan also includes robust support for green technology adoption. Subsidies for electric vehicles help speed up the shift to cleaner transport. Incentives for home retrofits promote energy efficiency and reduce emissions in homes. These efforts include public awareness campaigns. They aim to help Canadians make smart choices about energy use and their carbon footprint.
Carney’s shift to industrial carbon pricing is complemented by a new international trade tool — the Carbon Border Adjustment Mechanism (CBAM).
Introducing the Carbon Border Adjustment Mechanism
Carney wants to tackle carbon leakage and stay competitive, and thus, he plans to implement the CBAM. This policy would set tariffs on imports from countries with weaker carbon rules. Thus, it encourages global emission cuts and helps protect local industries.
The CBAM helps Canadian manufacturers compete better. Without it, they may have higher costs from local climate policies than their international rivals.
The introduction of the CBAM marks a significant shift in Canada’s approach to climate policy. Carney’s government wants to align trade policy with climate goals. This way, it can encourage other countries to improve their carbon rules. This approach shows global trends. The European Union and other regions are moving toward similar systems.
However, implementing the CBAM needs careful coordination with trading partners. It must also follow World Trade Organization rules to prevent disputes.
Balancing Energy Development and Environmental Goals
Carney envisions Canada as a leader in both clean and conventional energy sectors. His administration wants to create a national energy corridor to help share energy resources across the country. It will also cut dependence on the United States and boost energy security.
The new corridor will help move electricity, oil, and natural gas more efficiently. This way, provinces can share resources and take advantage of their strengths in energy production.
While promoting clean energy investments, Carney also acknowledges the role of traditional energy sources in Canada’s economy. Oil and gas are key to GDP and jobs, especially in Alberta and Saskatchewan.
Carney stresses the need to work together with provinces, territories, and Indigenous communities. This teamwork is key for energy projects that support both environmental and economic goals. This involves helping to build renewable energy systems like wind and solar. It also ensures that current industries can shift to lower-carbon operations.
The government’s approach is practical. It knows that quickly moving away from fossil fuels might hurt the economy. Instead, Carney advocates for a gradual transition, supported by investment in innovation and skills development to prepare workers for the jobs of the future.
The Global Stage Awaits — Can Canada Deliver?
Although Canada accounts for roughly 1.5% of global emissions, its advanced economy and resource wealth position it as a key player in shaping international climate policy.
Carney has extensive experience in global finance and climate advocacy. This enables him to play a significant role in international climate discussions. As a former Governor of the Bank of England and the Bank of Canada, he brings credibility and expertise to the global stage.
Canada will play a bigger role in groups like the UNFCCC and the G7. It will push for teamwork on carbon pricing, sustainable finance, and climate adaptation.
However, Carney faces challenges at home. He must work with a minority government and tackle regional gaps in support for climate policies. Provinces that depend on fossil fuels might oppose federal plans. This means they need to negotiate carefully and design policies that help everyone meet emission reduction goals.
Canada has promised to cut its greenhouse gas emissions by 40–45% below 2005 levels by 2030 as part of the Paris Agreement. The country also aims to reach net-zero emissions by 2050.
The Canadian Climate Institute estimated that the carbon tax would have helped lower emissions by 8–9% by 2030. The carbon tax applies to emissions from transportation and buildings. On the other hand, the industrial carbon pricing systems could cut around 20-48% of emissions by 2030, as shown below.
Even though the tax on consumers is gone, government rebates for electric vehicles and home upgrades will still help reduce emissions in these areas. Without the tax, Canada will need new policies to stay on track, and Carney’s administration will be on it.
Carney’s Climate Balancing Act
Public opinion remains divided. Some Canadians prioritize economic growth and energy affordability; others demand more ambitious climate action.
Prime Minister Mark Carney’s challenge will be to bridge these divides. He needs to show that environmental responsibility and economic prosperity can go hand in hand.
Carney’s climate strategy reflects a pragmatic approach: balancing the need for economic stability with environmental responsibility. Carney wants to shift Canada from consumer-based carbon pricing to industrial regulation and international methods like the CBAM. This change aims to make the country a strong and innovative leader in global climate efforts.
As Canada works to reach its climate goals, the world will be watching. If successful, Carney’s balanced approach could offer a model for nations seeking both economic resilience and climate leadership.
