Mark Carney portrays himself as a political outsider and Liberal leadership candidate who represents change. One of his few policy proposals is to replace the consumer carbon tax with a complex regulatory scheme that will result in a higher industrial carbon tax on big emitters and subsidies for consumer purchases of environmentally friendly products. Further he will place tariffs on products from countries with weak carbon policies as well as tighten financial regulations that will make it more difficult for big emitters to raise capital. Canadian taxpayers will not be better off since companies will pass on their increased costs to consumers, who will lose the consumer carbon tax rebates, and only prosperous Canadians will be able to take advantage of subsidies for products like electric cars.
The bigger question is: does Carney’s plan represent change or is it merely a continuation of the main elements of the Trudeau Liberals’ environmental policies which have contributed to a decline in investment, stalled economic growth and federal-provincial gridlock?
Like the Trudeau Liberals, Carney focuses on complex regulations and taxes to reduce emissions, citing supposed European success in implementing such policies, even though electricity prices in Europe are among the highest in the world. He also claims that under the presidency of Donald Trump, American progress on climate change will languish, providing an opportunity for Canada to leapfrog ahead of the United States in environment policy leadership, which will enhance Canada’s competitiveness in the future when a country’s carbon footprint will be a major factor in investment.
There are several problems with this argument. First, Canada is not a European country. It is a North American country whose main trading partner is the United States and whose main export is energy, which provides significant revenue to fund Canadian programs and services. American environmental policy does not have the same emphasis on regulation and taxation as European countries. The Biden administration, through the Inflation Reduction Act, stressed investment in technology and subsidization, while Trump is rolling back environmental measures.
While a country’s carbon footprint will be a factor in competitiveness, other factors are more important. Canadian competitiveness was one of the main concerns of the Saskatchewan Economic Assessment Tribunal which was commissioned in late 2023 to report on the economic costs of federal energy-environmental policies. A critical finding was that tax and regulatory regimes were the main factors driving North American competitiveness. That is, if Canada has more onerous regulations and taxes, production and capital will shift to other countries, with no decline in global emissions.
As well as continuing the Trudeau government’s reliance on complex regulations, Carney shares Trudeau’s view of the primacy of the federal government in environmental policy, even promising to be more aggressive in exercising federal powers. However, the provinces share jurisdiction with the federal government over the environment and have their own jurisdiction over natural resources; thus, successfully implementing environmental policy requires federal-provincial co-operation. Instead, the Trudeau government has unilaterally imposed environmental measures, and the provinces have responded with court challenges, with parts of the Impact Assessment Act being declared unconstitutional by the Supreme Court. The Saskatchewan tribunal found that federal-provincial gridlock and uncertainty about the future of environmental policy were deterring investments in energy and in technologies to reduce emissions.
Carney’s continuation of Trudeau’s approach to environmental policy and his aspiration to surpass Americans in environmental leadership is at odds with his promise to promote economic growth. Complex environmental regulations undermine Canadian competitiveness, which is especially problematic since we are a North American country whose main export is energy.
An economic growth agenda requires major changes in our environmental policies, with our competitiveness as a main consideration. The federal government should seek an expedited reference to the Supreme Court regarding the constitutionality of federal environmental policies, like the cap on oil and gas emissions, to clarify the respective jurisdictions of the two levels of government. Further, the federal government should coordinate its environmental policies with those of the provinces, so that they are working together not working against each other. And we should build on our successes. The current carbon tax on big emitters, which is supported by all provincial governments, has resulted in major emissions reductions since the revenue collected from the tax is invested in emissions reducing technologies.
Mark Twain said, “History doesn’t repeat itself, but it often rhymes.” Carney’s approach to environmental policy is not identical to Trudeau’s, but it rhymes.
Janice MacKinnon is vice-chair of the Saskatchewan Economic Assessment Tribunal.