Canada could end up without federal carbon pricing after next election

TORONTO (ICIS)–Depending on who wins the next election, Canada may soon be without federal carbon pricing.

• Opposition Conservatives to scrap carbon pricing
• Ruling Liberals would retain industrial carbon pricing
• Industry sees carbon pricing as “backbone” of decarbonization

Canada’s opposition Conservatives have finally clarified their position on federal industrial carbon pricing – they would abolish it, if they win the next election, they said, along with the federal consumer carbon tax.

This would lower prices in the Canadian steel, aluminum, natural gas, food production, concrete and all other major industries, boost the economy, and allow “our companies to become competitive again with the United States”, the party said on Monday.

Canada’s provinces could still address carbon emissions “as they like but will have the freedom to get rid of these industrial taxes that the federal government has forced them to impose”, party leader Pierre Poilievre said.

Instead of carbon pricing or a carbon tax, the Conservatives would use technology “to protect our environment” they said.

In particular, they would expand the eligibility for certain investment tax credits (ITCs), they said.

The Conservatives’ announcement came after Canada’s minority Liberal government, under its new prime minister, Mark Carney, suspended the consumer carbon tax.

The suspension was one of Carney’s very first actions after taking over from Justin Trudeau last week.

However, Carney said that his government would retain and improve federal industrial carbon pricing as the most effective measure to control emissions.

The premier (governor) of oil-rich Alberta province, Danielle Smith, said that she was concerned Carney’s government would “significantly increase the industrial carbon tax”, which would be just as damaging to Alberta’s economy as the consumer carbon tax had been.

She suggested that federal industrial carbon pricing was a hidden carbon tax, rather than a transparent one.

CHEMICALS
Industrial carbon pricing is seen as key in attracting investments in low-carbon projects, such as Dow’s Path2Zero petrochemicals complex under construction in Alberta province.

Trade group Chemistry Industry Association of Canada (CIAC) supports industrial carbon pricing.

Carbon pricing and programs offering incentives for low-carbon chemical production plants were needed to get those facilities built in Canada, the group has said.

“We support industrial carbon pricing as the backbone of decarbonization across this country,” CIAC and other industrial trade groups said in a joint statement last year.

Industrial carbon markets were the most flexible and cost-effective way to incentivize industry to systematically reduce emissions, they said.

ENVIRONMENTALIST
Environmental Defense said that Canada’s industrial carbon pricing has “effectively driven down pollution levels more than any other measure”.

The group also said that federal carbon pricing was needed if Canada is to diversify its exports towards other markets, away from the US.

For example, Canada would not be able to access the European market without strong environmental rules like industrial carbon pricing, the group noted.

The EU is implementing a Carbon Border Adjustment Mechanism (CBAM) that puts a price on the emissions of carbon-intensive goods imported into the EU.

CANADIAN ELECTION
Carney, who does not have a seat in parliament, is expected to call an election possibly as early as this week. Once called, the election will likely take place in late April or early May.

Following Trudeau’s resignation announcement on 6 January, the tariff threat from the US, and US President Donald Trump’s repeated suggesting that Canada should become part of the US, the Liberals have caught up with the opposition Conservatives in opinion polls about the next federal election.

By law, the elections must be held before the end of October.

Focus article by Stefan Baumgarten

Thumbnail photo source: International Energy Agency