Canada's carbon tax in the crosshairs

Canada's carbon tax has become as toxic as the fossil-fuel emissions it aims to curb.

The federal levy has been "hailed as a global model of progressive environmental policy", said The Guardian, but Prime Minister Justin Trudeau's Liberal Party is under mounting pressure to remove his flagship policy. For months the leader of the opposition Conservative Party has been issuing "dire and increasingly apocalyptic warnings about the future" – and blaming the carbon tax.

Canada's cost-of-living crisis and the "pugnacious" populist Pierre Poilievre have pushed the policy back into the spotlight. Poilievre said this month that there was only one way to avoid a "devastating crisis": Trudeau must "call a 'carbon tax' election".

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Visible cost of cutting emissions

The carbon tax was introduced in 2019 to crack down on carbon dioxide pollution and encourage the transition towards clean energy. At the moment, Canada aims to cut its CO2 emissions by 40%-45% below 2005 levels by 2030.

Each province and territory designs its system and collects the proceeds of the tax. About 90% of those revenues are then returned to households through quarterly rebates based on family size. The other 10% helps grant recipients, such as businesses and schools, reduce fossil fuel consumption.

The idea is to incentivise people and businesses to change their behaviour. When fossil fuels cost more, people use less, and are free to choose the cheapest way to reduce their emissions.

The levy targets both consumers and industry, and taken together it is projected to reduce Canada's emissions by as much as 50% by 2030, according to a recent report by the Canadian Climate Institute.

Along with other climate policies, it has already reduced emissions by about 8%, said Katya Rhodes, assistant professor at the University of Victoria, on The Conversation.

It also returns most revenues to households, and Canadians are "better off with carbon pricing than without it". But none of that outweighs "the heavily visible costs that citizens experience at the pump", or on their home heating bill.

The consumer tax came into effect at $20 per tonne but has "steadily climbed since", said CBC, rising to $80 per tonne in April. Almost 70% of Canadians opposed that increase, according to a survey by Leger.

The green policy culture war

The tax is "seen as a test case" of how to win public backing for a green transition that costs consumers in the short term, said the Financial Times. But Trudeau's "flagship policy" has become so unpopular that last November, the prime minister was "pressured into agreeing a three-year delay to its imposition on home-heating oil" just to keep his hopes of re-election in 2025 alive.

Trudeau's struggle shows the difficulty of winning public support for policies that "impose the upfront costs of the net-zero transition on households and companies already struggling with high inflation".

Support for the carbon tax has "eroded even among the policy's former backers", said Reuters. The Conservatives have vowed to "axe the tax" if they win power in the next election, scheduled for October next year. At the moment, polls suggest that Trudeau's Liberals would "lose badly to the Conservatives".

With that significant lead, the Conservatives are "keen to capture mounting frustration with the incumbent government and transform a federal vote into a referendum" on the carbon tax, said The Guardian. They argue that it hurts Canadians already grappling with rising costs in rent, groceries and transport.

Last month, New Democratic Party leader Jagmeet Singh said the policy puts the "burden on the backs of working people".

"The reality is, it's easy to say 'axe the tax'," said Environment Minister Steven Guilbeault. "No one likes to pay taxes. It is more complicated to explain that climate change is real, it's costing Canadians billions of dollars and carbon pricing is one of many measures we’re putting in place to try and fight climate change."

The carbon tax, and environmental policies in general, have been dragged into "this culture war where facts don't matter, where the truth has no currency".