The carbon tax truth is out there

Conservative Party Leader Pierre Poilievre is misleading Canadians about the carbon tax in his attempt to sink the governing Liberals, experts say.

According to Poilievre, the carbon tax takes money out of people’s pockets. He points to a report from the Parliamentary Budget Officer (PBO), which he says confirms his claim, and said he would “dare the Liberal media” to double-check him. At the same time, Prime Minister Justin Trudeau and his senior cabinet ministers insist the opposite is true: more people get more money back through rebates than is collected from the tax.

So who is telling the truth? It depends who you ask.

According to the PBO, “both are truthful, depending on whether you view it from a fiscal standpoint only or within a broader economic context.”

It’s a bit like saying it depends on whether we’re talking about a policy in a vacuum or in reality.

Experts interviewed by Canada’s National Observer say defenders of the carbon price are right that more people receive more money back than they pay, making it a useful tool to address climate change and affordability and note the PBO’s analysis was severely lacking.

The PBO report found two things. One is that 80 per cent of families receive more money back through rebates than they are taxed. But it also calculated the carbon price’s impact on economic growth and jobs could ultimately mean less money for 80 per cent of families.

The dual findings suggest political leaders are cherry-picking facts from this report to suit their narrative. Indeed, Parliamentary Budget Officer Yves Giroux took to the media after the report was published last year to say he was “concerned” about the political spin at play.

University of British Columbia political science professor and carbon price expert Kathryn Harrison said that the conflicted findings speak to a subpar methodology. She explained there are two types of benefits and two types of costs when it comes to the carbon price, and the PBO didn’t properly account for this.

First are the specific carbon price costs and benefits. That refers to how much people pay in a carbon tax (cost) and how much they receive back through rebates (benefit). This is the most simple calculation to make, and the PBO was unequivocal that more people receive more back through rebates.

Second, there are the economic costs and benefits, which refer to the economic impact of the carbon tax on consumer behaviour. If someone installs a heat pump or purchases an electric vehicle, that is a cost. But those types of investments lower planet-warming greenhouse gas emissions in the real world and lead to benefits, like improved air quality. These investments also incentivize growth in the green economy.

The PBO added together the carbon tax and economic costs and subtracted the rebates, but “didn’t even try to take into account” the broader economic benefits, Harrison said. “They also didn't take into account other complementary policies, like subsidies for heat pumps and electric vehicles.”

Senior associate and economist with the International Institute for Sustainable Development Aaron Cosbey similarly took issue with the PBO report, calling the messaging “terrible.” Any tax has a cost to the economy, and if you don’t model the benefits alongside the costs, you’re left with a “faulty” conclusion, he said.

“Poilievre is giving Canadians an incomplete picture,” he said. “Judge for yourself why he's doing that — it looks pretty political to me — but it's an incomplete picture.

“It's a cynical play to boil the whole thing down to what you're going to pay at the pump, what you're going to pay for your heating bill. And if you cast climate action in those terms, you're going to win a popular vote. That's the sad truth,” he added. “But it's such a mischaracterization of climate policy and climate action.”

The real affordability issue for Canadians is the “overdependence” on fossil fuels, Cosbey said. Over the lifetime of the product, it’s cheaper to power a car with electricity than gasoline, it’s cheaper to heat a home with a heat pump than natural gas, and it’s cheaper to cook on an induction stove. As long as Canadians use fossil fuels for electricity generation, heating and transportation, “we are going to be subject to the kind of inflationary impacts that we saw as we came out of COVID,” he said.

Given the price of renewables keeps falling as the price of fossil fuels increases, continuing to burn oil and gas is a “ticket to unaffordability, and there’s nothing like a carbon price to get you off fossil fuels,” he said.

Since Poilievre took the reins of the party a year and a half ago, he’s rallied tremendous support and posted record-breaking fundraising numbers with a consistent message: axe the tax. With a scheduled increase to the carbon price approaching on April 1, he’s built on his core message with a campaign to “spike the hike.”

His anti-carbon price politics came to a head last week, when Poilievre’s party tabled a motion calling on the federal government to cancel the planned increase and days later, filed a non-confidence motion that if successful would have toppled the government. It failed, but experts told Canada’s National Observer it didn’t need to succeed in order to serve a purpose. Rather, the consistent and escalating attacks on the carbon price are framing the next election as a referendum on Trudeau’s signature climate policy — a tactic that appears to work to Poilievre’s benefit.

"People are opposing a policy that is putting money in their pockets and is contributing to the kinds of action to address climate change that they say they want," Harrison said. "So this is very disturbing to me that we are seeing misinformation have such a big impact on Canadian politics."

Since the carbon price was put in place in 2019, the tax on each tonne of carbon pollution has increased every year. It started at $20 per tonne and if the planned trajectory holds, it will climb to $170 per tonne by 2030. The purpose of the policy is to make planet-warming greenhouse gas emissions steadily more expensive to incentivize investments in clean alternatives. That’s why on April 1, the start of the next fiscal year, the carbon price will increase by $15 to $80 per tonne.

At the same time a carbon tax is levied, a rebate is provided to Canadians that returns more money than is taxed to 80 per cent of households. Only the most wealthy Canadians find themselves out of pocket.