Conservative Party Leader Pierre Poilievre’s new promise to kill industrial carbon pricing would eliminate the central plank of Canada’s emission-reduction efforts, while making Canada’s economy less competitive in the long run, experts say.
Poilievre has long railed against the consumer carbon price, which Prime Minister Mark Carney removed as one of his first actions in office on Friday. But following that move, Poilievre is keeping the debate alive. On Monday, he drew new battle lines over climate policy, saying that if elected, he would repeal the industrial carbon price (known as the output-based pricing system or large-emitter trading system), which is the single biggest driver of emission reductions in Canada.
Even heavy industrial companies and organizations have expressed support for the system, which is projected to be responsible for as much as half of Canada’s emissions reductions by 2030.
Close observers note the decision does not make economic sense, and would represent a massive blow to emission reduction efforts. As such, it is far more likely to be a politically-driven decision than one guided by a desire to lower prices for consumers or better position Canadian industries, those interviewed by Canada’s National Observer say.
“It reeks of desperation, to be honest,” said Chris Bataille, an adjunct research fellow at Columbia University and expert on industrial emissions. Conservatives have been dropping in the polls, as Liberals have rebounded, leaving Poilievre in a position of wanting to catch the public’s attention, he said.
According to an Angus Reid poll of voter intentions published Monday, Liberals under Prime Minister Mark Carney have surged to 42 per cent support. The Conservatives have dropped to 37 per cent support, after having held about a 20-percentage-point lead in polls only a few months ago. If those numbers hold, Liberals are projected to secure a majority government, having now picked up extremely valuable support in seat-rich Ontario.
It’s against that backdrop Poilievre pledged to repeal industrial carbon pricing. He characterized it as a tax that, if removed, would make the economy more competitive with the United States.
“We will take the carbon tax off your gas, heat and food,” he said. “But we will also axe the tax on Canadian steel, aluminum, natural gas, food production, concrete and all other industries.”
If economic competitiveness is the goal, removing industrial carbon pricing is the wrong approach, said Bataille. The European Union has carbon pricing, and next year will implement a carbon tariff — called a “carbon border adjustment mechanism” — that effectively imposes a tariff on goods imported into the EU that have high carbon emissions. In other words, if Canada removes industrial carbon pricing, then its exports to the EU would face the carbon tariff, making those goods less competitive overseas.
“What [Conservatives are] effectively saying with this is we don't care; our bread is buttered with the Americans, and we don't think the Americans are going to move to significant carbon pricing or border carbon adjustments anytime soon,” Bataille said.
“Us removing our industrial price is not only offside with the Europeans … but we may end up offside with the Americans,” Bataille added. That’s because even though U.S.President Donald Trump is a noted climate-change denier intent on boosting fossil fuel production, legislation is working its way through Congress that could see a carbon tariff implemented.
For years, Republican Senator Bill Cassidy has been trying to put into action his "Foreign Pollution Fee Act” that would see carbon tariffs imposed. While the goal is at least partly to curb greenhouse gas emissions, the policy is a direct shot at Chinese manufacturing. By making it more expensive to import high emission goods from China using a carbon tariff, the goal is to reshore American manufacturing.
Hadrian Mertins-Kirkwood, senior researcher with the Canadian Centre for Policy Alternatives, said, given Europe is moving towards carbon tariffs, it’s counterproductive to ditch industrial carbon pricing.
“As the rest of the world — not just the EU, not just Canada, not just China — is trying to decarbonize, demand for cleaner goods is going up, and I think we're going to see more things like carbon border adjustments among likeminded countries in the coming years,” he said. “Getting rid of industrial carbon pricing aligns us with the U.S. at a moment when we want to be moving in the opposite direction.”
If the economics of ditching industrial pricing make little sense, Mertins-Kirkwood said Poilievre’s latest pitch can be explained by the Conservatives’ desire to return to a winning formula.
“By making this political shift from consumer pricing, which is now a moot point, to industrial carbon pricing, they can keep the same line: ‘We are against carbon pricing, and the Liberals support it, and you should vote for us,’” he said.
In October, RBC published an analysis of carbon pricing that found industrial pricing could be a strategic asset for Canada in an era of low-carbon trade.
“As countries fuse their economic, environmental and geopolitical objectives, there is a growing imperative to link trade and climate policies,” the bank said. “In the new trading paradigm, Canada has the opportunity to compete in the exports of low-carbon goods, while also navigating market disruptions caused by emerging clean tech innovations.”
That’s because “Canada already has a head start in this low-carbon competition,” the analysts wrote — and Canada has the industrial carbon price to thank. “By fine-tuning and crafting policy that delivers emissions reductions domestically without compromising our competitiveness, Canada can gain an advantage in the new low-carbon economy.”
‘Not a serious person’
Catherine McKenna, principal of Climate and Nature Solutions and Canada’s former environment and climate change minister, told Canada’s National Observer that Poilievre is simply trying to recycle “an old tired slogan.”
“Pierre Poilievre is not a serious person, he's never been a serious person,” she said, contrasting the Conservative leader with Carney, who was in Paris and London Monday, meeting with French President Emmanuel Macron and U.K. Prime Minister Kier Starmer — two leaders she said were serious about climate change, not just because of its massive societal cost, but also because of economic opportunities presented by the energy transition.
McKenna said Poilievre is playing political games, and Canadians and politicians alike should not get sucked in.
“I say this as someone who cares greatly about climate change, but what Canadians want is someone serious that can deal with Trump tariffs, stand up for our economy, work with allies and also defend our sovereignty, including and especially in the Arctic,” she said.
“He's going to continue to play games. He's going to continue to use his slogans, and I think we just need to be very disciplined and focus on real concerns that Canadians have that are absolutely 100 per cent legitimate.”
In a statement, Carney’s office said it’s clear that Poilievre’s “opposition to having an environmental plan has always been designed to let the biggest polluters off the hook.”
“Instead of rewarding the biggest polluters and making Canadians pay, our new climate plan will reward Canadians for greener choices and make the biggest polluters pay their fair share,” a spokesperson said.
Laurel Collins, the NDP environment critic, said in a statement that Poilievre’s goal is to help oil and gas companies pay less tax, but added that Carney is not the answer.
“The Liberals have been giving big oil and gas CEOs billions of dollars in subsidies. That won’t change with Carney, who invested billions of dollars in coal and oil,” she said.
“We can create good jobs by investing in building an East-West energy grid for electricity transmission and Building and Buying Canadian — including using 100 per cent Canadian steel,” she said. “We can fight the climate crisis and make big polluters pay.”
Some right-wing premiers are supportive of Poilievre’s proposal. On Monday, Saskatchewan Premier Scott Moe, who last year bucked federal law by ordering the province’s utility SaskEnergy to not collect the federal consumer carbon price, said the industrial carbon price should be repealed.
And on Friday, hours after Carney repealed the consumer carbon price, Alberta Premier Danielle Smith said she was “gravely concerned that plans to significantly increase the industrial carbon tax will be just as damaging to Alberta’s economy as the consumer carbon tax has been.”
A Timbit a barrel
Industrial carbon pricing is the workhorse of Ottawa’s emission-reduction plan, by requiring companies to pay a carbon price if they exceed a certain threshold of emissions intensity. Companies that pollute more than they’re allowed must buy credits to compensate, while companies that emit less than their threshold generate credits to sell.
A briefing note prepared for a federal deputy ministers’ meeting on the net-zero energy transition, obtained by Canada’s National Observer using a federal access to information request, describes the far-reaching impact of the carbon pricing systems as pushing costs up for “poor performers,” while offering options to generate more revenue for firms that can sell carbon credits.
The risk of companies passing the cost on to consumers in industrial pricing is “minimal,” the briefing note reads, “because facilities compete in international markets.”
Industrial pricing provides regulatory certainty over long time periods, which is typically demanded by companies investing hundreds of millions, if not billions, of dollars in decarbonization.
In October, representatives from heavy industries, including the Canadian Steel Producers Association, Alberta's Industrial Heartland, Canadian Manufacturers and Exporters, cement giant Lafarge, and the Chemistry Industry Association of Canada (representing plastics manufacturers and other refineries), wrote to provincial environment ministers, calling industrial carbon pricing “the backbone of decarbonization.”
The groups argued that industrial pricing is important, but should be improved to deliver steeper emission reductions and improve global competitiveness.
The Business Council of Canada declined to comment Monday, but it has been a longtime supporter of carbon pricing. In 2007, the influential lobby group endorsed using price signals to achieve emission reductions in the Canadian economy.
“Carbon pricing represents a market-based approach to reducing emissions. But carbon pricing alone is not the answer,” said Goldy Hyder, president of the Business Council of Canada in 2021. “To prepare for the future, businesses require a stable and predictable regulatory regime that allows them to attract the capital they need to invest in innovative technology and climate solutions.”
According to the Canadian Climate Institute, industrial carbon pricing is the most important climate policy for the federal government — expected to be responsible for between 20 to 48 per cent of the country’s emission reductions by 2030, compared to just 8 to 14 per cent for the consumer-facing carbon tax.
“Our analysis shows industrial carbon pricing adds next to nothing to the operating costs of large emitters — for example, it drives low-carbon innovation in the oil and gas sector at less than the cost of a Timbit a barrel,” said Rick Smith, president of the Canadian Climate Institute in a statement. “Large-emitter trading systems also create lucrative credit markets that help attract investment to Canada for new, low-carbon projects — from carbon capture and storage to clean steel to low-carbon chemical manufacturing.
“Cancelling large-emitter trading systems would ultimately hurt more than it would help,” he added. “It would create profound uncertainty for businesses and investors at the worst possible time, and jeopardize upwards of $5 billion in credit values in Alberta alone.”
Smith said industrial pricing sends an important signal to businesses making large investments, and relying on incentives like clean-technology tax credits will not be enough to drive pollution down as required. Removing a central plank of a climate plan like industrial carbon pricing would make hitting Canada’s 2030 emission reduction target “impossible,” he said.
The federal industrial carbon price is in place in Manitoba, Prince Edward Island, Nunavut and Yukon. Other provinces have their own industrial pricing systems and would not directly be affected by Poilievre’s promise, if it comes to pass. Alberta was actually the first jurisdiction in North America to introduce an industrial carbon price in 2007.
However, the risk is that with a federal backstop removed, provinces may begin to abandon their versions of the policy, similar to how British Columbia is now working to remove its consumer carbon price following Carney’s repeal of the federal fuel charge.
John Woodside / Local Journalism Initiative / Canada’s National Observer
Comments
It won't be Poilievre's last Hail Mary given his quickly sinking political fortunes.
As one of CBC's "Power and Politics" panelists noted "it's bad policy and it's bad politics".
I saw a rather big picture of P.P. and his wife smiling bigly at the site of the bigly axe there industrial carbon tax announcement in my local NP edition.
Couldn't help but wonder "don't you two have small children? wonder what they will think someday of this Trumpian, anti-environmental grovelling for votes that pops and mom are engaged in?"
A pretty desperate move by Poilievre no matter which way you look at it. Carney killed the consumer portion as it wasn't popular with a lot of people out of ignorance and disinformation spread by Poilievre and bad messaging by the Liberals. Consumers will not likely see any change in cost of things, except at the pumps for the short term only, plus lose out on the rebate forever.
Now Poilievre is attacking the industrial carbon price in desperation with his losing popularity. The message Poilievre is sending clearly shows, he doesn't care about climate change, he doesn't care about the future of Canadians as weather events get worse and doesn't care about his own children's future as climate change takes a firmer grip. What is even more troubling, is a conservative party in denial that climate change is even real.
Poilievre also avoids getting his security clearance for some reason, what is he hiding? That seems to suggest he has skeletons in his closet he doesn't want anyone to find out about. This makes his trust factor questionable. Poilievre is a career politician with zero real world experience and yet leads a political party and makes you wonder, with no real-world experience, how would be understand businesses, workers or even the global economy. Poilievre has no idea what it is like as a working Canadian, whom never will benefit from the major perks as an MP/Leader with an excessive pension and benefits. I'd like to see Poilievre live off what Canadians only get, CPP and OAS.
The only thing Poilievre has to offer Canadians is slogan after slogan, with no substance to back up his messaging and attack ads. Poilievre is unfit to lead a lemonade stand.
It makes no sense what Poilievre is proposing..where is his "common sense"?
Where is his (Poilievre's) "common sense"?
It was only a slogan borrowed from Trump.
And now a similar policy to Trump's thinking.
Priceless.
Rick Smith, president of the Canadian Climate Institute: “Our analysis shows industrial carbon pricing adds next to nothing to the operating costs of large emitters — for example, it drives low-carbon innovation in the oil and gas sector at less than the cost of a Timbit a barrel."
In reality, federal and provincial carbon pricing schemes for large industrial emitters are weak and ineffective. Grossly under-reported oilsands emissions do nothing but climb year after year.
Rick Smith is exactly right about operating costs. Canada's Large-Emitter Trading Systems (LETS) add next to nothing to the operating costs of large emitters. Hence, no real incentive to cut emissions.
The workhorse of industrial carbon pricing is the carbon market and credits system. LETS' effectiveness depends on the carbon market: the stringency of emissions-intensity thresholds, the value of carbon credits, and companies' demand for those credits. If there is a glut of carbon credits, their value will fall, reducing industry's incentive to cut emissions.
Canadian Climate Institute (CCI): "These interactions, along with relatively weak emissions-intensity thresholds, risk creating a surplus of carbon credits in large-emitter trading markets, thereby reducing their price and making it cheaper to buy credits. The impact is weaker incentives to cut emissions and weaker effectiveness of LETS."
Canada's industrial carbon pricing systems are the Swiss cheese of carbon policy.
Large emitters are subject to output-based pricing systems (OBPS), which price a fraction of total emissions, which effectively means a low carbon price on total emissions.
Federal and provincial carbon pricing schemes for large industrial emitters shield 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 Alberta's oilsands, effectively pay a fraction of consumer rates. Under Alberta's Technology Innovation and Emissions Reduction Regulation (TIER) pricing regime, major O&G companies pay pennies on the dollar in carbon costs.
In Alberta, 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.
"Canada's biggest emitters are paying the lowest carbon tax rate" (Corporate Knights, 2022)
"Oil and gas producers pay among the lowest average carbon costs of any sector…
"There's a patchwork of OBPS policies across the country, and some provinces have implemented 'weak' or 'non-existent' systems that have let many big polluters off the hook."
"...Ottawa and most provincial governments grant heavy exemptions to a number of sectors, including O&G, chemicals, cement, steel and mining.
"But generous exemptions mean that how much of a firm's actual emissions are taxed varies widely by province, and, on average, companies end up paying for only 16% of the carbon actually produced.
"[In 2020, Suncor's] average carbon cost was roughly $2.10 per tonne, about one-14th of the full carbon price."
"The impact of a carbon price is greatly lessened by the relatively small proportion of emissions that are actually covered by the price.
"The federal OBPS and AB's TIER system levy the carbon price on roughly 10% of a large emitter's GHGs. At a $50 marginal price, producers pay less than $1 per tonne of CO2 equivalent on their total production." (Corporate Knights)
"Canada needs to make Big Oil pay their fair share" (Corporate Knights, 2022)
As the PBO pointed out (May 2024), the industrial carbon price applies only to 20% of emissions maximum. 80% of emissions are exempt. For some industries, only 5-10% of emissions are exposed to the carbon price. (90-95% exempt.).
"Revisions to PBO's carbon tax analysis will 'vindicate' government, minister predicts" (CBC, 2024)
"Most big emitters pay the carbon price on anything they emit above 80% of what the average emissions are in their industry. … Industries that face more foreign competition, such as cement, lime and some fertilizers, have an even higher limit, 90 or 95% of the average.
"… In Manitoba, Saskatchewan, Ontario, and New Brunswick, big emitters accounted for about 25% of total emissions in 2019, but paid less than 10% of the carbon levies collected. Consumers and small businesses paid the rest.
"… 'The current large emitter programs provide a perverse long-term incentive,' the [2021 Canadian Climate Institute] report said.
"'They are explicitly rewarding the most emissions-intensive facilities in the country to not make the major investments needed to be prepared to compete in a carbon-constrained market.'"
"Biggest industrial emitters don't pay fair share for pollution, critics say" (CP, April 14 2022)
"Federal watchdog warns Canada's 2030 emissions target may not be achievable' (CBC, 2022)
"There's a patchwork of OBPS policies across the country, the commissioner said, and some provinces have implemented 'weak' or 'non-existent' systems that have let many big polluters off the hook.
"He said the federal government must insist on minimal national standards so that the provinces with their own OBPS policies … collect a sufficient amount of taxes from these emitters. As it stands, the cost to industries varies widely between provinces, DeMarco said.
"The commissioner said the current weakness of the industrial system is undermining the 'polluter pays' principle of carbon pricing."
"Catherine McKenna on Her Blistering Climate Op-Ed" (11-Feb-2025, The Tyee)
Former federal Environment Minister Catherine McKenna: "… The reality is that our output-based pricing system is not tough enough on heavy emitters, in particular oil and gas. The whole point is to have a price that gives them the incentive to actually reduce their emissions.
"I think we did a lot, but on climate, that only gets you so much. You have to get reductions. That’s the hardest thing in Canada, because we have one sector that really is by far the largest emitter and they aren’t doing the work.
"In the end, if we do not have oil and gas actually delivering, and in particular the oilsands, then we will never meet a target."
The risk of companies passing the cost on to consumers in industrial pricing is “minimal, because facilities compete in international markets.”
The notion that all sectors of all industries will just be forced to swallow their higher carbon costs instead of passing them on along the supply chain to consumers is a trifle optimistic.
Crude oil prices make up only one part of the pricing formula. Integrated O&G companies have operations upstream (exploration and extraction); midstream (transportation to refineries); and downstream (refining, distribution, and marketing). What they lose at one end in terms of higher carbon costs, they can make up for at the other. If upstream activities become more costly, integrated O&G companies can increase their refinery margins, and hike prices at the pump.
"What makes up the price of a litre of Shell gasoline?" (Shell)
"Four costs go into Shell's pump price: crude oil, taxes, refiner margin, and marketing margin. Gasoline prices go up and down over time and vary from place to place, so the price breakdown for a litre of gasoline also varies.
"40 - 55 per cent is crude oil costs (the raw material for making gasoline and diesel fuel)
"25 - 35 per cent is federal, provincial and municipal taxes and the GST
"10 - 25 per cent is the refiner's margin (the difference between what it costs to buy crude oil and the price refined gasoline sells for in the wholesale market which, in turn, is influenced by supply and demand)
"4 - 6 per cent is the marketing (or retail) margin that covers retail stations’ expenses and profits.
"2. What affects Shell’s wholesale price and the refiner's margin?
"Refined products like gasoline and diesel fuel are internationally traded commodities at the wholesale level. As a refiner, Shell Canada sets its wholesale price for each commodity based on supply and demand in Canada and internationally. To do this, we look at posted commodity prices - known as benchmarks - that are set, for the most part, in places like New York, Seattle, and Minneapolis. These then help us determine what our competitive domestic wholesale prices will be in places like Montreal, Vancouver and Edmonton.
"3. Why does the price vary from region to region?
"The cost of transportation and taxes (provincial and municipal) varies between regions. The level of competition also varies by region based on the principles of supply and demand."
No global price for cement. Cement costs depend on raw material and production prices, energy costs, transportation costs, labor costs, etc. Most of these costs vary regionally. If production costs rise, local cement producers and construction companies can pass these costs on to consumers.
No global price for power, either.
In "energy-only" electricity markets, such as in Alberta, power producers set their own bids in a reverse auction.
In Alberta, power producers can bid up to the price cap ($999/MWh). When renewable production is low, the big conventional producers bid some of their generators offline — a practice known as economic withholding. The rest of their production receives the maximum price — and power prices spike. Among the ten provinces, Alberta has the highest average power prices in the country.
Electricity Prices in Canada 2023 (Energy Hub)