Policymaking has been compared to sausage-making, in that neither are pleasant to watch. And the federal carbon tax, called pollution pricing, may be one of the least-appetizing policy sausages of recent times. With beginnings rooted firmly in sound economic theory, the Canadian carbon price has ruptured like an overcooked sausage. All it needed was a poke from the prime minister because it appeared ready to burst at any moment.

The Maritime heating oil exemption from the carbon tax may have seemed like a minor adjustment, but it was the poke that set things in motion for what may be the inevitable unravelling of consumer carbon pricing at the federal level in Canada. Although not an ideal outcome, maybe it isn’t the worst thing to happen, either. Policy, after all, is meant to evolve and adapt.

The question now is: How do the Liberals respond to the mounting opposition across the country? Is a major revamp of retail pollution pricing, their signature climate policy, a possibility?

Unpacking that idea leads to three important conclusions:

1. Canada’s comprehensive and diverse array of industrial carbon pricing systems (output-based pricing) must be maintained and enhanced. The recent federal announcement on contracts for differences is an excellent example of a critical policy enhancement, as will border carbon adjustments be when introduced.

2. The federal government must focus on implementing the impressive package of economic, policy and regulatory tools that first and foremost position Canada for future economic growth while managing carbon emissions in a meaningful way. These include direct investments in net-zero manufacturing, clean technology investment tax credits, electric vehicle availability legislation, incentives for heat pumps, support for renewable and nuclear power, support for skills training and sustainable jobs, climate-resilient agriculture programs, enhanced methane regulations, an oil sector emissions cap, and more.

3. With points one and two in hand, the retail carbon tax may not be needed because the effort to preserve it may outweigh the benefits. A focus on delivering the other important policies will likely do more of the heavy lifting in terms of achieving our emission targets, and there is still much heavy lifting to do.

While it may be hard to imagine the Liberals voluntarily rolling over on the retail carbon tax, it might be politically smart to “read the room” and offer up some clever “policy adaptation” given how vastly different the world is today from when it was first introduced.

The political challenge is that most politicians don’t want to be seen changing their minds or backtracking — the dreaded flip-flop. And to be clear, adaptive policy is not waffling or flip-flopping, but modifying and improving a set of policies to increase uptake, compliance and efficacy.

For climate policy experts, the carbon tax was always meant to be part of the solution, not the dominant climate policy, writes @brucelourie #cdnpoli #CarbonPricing

This deep-seated fear of waffling leads politicians and civil servants to seek policies that are “perfect” before they are launched — a classic example of “the perfect being the enemy of the good.” Nasty political divisiveness leaves no room for adaptation or improvement — a sad reflection on our political space.

There are major downsides to removing a critical pillar of Canada’s climate-fighting agenda and the arguments against eliminating the tax have traction. Not least of which is that it will undermine one of the most oft-heard mantras of business: “We need policy certainty.” Major policy flip-flops do nobody any good. By eliminating carbon pricing, the most theoretically efficient and business-friendly climate tool is removed from the climate policy toolbox.

This may not present a problem for the Liberals in that they have an extensive toolbox from which to work and are using virtually all the tools at their disposal. The Conservatives, however, will have a tough time coming up with alternatives to carbon pricing after having rejected regulations, standards, incentives, subsidies and most other means of addressing emission reductions. The irony is that the most “conservative” of all of these policy tools is a market-based pricing mechanism.

A more germane question may be, “Is there any upside to ‘axing the tax?’” I can’t think of one other than the crass retail politics of lowering taxes (despite the fact most Canadians save more with the tax rebate). For climate policy experts, the carbon tax was always meant to be part of the solution, not the dominant climate policy.

The problem was that the carbon tax sucked all the oxygen out of the room to the point where politicians convinced themselves, with the vigorous support of economists, the carbon tax was all that was needed to fight climate change. What the tax proponents failed to communicate was the level of tax required to be effective (i.e., over $100/tonne) and the cost to consumers of a carbon price at that level. This is where economic theory does not work in political practice.

As a consequence, Canada was slow to adopt other regulatory pieces needed to fill in where the carbon tax could not — like an oil emissions cap, enhanced methane regulations, electric vehicle mandates, etc. These important policies are all nearing fruition, but they have taken too long and as a result, Canada will have a tough time meeting our 2030 climate targets.

Before the carbon tax, there was considerable debate around the relative contribution of a tax in achieving emission reductions. I recall speaking at an event with one of Canada’s leading climate economists, Mark Jaccard, in Ottawa in 2013, debating that issue. We landed on a figure of between 15 and 20 per cent of overall greenhouse gas emission reductions that could be attributable to a carbon tax going forward. That meant 80 to 85 per cent of emission reductions would need to come from more traditional environmental standards, regulations and incentives.

We agreed carbon pricing was an important tool in the policy toolbox but inherently limited by the political challenge of requiring the price to rise to over $100 per tonne of carbon before achieving meaningful emission reductions. For this reason, Canada would need to develop a full suite of actions to accompany the tax. In fact, it was the integration of the carbon tax along with other policies that helped create low-carbon alternatives that made for the most effective climate policy. This is still an argument to maintain a carbon tax because it pushes consumers and businesses in the right direction to take advantage of the incentives and comply with the standards. Policies need to be developed as co-operative packages, not standalone heroes.

The carbon tax succeeded at breaking through the climate policy stagnation in Canada, but it failed by being “too successful” and leading some to believe it was the “silver bullet” solution to climate change.

A taxing history

Industrial carbon pricing is well-supported by industry and pricing schemes in the provinces introduced before the federal carbon tax will likely remain. It is the consumer carbon tax that is most at risk, having enraged populist conservative politicians.

It is no coincidence the first carbon pricing system in Canada was introduced by Alberta’s Ed Stelmach, a Conservative premier, in 2007. It covers industrial emissions from large polluters and is well-regarded and still in force.

North America’s first broad-based carbon tax was introduced the following year by then-B.C. premier Gordon Campbell, a fiscal conservative. It was lauded for its “purity” in adhering to fundamental fiscal principles of lowering tax on income (a “good”) while raising the tax on carbon pollution (a “bad”).

In 2013, Quebec joined California’s cap-and-trade market, a form of carbon pricing. Ontario joined the same program in 2017 for a short-lived stint that was shut down the following year by Doug Ford after he became the premier. The diversity of carbon pricing systems across provinces and sectors makes Canada a fascinating laboratory for understanding climate pricing policy development, adoption and acceptance.

In the decade between 2008 and 2018, something happened to the carbon tax narrative and the positive attributes of carbon pricing as a business-friendly “market mechanism” were replaced by the simple negative narrative of “cut taxes” to the point where populists such as Pierre Poilievre use “axe the tax” as one of their primary rallying calls to engage and enrage their voting base.

Financially literate conservatives are fans of using market instruments to achieve environmental outcomes, and carbon pricing fits the bill perfectly. Economic theory tells us that charging a fee for something we don’t want (carbon dioxide pollution), motivates us to avoid the behaviours that produce carbon dioxide (using gasoline in your car or natural gas to heat your house or in industry, using coal to make steel and cement or carbon-intensive oil refining).

The higher the tax, the greater the financial incentive to seek low-carbon alternatives or invest in carbon-mitigating technologies. The crux is getting the price to the point where it shifts behaviour effectively without angering the public. We now know what that threshold is.

The backlash

Justin Trudeau’s sausage poke was all that was needed for an explosion of carbon tax opposition, resulting in calls for tax exemptions from beyond the usual suspects, including premiers of all political stripes.

Maybe the consumer carbon tax has run its course and resistance isn’t such a bad thing? One of the reasons policymaking is so fraught is that no government wants to back down on something they have held so dearly.

For all its intellectual rigour, economic logic and thoughtful design, maybe the smartest thing for the Liberal government to do is to get ahead of the curve, deflate Poilievre’s tax-axing bluster and drop the guillotine themselves. Or at least adapt.

Best practice in law-making and policy design is “adaptive.” That means designing policy as best you can with the information and input at hand and then adjusting or adapting policies to the “real world” response over time. Modifications are often required to improve any sort of policy in response to uptake experience or social, technological and political circumstances. Nobody could have predicted COVID, autocrat invasions, skyrocketing oil prices and record levels of inflation causing extreme pressure on housing and food prices, the basics of life. And whenever immediate needs are threatened, policies and laws to protect long-term environmental protection tend to go by the wayside. These are the “real world” circumstances that make policy adaptation essential.

In 2013, the Ecofiscal Commission was launched as an independent, time-limited think tank with the goal of making fiscal policy (taxes and fees) a priority in Canada for addressing environmental problems. It was hugely successful and many would argue it laid the foundation for the federal carbon tax.

The commission brought together the country’s top economists, together with a high-powered advisory group that included former politicians and business leaders, including Preston Manning and Jean Charest, who advocated for fiscal measures over regulation, seen to be more efficient and better aligned with “conservative” values.

An underlying premise of the commission, and carbon pricing proponents generally, was the support it could garner from business-friendly liberals and small “c” conservatives across the country. Pricing was seen as a bridge-building climate policy. So much for that idea.

Fast-forward 10 years and the world is a very different place. We no longer have conservative political leaders in Canada, at least not outside of Nova Scotia. They have been replaced by populists. And rather than having a value-centred compass to guide policy and leadership, populists focus on their voters, which recalls the quote: “The best argument against democracy is a five-minute conversation with the average voter.”

The Liberal government was courageous, diligent and well-intentioned in the design and delivery of the federal “pollution pricing” system. One might even describe it as Brian Mulroney-style vision and leadership. It put Canada on the map as one of the few countries in the world (outside of Scandinavia) with serious climate legislation based on pollution pricing. There were improvements that could have been made at the outset to enhance public support, apparently rejected by bureaucrats against the advice of pricing policy experts. However, perfection is elusive and shouldn’t stop public policy from advancing.

The federal carbon price was not only smart legislation that held its own in a Supreme Court challenge from populist provinces, it was the first serious climate policy implemented by any federal government in Canada.

This is the real success of the carbon tax. It broke through the federal climate narrative barrier of “Should we develop serious policy to address climate change?” to “What are the most effective policies to address climate change?” It was a monumental shift for Canada after decades of dithering by all parties. Perhaps the federal carbon tax has fulfilled its primary task. It was ground-breaking at the time and never considered to be the “be-all, end-all of climate policy,” except possibly by economists.

With Canadians on board for serious climate action, businesses supporting the new economy and a robust suite of policies and incentives to help us navigate the next decade, Canada is well-positioned for economic growth and climate change success with or without a consumer carbon tax.

Bruce Lourie is president of the Ivey Foundation and co-author with Rick Smith of Slow Death by Rubber Duck: How the Toxic Chemistry of Everyday Life Affects Our Health. He also sits on the board of Canada's National Observer.

Perhaps one of the problems getting the public to accept the carbon tax is that most Canadians don't think there is an alternative to paying the tax. They see the upfront cost of installing a heat pump, buying an EV, improving insulation etc but don't calculate the savings in the long term. In other words, most people are not economists and therefore don't think in those terms. 80% of the population is better off with the carbon tax rebate but most people don't believe that so they don't accept the policy.

And Poilievre is very good at spreading fear and misinformation for political gain.
He follows the Trumpian model and doesn't give a damn about anything except his chances of gaining power.
Plus, he really does roll over for big fossil fuel's fantasy world.

Economic ignorance is surely part of it, but I don't really think that most Canadians look at anything. The vast majority just seem to be expecting to pollute as much as they feel like for as long as they feel like and that's why we're in this situation.

It may be time for the Liberal government to be open up frankly with tax payers: acknowledge that its price on carbon, although an efficient tool to reduce consumption of carbon-rich substances, has become a political anchor preventing it to move ahead on a climate-saving agenda. So, cut the anchor chain and promote other more politically acceptable measures. At the same time, cut the grass under the feet of the Conservatives.

The Liberals failed not with implementing carbon pricing, but in dithering for four years to do it. Meanwhile, they bought a pipeline and shovelled billions into carbon capture and LNG, with failure written in the wind before a single tax credit went on book.

While these divergent paths consumed their time, affordable housing and pandemic survival and recovery dominated society's consciousness. Then climate topped the news with fire and ice.

Given all of these one-two punches, Trudeau et al should have developed a more nimble flexibility. Sober second thought is not flip flopping unless a government lets the idea-free vacuous opposition control the narrative.

Enacting a simple carbon tax is the low hanging fruit, and it shouldn't have taken so long. Moreover, it needed to be followed up with a steady release of policies to electrify the economy. We'd be a lot further ahead if a more pro-active tact was taken with a lot more direct investments into electrification.

It's never too late to give Canadians a helping hand in that effort, with or without a carbon tax. Politically, I wouldn't advertise watering down carbon pricing, but it could pay dividends with policy-minded voters to heavily promote very generous programs to buy heat pumps, to upgrade the local grids and fund renewables a lot more. Add in building affordable non-profit rental housing and they may just rebuild their edge over Poilievre while taking back control over the narrative.

Climate policy is not the only baby in the basket. We now have a national childcare program and, finally, a very fresh agreement with the NDP minority partner on pharmacare. These are exceedingly valuable benefits to society that seem to be completely ignored in the hatred directed toward Trudeau from all sides for his egregious sin of being two-faced. Poilievre's aura by comparison is uniquely one dimensional and simple: NO policy whatsoever on the big ticket items, and focus exclusively on first winning, then on tearing down the government if elected.

What a terrible thing that would be, and it's hard to understand how some armchair critics would actually promote "allowing" Poilievre to become PM merely to punish Trudeau for less than ideal climate action. We will lose so much more than just climate policy if that was carried through.

In face of the Trudeau Liberals' abysmal failure on climate, Mr. Botta finds consolation in the fact that the Liberals support social programs. As if the Liberals' progressive policies on other files somehow excuse, offset, or mitigate their failure on climate.

Climate change is not one issue of many. Climate change does not rank with healthcare, childcare, EI. Climate and environment are the background to all our activities. Climate change is existential. Climate is the lens through which all economic and quality-of-life issues must be viewed.

Six hundred of Alex Botta's neighbours perished in June 2021's unprecedented heatwave. They no longer have to worry about healthcare, pharmacare, childcare, and EI. More than a billion marine organisms perished.
Many Canadians can survive, for better or worse, with or without Liberal social policies. We can't survive, much less thrive, amid ecosystem collapse, which is where petro-progressive climate policies lead us.
The Liberals fail shamefully on other files, as well. Do 30,000+ dead in Gaza trouble your conscience? The Trudeau Liberals have provided political cover for Israel's ethnic cleansing, starvation, and genocide. U.S. Pres. Biden, PM Trudeau, and most Western leaders have blood on their hands. Enabled by their supporters.

If your house is on fire, what is your main concern? The fire or pharmacare, childcare, and EI?
Would you rush to rescue your children — or worry about whether the daycare centre has space for them?

Climate failure under the Liberal banner is just as deadly as the Conservative brand. Failure by stealth is more insidious and more difficult to combat.

Mr. Botta comforts himself with the notion that by voting Liberal he is also voting for pharmacare, childcare, EI, etc. Enjoy your dental plan while you watch your house burn down.

No worries, Geoffrey. There is a fire hydrant not 10m from my house. And we're wired to a monitored alarm system that includes heat and smoke detectors. And there are three fire stations within one km, each with a response time of under five or six minutes.

Regardless, the mass dump of info contained in your personal criticism seems to have excluded one important fact with two parts: world fossil fuel demand is peaking and entering a plateau, and emissions have been dented by renewables. The IEA and other institutions have documented it. This was reiterated in Chris Hatch's CNO affiliated newsletter just today, and comes with data charts. No mention of carbon taxes.

I have and will always continue encouraging the Liberals, the NDP, the Greens and any other centrist or progressive political party to enact policies to dramatically increase direct investments in renewables. It seems that is the only thing that's working and could make up for the failures of carbon pricing as practiced by politicians whose focus is only on the next election, abd those who trued to take a parallel path to subsidize TMX, CCS and LNG. All of these will fail on economics alone; none will succeed in the long run regardless of how much public money is shovelled into them.

Yep, Trudeau is guilty of shovelling it. But he will be outcompeted by Poilievre several times over should we let him get elected. It's not too late for Trudeau to change and focus on building a resilient electrified economy, and our letters and public comments need to ecourage him to do just that.

Centrist and progressive parties also happen to be good at social policy that strengthen society To portray that as displacing climate policy is patently wrong and misguided. Punishing them for weakness so far on the climate file will not fix the problem, and in fact will just toss ALL policies, including climate, into the dumpster once Poilievre sits in the big chair. The damage will take more than one electoral term to be corrected and to heal.

I will spend my energy in the way I choose, and that's to keep encouraging Libs, NDPers, Greens etc to up their game and invest more widely in electrification rather than stabbing them in the back for their failures, and for not achieving impossible perfection.

@Alex: I am glad for your sake that you live in close proximity to a fire hydrant. Congratulations on your heat and smoke detectors. Perhaps you have an air conditioner as well.
Over 600 of your neighbours were not so fortunate in 2021. Not to mention the marine organisms and wildlife that perished in the unprecedented heatwave.
Oh, well.

Alex: "world fossil fuel demand is peaking and entering a plateau"
A plateau that per current policies is likely to flatline for decades. We don't need emissions to flatline. To keep warming below higher danger limits, we need to cut emissions dramatically.

Doubling down on fossil fuels sabotages Canada's climate targets, locking in production and emissions for decades. Climate insanity.
Liberal energy policy defies the best available science:
The IPCC warns that the world must nearly halve GHG emissions by 2030 and eliminate them by 2050 to keep warming below the danger limit of 1.5 C.
IEA's Net-Zero by 2050 report says no new investment in fossil fuels after 2021 to limit global warming to 1.5 C.
No time for fossil-fuel expansion.
The oil industry's business model takes us far beyond the "safe" limit of 2 C of warming. With the loss of half our Arctic ice, coral reefs, and kelp beds, clearly we have already passed the safe limit.
The devastation is already apparent. And Trudeau, Poilievre, Horgan, Eby, Kenney, Smith, and Notley want to keep going?

@Alex: Under the IEA Stated Policies Scenario (STEPS), oil demand increases to 2030, flattens out, and declines to current (2022) levels by 2050.
IEA: "The Stated Policies Scenario (STEPS) sees a peak in energy-related CO2 emissions in the mid-2020s but emissions remain high enough to push up global average temperatures to around 2.4 °C in 2100. This outcome has improved over successive editions of the Outlook but still points towards very widespread and severe impacts from climate change.
"… Although oil demand for petrochemicals, aviation and shipping continues to increase through to 2050 in the STEPS, this is not enough to offset reductions in demand from road transport, as well as in the power and buildings sectors. As a result, oil demand peaks before 2030. The decline from the peak however is a slow one in the STEPS all the way through to 2050."

Alex: "It seems that is the only thing that's working"
Any evidence that carbon pricing is not working? To be truly effective, of course, the carbon price needs to go much higher.

Alex: "[TMX, CCS and LNG] will fail on economics alone; none will succeed in the long run regardless of how much public money is shovelled into them."

TMX, CCS, and LNG do not need to succeed in order for climate action to fail. Hundreds of billions of public and private investment dollars diverted to fossil fuel infrastructure are hundreds of billions of dollars not invested in the energy shift and climate action. Deliberate sabotage.

Contrary to your claim, I do not criticize the federal Liberals and provincial NDP for failing to achieve "impossible perfection." A gross distortion of my position and their actual intention and achievement.
I do not expect or require the Liberals to achieve perfection. I expect climate leaders not to deliberately sabotage their own climate policy.

The Liberals did not try and fail. They tried to fail — and largely succeeded. Big difference.
The Liberals said one thing and did another. Dishonest and disingenuous. Trudeau repeatedly lied to voters. That's unforgivable. Even today, he is advertising that we need to sell fossil fuels to fund climate action.

The Liberals and Conservatives both plan to fail on climate. Which is worse? Climate sabotage on the right — or betrayal by "progressive" parties?
Who's worse on climate? The deniers who deny their house is on fire, or the deniers who accept their house is on fire, but throw fuel on the flames — then stand back and watch it burn?

Conservatives generally deny the problem and reject the science. Petro-progressives like Trudeau, Notley, and Horgan claim to accept the climate change science, but still push pipelines, approve LNG projects, promote oilsands expansion, subsidize fossil fuels, and let fossil fuel interests dictate the agenda.
Acknowledge the science, but ignore its implications. Boast about climate leadership, but push fossil fuel expansion and pipelines. Sign int'l agreements, but fail to live up to them. Putting emissions targets out of reach.
In fact, the federal Liberals and provincial NDP parties (AB and B.C.) have proven far more effective than the Conservatives in delivering on Big Oil's agenda.

The new denialism. Just as delusional as the old kind but more insidious. And far more dangerous.
"The New Climate Denialism: Time for an Intervention" (The Narwhal, 2016)

@Alex: In reality, Trudeau and Poilievre are the Tweedledum and Tweedledee of climate disaster. Both parties serve Corporate Canada. Only the Liberals are far more effective.

Big Oil couldn't ask for a better setup. Terrified by the Conservative bogeyman, progressive voters run into the arms of Trudeau's Liberals. CAPP sets their Conservative hounds on the Liberals, while the Liberals give the O&G industry just about everything on its wishlist. The Liberals play the fear card every election to limit the NDP and Green vote.
Progressives fall for it every time.

"Canada is a continually bad actor on the global stage, despite protests that Justin Trudeau is ruining the oilsands. Drawing on research from Quebec's French-language newspaper Le Devoir, the New Democratic Party has argued Trudeau has been kinder to Big Oil than Stephen Harper ever was. He has also been crueller to the most vulnerable."
"Oil and gas approvals spell ecocide" (National Observer, 2023)

Backsliding petro-progressive governments are instrumental in the rise of right-wing extremism and denialism.
The petro-progressive provincial NDP and federal Liberals are not in a tug-of-war with Conservatives over climate. They are dance partners. The NDP and Liberals promote fossil-fuel expansion and take science-based options off the table. This allows the "conservatives" to shift even further right, doubling down on denial and fossil fuel intransigence. But it's Notley and Trudeau who shift the Overton window. It's Trudeau, Notley, and Horgan who shut down the space for science-based climate policy.
The climate plans of the Liberals and provincial NDP are premised on fossil-fuel expansion. It's the Liberals and NDP who ignore the science and undermine the climate movement.
When Danielle Smith jams a wrench into the spokes of renewables, or Poilievre promises to axe the tax, progressives fight back. When the NDP and Liberals build pipelines, progressives applaud or stay silent.
"At least, it's not the Conservatives."

Trudeau and Notley moved the ball on the Trans Mountain pipeline down to the ten-yard line. Their signal achievement was to "push country-wide support for pipelines from 40% to 70%." Something Harper, Scheer, Kenney, Smith, and Poilievre could never dream of doing.
Trudeau, Notley, and Horgan did something else Poilievre and Smith could never do: lead progressives over the climate cliff. Many of their acolytes now embrace fossil-fuel expansion.
When Poilievre and Smith say no to a shift away from fossil fuels, the progressive option is still ON the table.
When Trudeau and Notley say no, they took the progressive option OFF the table.
When Poilievre and Smith deny the science, progressives reject their arguments and head in the opposite direction.
When Trudeau and Notley deny the science, progressives accept their arguments and enable their climate sabotage.

Contrary to your claim, I do not "promote 'allowing' Poilievre to become PM". I merely read the writing on the wall. Also the polls.

This well written article portrays the carbon tax as only a first step. That is absolutely correct, and it is also correct to illuminate that the government failed to take enough additional steps to electrify everything.

It's noteworthy to think back to Rachel Notley's intense promotion of TMX. She was elected in part with a carbon tax in her campaign literature, but once in the big chair she turned toward full-on carbon economy expansion, using a simple, quickly enacted carbon tax as a "contract" to pollute more. She even defined the upper limit of that pollution as an outrageous 100 megatonnes.

In essence, her carbon tax gave her permission to defeat any benefit it would have brought with lower consumer-generated emissions with yet more petroleum extraction.

It's painfully obvious that a carbon tax subjected to political shenanigans cannot achieve its primary goal more than what should be highly effective.

The feds really need to step up direct climate action and beef up investments in renewables and domestic electrification, and to be widely seen doing so with or without Trudeau's face on the front cover.

Lourie: "All it needed was a poke from the prime minister because it appeared ready to burst at any moment."

The federal carbon levy (not a "tax") appeared ready to burst at any moment because the Liberals failed to sell their signature climate policy to Canadians.
The Liberals also failed to defend it from spurious attacks by the Conservatives and Postmedia's mischief-making scribes.
The Liberals simply ceded the field to the Conservatives. The Liberals did not even show up.

Lourie: "The crux is getting the price to the point where it shifts behaviour effectively without angering the public. We now know what that threshold is."

Nonsense. For 80% of households, carbon rebates exceed carbon costs. Most households come out ahead.
The issue is communication failure. The Liberals have only themselves to blame for that.

Lourie: "The Maritime heating oil exemption from the carbon tax may have seemed like a minor adjustment"

Factually incorrect. The heating oil exemption was not limited to Atlantic Canada, but extended nation-wide. A higher proportion (30%) of households in Atlantic Canada uses heating oil. But 75% of households using heating oil are located west of Atlantic Canada.

By granting the exemption, the Liberals tacitly accepted the opposition's argument that the carbon levy was a financial burden on Canadians. Whereas for 80% of households, carbon rebates exceed carbon costs.

The Liberals previously sabotaged their own climate policy by doubling down on fossil fuels; buying and building an oilsands export pipeline; and disingenuously arguing that we need fossil fuel revenues to pay for the energy transition.

Lourie: "The federal government must focus on implementing the impressive package of economic, policy and regulatory tools…"

Optimally, the federal government would rely on the most efficient tools in the toolbox. Carbon pricing chief among them.
Since the Liberals botched their signature climate policy, and government in general, they now have until October 2025 to establish climate policy that can survive four years of PM Poilievre. Good luck with that.

Carbon pricing is not only the most efficient tool, but it is also technology agnostic. Absent carbon pricing, the government will pick winners and losers — and we all know how well that works.

Highly flawed and hugely expensive industry-friendly technologies like carbon capture, SMRs, blue hydrogen, EVs, and even LNG will be big winners, while far better but less sexy solutions — basic public infrastructure like transit — are neglected.
Nuclear power, on Lourie's list, will compete with, divert investment from, displace, and delay the advent of cheap renewables like wind and solar.

Lourie: "What the tax proponents failed to communicate was the level of tax required to be effective (i.e., over $100/tonne) and the cost to consumers of a carbon price at that level."

Rebates would increase in line with fuel charges. The increasing incentive to switch to less energy- and carbon-intensive lifestyles and technologies would accelerate the shift, thus reducing carbon costs. That is how carbon pricing works.

Average household spending on energy may well decrease, as Canadians spend more on highly efficient electrified systems but much less on extremely inefficient and wasteful fossil fuels.
"Our analysis finds that Canadians will spend 12 per cent less on energy by 2050 than they do today. They will switch off fossil fuels to power their homes, vehicles and businesses with clean energy. … Our research shows that a big switch away from fossil fuels will have Canadians spending less on energy. That is because electric technologies are much more energy efficient than fossil-based ones."
"Clean electricity, Affordable energy" (Canadian Climate Institute)
Total energy costs fall as households use and waste less energy.

Lourie: "It is no coincidence the first carbon pricing system in Canada was introduced by Alberta’s Ed Stelmach, a Conservative premier, in 2007. It covers industrial emissions from large polluters and is well-regarded and still in force."

Dubious. Alberta's large industrial emitters, including oilsands companies (Pathways Alliance), fall under the province's own Technology Innovation and Emissions Reduction Regulation (TIER) pricing regime. Federal and provincial carbon pricing schemes for large industrial emitters shields them from carbon pricing. The purpose of the OBPS and its provincial counterparts is not to expose heavy emitters to the carbon price, but to shield them from it, so they can remain competitive in global markets. Large industrial emitters, including in AB's oilsands, effectively pay a fraction of consumer rates. Major O&G companies pay pennies on the dollar in carbon costs.

TIER dollars are effectively recycled back to industry to fund carbon capture technology and research. Projects industry should be paying for in the first place.

Federal and provincial carbon pricing systems do not impair large industrial emitters' profits — or reduce their emissions. Oilsands emissions do nothing but climb year after year.

The main flaw of carbon pricing is that it is too slow. Given the gradual increase in the carbon price over time, the market would not respond in time to achieve our emissions targets.

Climate change is the biggest market failure in history. Producers and consumers externalize or download the health and environmental costs of goods and services to the public purse, the environment, and future generations. Fossil fuel producers and consumers use the sky as a free dump.

To solve climate change and other environmental problems (e.g., urban sprawl), we need to address the market failure. Under full-cost accounting, all health and environmental costs are internalized in the item's ticket price. Unsustainable goods and services are priced out of existence. Until then, we subsidize our own destruction.

Lourie: "With points one and two in hand, the retail carbon tax may not be needed because the effort to preserve it may outweigh the benefits."
A moot point. The Liberals have at most only twenty months to go before being turfed from office. PM Poilievre will roll back most of the Liberal's climate legislation. Anything that inconveniences conventional industry and consumers will be gone.

Lourie: "Maybe the smartest thing for the Liberal government to do is to get ahead of the curve, deflate Poilievre’s tax-axing bluster and drop the guillotine themselves."
Far too late. The Liberals cannot save themselves by axing the tax before Poilievre can do it. The Liberal ship is going down, regardless. Axing the tax will be seen as just another act of desperation — confirming the Liberals' impending defeat.
Lousy analysis and worse advice from Mr. Lourie.

Lourie: "With Canadians on board for serious climate action, businesses supporting the new economy and a robust suite of policies and incentives to help us navigate the next decade, Canada is well-positioned for economic growth and climate change success with or without a consumer carbon tax."

What universe does Mr. Lourie live in? Is he not aware that PM Poilievre will roll back most of the Liberals' climate legislation?

Is this the best climate-policy analysis on offer? No wonder we are in trouble.

Economist work and (think about the future), what will decisions made now help change the future for the better, more profitable, healthier for the environment.
Most Canadians live in the (now moment) as to what they hear in opposition must be what they want. They mostly see and notice about how each week they are not getting ahead, not in terms of what we need to do to set the future for our children and grandchildren.
I totally agree with the fact that the carbon pricing was to be a tool of climate mitigation, not the be all and only tool. The tax needs to be flexible to the economy it needs to fluctuate like the BoC interest rate.
Great article to give both sides of the story.

The biggest determinant of Canada's future carbon policies will be the results of the 2024 US elections. That fact seems to be missing from the article.

For example, a Trump victory would likely see a Canadian federal government more focussed on keeping him from levying tarfiffs/sanctions on Canadian industry. Trump would gut US regs/subsidies re carbon (e.g. the IRA), reducing pressure on Canada to strengthen carbon regs. A Biden victory would likely do the opposite, and force Canadian govts to strengthen carbon regs.

Politicians eventually respond to voter concerns, and the short term viewpoints of most voters means, if need be, climate regs will be sacrificed to protect jobs. Doesn't matter to them what the long term consequences are.

The carbon tax is but (one) tool for climate change mitigation.
Public Transit is another one of the tools.
Green Tech a in solar and wind power is another.
It looks as though Hybrid cars are going to be next along with EV's.
It has taken just over 100 years to make this mess and will take another 10 to start to fix it.