Freeland and Carney may ‘axe’ the consumer carbon tax, but they’ll likely keep all the other anti-carbon policies on the books
By Robert Lyman, National Post, Jan. 23, 2025
Filmmaker and comedian Woody Allen often uses a rhetorical technique called a switcheroo. A switcheroo is a sudden unexpected variation or reversal of words, in Woody’s case used for humorous effect. For example, he once claimed that he carried a bullet in his breast pocket because someone once threw a bible at him and the bullet saved his life.
The aspiring leaders of the Liberal party are no strangers to the technique. Both Mark Carney and Chrystia Freeland have signalled that if elected they will terminate the federal government’s carbon dioxide pricing system, colloquially known as the carbon tax. They may believe that in a single stroke that cuts the legs out from under the Conservative party platform commitment to “Axe the Tax.”
They clearly hope voters have short memories. Both Carney and Freeland have spent at least the last 10 years embracing carbon taxes as their preferred policy instrument for reducing greenhouse gas (GHG) emissions and castigating as “climate-deniers” anyone who took issue with this approach.
Just last month, the Trudeau government set a new target for GHG emissions reductions by 2035, proudly proclaiming that “Carbon pollution pricing is … working. It will contribute as much as one-third of Canada’s emissions reductions in 2030. Between 2019 and 2021, pricing pollution accounted for 18 megatonnes fewer emissions than would otherwise have been emitted.”
Canada has over 400 climate policy measures—which ones will Carney and Freeland also ‘axe’?
There is a long list of problems with the design of the Canadian carbon pricing system. But most economists still think such a system, if properly designed and implemented, could have advantages over “direct action measures” like regulations and subsidies.
The federal and provincial governments, however, have not relied solely on market-based measures to reduce emissions. Instead, they have thrown the entire policy tool kit at the problem. Climate Policy Tracker’s latest count is that over 400 — that is not a typo: 400 — federal, provincial and territorial measures aim to reduce emissions.
Carney and Freeland have so far neglected to say which measures they would rely on in place of carbon taxes to achieve their objective of getting Canadians to switch away from fossil fuels. So, to which policies will the switcheroo switch?
‘Ditch the switcheroo’ should be new Conservative slogan
More regulations? The four highest-profile regulatory measures announced to date are: the Clean Electricity Standard, which will force the elimination of all hydrocarbons for electricity generation by 2035; the Light Duty Vehicle Emissions Standards; the closely related ban on the purchase of internal combustion vehicles by 2035; and the Emissions Cap on the Oil and Gas Sector. Together these policies now, or will soon, impose tens of billions of dollars in costs on the Canadian economy.
More subsidies? Under its latest fiscal plan, the federal government will spend $121 billion to 2027-2028 on climate measures. And the provinces will probably spend at least that much. Those subsidies translate into serious costs for taxpayers.
Unless the Liberal party abandons or moderates its current near obsession with reducing GHG emissions, its switcheroo following the demise of the carbon tax will involve pursuing current emission targets by leaning more heavily on these other policy measures — which are very likely to be more costly economically than the carbon tax.
Even worse, the new target the Trudeau government announced just before Christmas is to get emissions to 45-50 per cent below 2005 levels by 2035. But the reduction from 2005 to 2024 (greatly aided by the pandemic) was only 7.1 per cent. Absent a major and prolonged recession, the new target seems both well beyond reach and, more to the point, beyond the likely tolerance of the Canadian public.
Pursuing more expensive and intrusive emission-reduction measures in Canada will be made more difficult by imminent events in the United States. The Trump administration may soon withdraw from the Paris Agreement and take other steps to reduce the costs and intrusiveness of emission-reduction measures there.
“Axe the Tax” is still a good idea but the political slogan may need to be adjusted to “Ditch the Switcheroo.”
Robert Lyman is an economist who specializes in public policy issues.