Five years into carbon pricing, Canada’s emissions still rising; shaky policy needs firm commitment

It has been over a century since, in the late 1800s, a Swedish scientist first calculated how increases in atmospheric carbon dioxide could raise Earth’s surface temperature. That was in 1896. Thirty-three years ago, the Nordic country implemented one of the world’s first carbon taxes (second only to Finland which introduced a system the year prior). While Sweden has been leading the way for decades with legislation to avoid extinguishing our way of life, Canada has failed to meet every single one of the ten climate agreements it has been a signatory to.

When the Swedish people drew a line in the sand, some 35 years ago, demanding that politicians and anyone else claiming to represent them commit to a carbon tax, it was a powerful message to the world—even if so much of our daily life and our economic livelihood was dependent on the fossil fuel industry, its survival will mean the end of ours. 

In 1991, the Swedish Parliament implemented a carbon tax on top of the existing energy tax to reduce emissions from some of the nation’s worst polluters. The reform saw environmental taxes increase exponentially while others decreased. Changes have been made to the policy since its implementation, but the Swedish model has always been characterized by a high tax rate levied on fossil fuel producers. The price on carbon in Sweden was $26 US per metric tonne of carbon dioxide equivalent at the time, the equivalent of about $60 US in 2024 dollars. By 2004, the levy rate had increased to $90 US and in 2020 it sat at $126. 

The heavy cost to polluters forced innovation, as antiquated features of daily life, for example the use of heating oil for homes in the winter, gave way to clean technologies, which also brought immediate cost benefits to consumers. 

While Sweden’s carbon tax revenue is not earmarked for any specific use — it goes toward the general government budget — the policy has steadily reduced greenhouse gas emissions. Between 1990 and 2018 they decreased 27 percent in Sweden with the largest reductions from home heating and industrial facilities, spurred by the carbon tax and subsequent innovations toward a clean energy grid. Despite the success, some experts argue the potential for emissions reductions is far greater than what has been achieved.

Sweden’s emissions are still decreasing exponentially. Its carbon tax policy has shifted the way governments deal with polluters. 

In Canada, however, the lesson has not been learned. 

Over the same three-decade period that Sweden achieved a 27-percent reduction in emissions, Canada’s rose 23 percent. 

Since 1990, Sweden has seen a downward trend in emissions save small spikes following the 2008 financial crisis and 2020 global pandemic. Canada’s emissions have continued to steadily rise.

(Our World in Data)

For five years Canada has had a price on carbon. But after declines experienced during the 2008/09 financial crisis and the 2020 global pandemic, emissions are skyrocketing. In 2022, national emissions were almost 40 percent above the target of bringing emissions down 40 to 45 percent below 2005 levels by 2030. Emissions had actually increased 2.1 percent from the previous year, part of an upward trend, pushing the country in the wrong direction. Even accounting for the effect of the pandemic, the pattern has been troubling.

The Liberal government’s policy to tax polluters is increasingly coming under scrutiny by opposition politicians on both sides of the aisle. 

Conservative leader Pierre Poilievre has made it clear the next federal election will feature the carbon tax at the centre of his platform. After the Liberals exempted home heating oil—initially to help those who used the energy source in Atlantic Canada—the Conservative leader began pushing for carve outs for all forms of home heating. He said it’s a compromise, until his party, if elected, ‘axes the tax’ completely. 

Poilievre is backed by the nation’s Conservative premiers. Saskatchewan’s Scott Moe made demands to have natural gas for home heating exempted and stated on X in October that if the exemption wasn’t granted by the federal government, starting January 1 SaskEnergy would stop collecting and enforcing the carbon tax on natural gas. Alberta Premier Danielle Smith continues to threaten legal action against the Liberal government over the policy.

While Minister of Environment and Climate Change Steven Guilbeault has admitted the Conservatives are framing the narrative on carbon pricing, he promises clearer communication from the government regarding its policies. He says the carbon tax, used by over 50 countries around the world to decrease reliance on fossil fuels and transition businesses, industry and individuals to lower carbon lifestyles, is not going anywhere. 

The carbon tax is reflected in the price of gas at stations across Canada.

(Raysonho/Wikimedia Commons)

Carbon taxes and an Emissions Trading Scheme (ETS) are the two most common forms of carbon pricing, each with its own positives and drawbacks. A strict carbon tax targets individual consumption, while the latter targets emitting industries.

“These two types of systems address different types of emissions and are ultimately trying to get different parts of carbon emissions in the Canadian economy,” Janetta McKenzie, acting director of oil and gas at the Pembina Institute, told The Pointer.

The carbon tax system puts an additional charge on emissions-based activities in the same way that GST is added onto most goods and services purchased within the country — exceptions include groceries, rent and other critical goods and services. The carbon levy is dependent on the concentration of greenhouse gas emissions. For example, natural gas is far more carbon intensive than using clean electricity (especially in provinces like Ontario where approximately 90 percent of the electricity is from clean sources). Prolonged use of a natural gas furnace for home heating would prompt a higher total tax than electricity use because the rate of carbon intensity is much greater. In 2019, the federal government introduced the carbon tax to provide a financial incentive for individuals and businesses to begin transitioning to lower carbon lifestyles. 

“The consumer carbon tax is ultimately trying to change behaviours,” McKenzie said. “It's trying to result in people making lower carbon choices and reducing emissions from that demand side.”

Canada’s system is designed to provide additional benefit to those who produce less emissions, rather than penalize those who produce more. All of the revenue generated within each province is invested back into the same province. Ninety percent is returned to households through a government rebate program. The remaining ten percent is channeled into programs to help businesses, schools and municipalities reduce emissions.

Under the Canadian system, two residents in Ontarians — Person A has twice the carbon footprint of Person B — would receive the same amount back under the rebate program. However, Person B, with the lower carbon footprint, would have paid less in carbon taxes.

“If you're talking about environmental effectiveness, like reducing emissions, then the revenue is secondary,” Dale Beugin, executive vice president of the Canadian Climate Institute, told The Pointer. “You get emissions reductions from the programs as well as emissions reductions for people trying to avoid paying the carbon price by adopting energy efficiency or to our electric vehicles.”

While 90 percent of carbon tax revenue is returned to consumers, Beugin explained they are also indirectly on the hook for many of the additional costs associated with the levy. He used the example of a plumber in a small town who would have to pay a heavy tax associated with emissions from the vehicle they drive. However, since every plumber is in the same situation, they can just charge a higher rate to consumers to cover the carbon tax.

“Those costs are ultimately borne by households,” he said. “So most of the rebate needs to go to the households.”

One of the most common arguments against the carbon tax is that it places greater stress on the cost of living, McKenzie said. She challenged this, referencing multiple analyses that show most Canadians receive more back from the rebate program than they pay in initial carbon tax.

“So most Canadians are better off under this consumer carbon tax. And the Canadians that pay more in carbon pricing than they receive, tend to be higher income households that have a bigger carbon footprint.”

Home heating is one of the biggest contributors to an individual’s carbon footprint.

(Alexis Wright/The Pointer)

Instead of holding firm on its carbon pricing policy, the Liberal government has chosen to move the goalposts. It has pushed a green agenda, led by an Environment Minister who was a former activist with Equiterre and Greenpeace, drawing criticism from right leaning Canadians, politicians and organizations. By making concessions, offering up loopholes for oil and gas companies — most recently describing its position on the Oil and Gas Emissions Cap as one that will not impact production — environmental organizations and citizens who prioritize climate action have questioned how the Liberals are using carbon pricing. 

Environmental organizations and think tanks stress that a carbon tax cannot work independently as the sole mitigator of harmful emissions. 

“If you were doing everything with carbon pricing, then what other things do you need to fill in the gaps?” Beugin said. “That's sort of a theoretical question, because we're not doing everything with carbon pricing. We don't have carbon prices that are high enough or certain enough to get us all the way to our targets. But even in that hypothetical, theoretical world, you want to make sure you're covering all the emissions carbon pricing doesn't.”

Governments cannot put a price on things they cannot measure. Therefore, other policies are needed for methane leaks, upstream oil and gas activities, agricultural emissions and other causes of pollution. 

The federal government has published a draft of its Clean Electricity Regulations (CER) that will help the country transition to a net zero electricity grid by 2035 and an entire net zero economy by 2050. But organizations like the Clean Air Alliance identified loopholes within the draft regulations that would allow for continued production and use of natural gas. This, critics say, is an example of a lack of firm policy to work alongside the carbon tax to achieve the overall emissions reductions that have been elusive in Canada. 

Near the end of last year, the Liberals announced their signatory position on the Global Methane Pledge at COP 28 and reconfirmed commitments to decrease methane emissions from the oil and gas sector 75 percent below 2012 levels by 2030. The draft regulations came alongside the federal announcement of the Oil and Gas Cap framework that limit emissions from the sector to 35 to 38 percent below 2019 levels by 2030, equivalent to approximately 40 to 46 million tonnes of greenhouse gas emissions. Environmental advocates have criticized the cap for not proportionately targeting the oil and gas industry for its outsized contribution to emissions, while conservative premiers like Alberta’s Smith criticize the cap as one that directly hurts production, potentially threatening the province’s biggest industry sector and the livelihood of all Albertans.

A country like Sweden, which produces less than one percent of the oil Canada produces, and consumes less than half the amount of oil and gas per capita compared to Canada, simply does not have the same economic and lifestyle relationship with fossil fuels that we do. 

Despite recent efforts to commit itself to emissions reductions, Canada is falling far behind nations like Sweden, and many of the 50 others that have implemented similar carbon pricing schemes.

Our country has the second highest per capita oil consumption in the world, only behind Saudi Arabia, and while much of this carbon footprint is linked to our geography and climate, lifestyle choices and poor land use planning that have nothing to do with these factors are major contributors to Canada’s outsized carbon footprint. 

A premier like Doug Ford, who makes decisions on behalf of 40 percent of Canadians, isn’t forced to push sprawl as a housing model, creating billions of extra tonnes of emissions from single-occupancy-vehicle-commuting and the heating and cooling of large homes, but he has taken his direction from the subdivision home construction industry which realizes large profits from building sprawl. Meanwhile, more Canadians and municipal governments are trying to adapt to low-carbon lifestyles that are supported by carbon taxes as a way to transition to smaller homes in dense, complete communities that are walkable and have plenty of transit options.

The Liberal government, through its recent Housing Accelerator Fund, which delivers large grants (Mississauga and Brampton have just been approved for almost a quarter of a billion dollars, between the two cities) to incentivize density and transit investments across Canadian cities, is finally aligning its carbon tax with supportive land use and transportation policies that have previously been controlled at the provincial and municipal level. These types of policies should have been in place before the carbon tax was rolled out.   

Without these types of government actions Canada will continue to move in the wrong direction compared to other countries. In 2022, Canada emitted approximately 15.2 metric tonnes of carbon dioxide equivalent per person, four times the per capita emissions of Sweden.

Progress reports have determined that Canada will continue along the same emissions trends, failing to meet its climate targets. The Liberal government succeeded in emphasizing environmental policies as part of its platform in both 2015 and 2019. But recent audits from Canada’s Environment Commissioner show the government has fallen far short of its commitments. 

 

(Office of the Auditor General of Canada)

The federal Emissions Reduction Plan does not include a target or expected reduction for 76 (95 percent) of the 80 actions identified. Failure to provide a target makes tracking of progress exponentially more difficult and allows polluters to ignore taking action. Despite the overall target of achieving a 40 to 45 percent reduction in emissions below 2005 levels by 2030, nearly half of the measures in the plan have no deadline. Coupled with delays in implementation of the oil and gas emissions cap and other policies, like the slow uptick of electric vehicles, the audit concluded that Canada will once again miss the 2030 emissions target.

The Conservatives claim we can achieve environmental sustainability without ambitious policy, with no clear plan to lower emissions. Beugin stressed that while emissions are still rising across Canada, these increases are much more subtle than they would be without any carbon pricing policy in place.

“That's a hard thing for people to internalize because the fact is, without policy, emissions would have kept going up. Leveling off of emissions, as we've seen nationally, is actually a pretty big success, but not enough. We need to do more to get to targets,” he said. “But it's been a big driver of that progress that we're seeing, relative to historical emissions.”

British Columbia has had its carbon pricing scheme in place since 2008 and has seen a shift in the trend of the emissions trajectory providing hope for the rest of the country.

McKenzie said it is crucial in order for the carbon price to remain competitive, that it keep increasing. Canada’s current price sits at $65 per metric tonne of carbon dioxide equivalent and is set to increase by $15 per year until it reaches a price of $170 in 2030. 

“We'd like to see more certainty where the price is going. So eventually, we're going to need to see the expected trajectory of prices beyond 2030. Just the loss of these investments for big projects reduces emissions half lives longer than seven years,” Beugin said. “So what the price post 2030 is matters a lot.”

“Our analysis at the Climate Institute says that all the things we have, carbon pricing plus regulatory policies plus subsidies, gets us within spitting distance of our 2030 target, if we implement them all as quickly as we can. That puts an urgency for implementation not just on carbon pricing, but for the other [policies].”

If successful, Canada’s carbon pricing scheme will account for up to one-third of emissions reductions in 2030. There is international consensus that carbon pricing is needed. But Conservatives want to scrap it; and the Liberal government has failed to find the political will to commit to it. 

Email: [email protected]

Twitter: @rachelnadia_

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