While the United States debates whether or not to put a price on carbon emissions, Canada is getting into the nitty-gritty of how best to do it. The country’s ruling Liberal Party enacted its carbon tax back in 2016 to much controversy. Former Conservative Party of Canada (CPC) leader Andrew Scheer decried the tax and suggested it was a blow to national unity within Canada. A few provinces with conservative governments—notably Ford Nation (Ontario) and oil-rich Alberta—took legal action against the tax, claiming that it wasn’t constitutional.
Recently, the Supreme Court of Canada decided that the tax was constitutional.
The CPC—which still retains ties with its provincial counterparts despite having a different name—has now proposed its own carbon-pricing scheme. Its strategy is a different beast from the Liberals’ existing policy. This is likely in no small part because the CPC’s relationship with the climate has long (but not always) been strained.
As it stands, Canada’s current carbon tax has placed a CA$40-per-tonne price on CO2 or equivalent emitted by consumers. This sum is slated to increase each year until it reaches CA$170 per tonne by 2030. The hope is that this cost will discourage people from doing things that can result in carbon emissions, like filling up their cars with gas. Practically, it will also allow manufacturers time to design and produce more efficient automobiles and appliances. The timing should also help Canada reach its Paris Agreement Targets.
Currently, 90 percent of the funds garnered from the Liberal tax are evenly redistributed to households around Canada within the provinces from which they came—the other 10 percent returns to various groups like schools, small businesses, and Indigenous communities.
The CPC’s Personal Low Carbon Savings Account plan would also put a price on carbon, starting off at CA$20 per tonne and increasing to CA$50 per tonne but no higher. Rather than the government taking and distributing or using the levied funds, the cash would be added to a savings account set up for each person. This account would be specifically for people to purchase green goods like bikes or energy-efficient furnaces.
Both the Liberal and CPC plans also have provisions for large industrial emitters. Functionally, there’s a cap on emissions, and companies that go over the cap pay in accordance with it. If you go under, you receive a credit that you can sell to other companies. Industrial emitters are also subject to a federal fuel charge.
Ars spoke with Canada carbon-tax experts to get a sense of how the two different approaches stack up. We also reached out to the two parties for comment but didn’t hear back in time for publication—possibly because Canada’s federal budget was just announced.
Pros and cons
Nicholas Rivers, associate professor at the Graduate School of Public and International Affairs at the University of Ottawa, called the CPC’s fuel levy “gimmicky and likely to be ineffective.” He suspects the right-wing party decided to adopt a carbon-pricing policy as a political measure to help it broaden its appeal. However, carbon pricing remains contentious in conservative circles and as such, the Personal Low Carbon Savings Account is something of a misstep as far as carbon pricing goes. Under the Liberal carbon tax, for example, the more fuel a person burns, the more they pay in taxes, which incentivizes people to curtail their carbon consumption. That might not be the case with the CPC’s plan.
“Essentially, it’s taking money out of one of your pockets and putting it right back into the other. That will negate, or substantially mitigate, any incentive the carbon tax would give you to reduce your emissions,” he told Ars. “You’ll pay more tax, but you’ll also get more money in your carbon-savings account.”
Because, under the Liberal tax, the amount people get is not dependent on the carbon they used, the strategy should reduce consumption without disproportionately targeting lower-income people, he said. People who consume more carbon, however, end up paying more carbon tax and only receive what everyone else does.
“I know that if I reduce my emissions, I will pay less tax but still get the same amount of money back in my rebates,” Rivers said.
Rivers also noted that, just in terms of raw numbers, the CPC’s plan is weaker than the Liberal Party’s. If implemented today, the plan would walk back the price on carbon by half—from CA$40 per tonne to CA$20 per tonne. The current maximum price of carbon under the Liberal tax is also more than three times higher than that of the CPC’s proposal. The CPC also hasn’t specified when its levy would end up reaching CA$50 per tonne.
Rivers also noted that it might be tricky to define what a low-carbon purchase is—and thus what the money in the proposed savings accounts could be spent on. The measure could also be an “administrative nightmare,” as it would require every Canadian to go out and get one of these accounts to participate.
Further, while the Liberals’ carbon tax was ultimately deemed constitutional, the legality of the CPC’s has yet to be put through the ringer. That’s not to say the court would not find it constitutional, but it’s unclear at the moment, Rivers said. Right now, provinces can avoid using the federal carbon tax if they implement a comparable or better strategy of their own. The CPC’s strategy only notes that if the party forms a government and enacts its plan, it will work with provinces to implement it. It’s unclear what that would mean or how it would work in practice, Rivers said.
“It’s not at all clear whether they could implement something like this. For many reasons, I think this is not an effective approach. It was designed to be ineffective from the start to satisfy members of the Conservative Party who don’t want this approach,” he said. But he also noted that the plan lacks the details necessary for him to give it a complete assessment.
Climate policy has a “long, long way to go”
Isabelle Turcotte, federal policy director of The Pembina Institute, a Canadian energy think-tank, said that the CPC’s carbon levy represents a welcome change. Despite all the arguments against carbon pricing made by conservative leaders around the country, the right-wing party’s decision to adopt the tactic is now shifting the debate toward how carbon should be priced rather than if it should be priced at all. “It was really great to see the Conservative Party acknowledge how pricing pollution is an essential tool, a very cost-effective and powerful tool to tackle climate change,” Turcotte said. “It’s great for all of us to be operating in a context where climate action is less and less partisan.”
However, she also noted that the CPC’s proposed carbon levy doesn’t make many provisions for reduction goals—like the IPCC goal of reducing CO2 emissions by 45 percent compared to 2010 levels by 2030 and reaching net-zero carbon by 2050. So if the CPC isn’t going to deploy a carbon tax to its full extent, it would need to make up for the carbon reductions elsewhere in its climate plan. The party’s climate plan does make some of these other provisions—such as investing CA$5 billion in carbon capture, utilization, and storage tech. But Turcotte noted that a robust carbon tax could also incentivize the development of this kind of technology, and it might be a better pathway to do so.
She also suggested that the Personal Low Carbon Savings Account idea could be “flipped on its head.” Rather than an account that gets filled up the more a person spends on carbon, there could be a maximum amount within these accounts that decreases each time a person consumes fossil fuels. This could be a more direct and representative way of showing that there is a limit on the emissions each person can generate, she said. If people know that for each tonne of carbon they burn, they get a certain amount of money, there could be a “perverse incentive for those who are able to afford it to just keep racking up the points,” she said.
There are elements within the CPC’s broader climate plan that, Rivers said, are actually good—though it’s likely the carbon levy will inevitably draw more headlines—and they don’t appear in the Liberal climate plan. For one thing, the party promises to mandate that natural gas will need to be 15 percent renewable content (gas that is captured from farms and landfills, for instance) by 2030. That could generate substantial—but not dramatic—emission reductions, he said. The CPC is also proposing a regulation that 30 percent of all vehicles sold be zero-emission, also by 2030.
“There are elements in the Conservative climate plan that are substantive and will generate real reductions,” he said.
The Liberal plan could also use some work. For example, most of the debate surrounding the carbon tax has centered on what it means for consumers rather than large emitters—a matter Turcotte calls a kind of “quiet, nerd debate.” In the Liberal (and Conservative) plans, stronger standards could be set in that area. Further, according to Rivers, the Liberal carbon tax’s current endpoint, CA$170 per tonne, might not be able to reduce carbon emissions to zero, which “is where we really need to be,” he said.
“We have a long, long way to go in climate policy.”