While Prime Minister Mark Carney has so far been preoccupied with the response to U.S. tariffs and differentiating himself from the previous Liberal prime minister, he is expected to also focus substantially on net-zero emissions policies, as he has indicated on the campaign trail and given his past high-level roles on the file.
Values as Private Citizen and Stance as Politician
Carney, who after stepping down as the governor of the Bank of England in 2020 became the U.N. Special Envoy on Climate Action and Finance, outlined his vision on how to build a better world in his 2021 book “Value(s).”“I wrote Value(s) because I believed, even before Covid struck, that we needed radical changes to build a better world for all,” reads the preface of the book.
“The experience of Covid has reinforced the public’s desire for sustainability. The world began to translate this resolve into climate action in Glasgow at the UN Climate Change Conference (COP26) last November [2021], starting to turn what the Industrial Revolution has wrought into the sustainable revolution that our kids and grandkids deserve.”
In his book, Carney says financial institutions should commit to backing companies that have net-zero commitments. This includes companies in “heavy emitting sectors,” he wrote, such as steel, cement, and transportation.
He said net-zero investments can be a major opportunity for Canada, bringing jobs and enabling growth for the economy. Some of these jobs could be realized in the creation of a “zero-carbon electricity grid,” accelerating the adoption of electric vehicles, increasing energy efficiency of homes and offices, and projects involving hydrogen as an energy source and carbon capture.
Carney praised Canada’s carbon tax scheme brought in by the Trudeau government, as well as mandates for the sale of EVs and a net-zero electricity grid, which were highly contested by Alberta and Saskatchewan.
“Effective public policies include carbon prices such as Canada’s legislated path to $170/tonne in 2030 with the proceeds rebated to Canadians, and our commitments to a clean grid and clean cars by 2035,” he said.
“And we can help build a new international economy. Cross-border trade in goods, services, capital, and carbon will increasingly align with countries’ shared values.”
His book adds that the new “sustainable financial system” which he was championing helps developing countries in three different ways. First, they can benefit from the efficiencies developed by “financing investments in sustainable infrastructure” that can be used globally. Second, companies based in developed countries committed to net-zero targets which also have engagements in developing countries will play a role in reducing emissions in those regions as well. And third, he said, net-zero initiatives will result in new market structures that increasingly drive capital flows to developing countries.
“To be clear: companies’ responsibility is first and foremost to reduce absolute emissions. But where they cannot, they should purchase credits to neutralise their residual emissions on the path to net zero,” he wrote.
He said he will provide funding to make buildings more energy efficient and boost the use of electric vehicles. He also said his government would ensure “fairness for Canadian industries on the global stage,” and better integration “with allies in the fight against climate change.”
New Mechanisms
Carney’s initial plan to reduce greenhouse gas emissions released during the Liberal leadership campaign aims at expanding some of the measures and policies put in place by the federal government under former Prime Minister Justin Trudeau.The plan in some cases goes beyond current policies by proposing new mechanisms, such as imposing a tariff on foreign goods that do not meet certain emissions standards.
This measure is called the carbon border adjustment mechanism. Its stated purpose is to help Canadian industries being affected by carbon pricing to compete with other countries that lack such policies.
Carney said in Europe this week that implementing carbon policies is a requirement for diversifying trade away from the United States, which has already slapped two sets of tariffs on Canada.
“Guess what one of the requirements is to diversify trade to the European Union? ... It’s to have a form of a price on carbon,” Carney said in London on March 17. He added that the United Kingdom has a similar requirement.
Fuel Charge
Carney has been a strong proponent of carbon pricing, but he pledged during his leadership campaign he would remove the carbon tax that applies to consumers and small businesses. He followed through shortly after he was sworn in as prime minister on March 14, bringing the rate for consumers to zero. Since Parliament is not currently sitting after being prorogued until March 24 by Trudeau, the Liberals cannot remove the legislation.
Carney has not said the measure was ineffective in reducing emissions, but that it had “become very divisive for Canadians.”
“Perceptions” of the negative impacts of the carbon tax on households without recognition of the rebate’s positive effects had made it “more of a divisive issue,” he said. “It’s been fed by misinformation and lies, quite frankly, by the leader of the Opposition.”
Conservative Leader Pierre Poilievre says the carbon tax has made Canadians poorer, a stance shared by the Parliamentary Budget Officer (PBO) Yves Giroux based on his analysis.
Liberals have argued that a majority of households got more in carbon rebates than they paid in carbon tax, which the PBO has confirmed. However, said Giroux, when tax’s full economic impact is taken into account, the cost of everything from production to transportation increases, leaving most households with a net loss.
Carney does not intend to get rid of carbon pricing that applies to industry. Instead, his plan to compensate for the removal of the fuel charge, which affects consumers and small businesses, is to make “big polluters pay.”
He wants to “improve and tighten” what is called the Output-Based Pricing System for large industrial emitters. The system would be linked to a new consumer carbon credit market that industrial emitters can pay into. That could lead to credit oversupply, which would be managed by tightening emissions targets, resulting in increased fuel prices.
Conservatives have called it a “shadow carbon tax,” saying the new prime minister isn’t being forthcoming with his true plan. Carney, for his part, says the Tories want to “allow our planet to burn.”
A Conservative government would do away with the “entire carbon tax,” said Poilievre, who has made “axing” the tax a key policy plank and slogan in recent years. He said on March 10 his policy on carbon pricing for industry would be released in the upcoming electoral campaign.
He went ahead with the announcement on March 17, saying removal of the tax on industry is necessary to rebuild Canada’s industrial base as the country deals with a trade conflict with its largest trading partner, the United States.
“With lower taxes, we will unleash a massive boom and bring home paycheques and production from the U.S. and other countries,” said Poilievre, who added that technology and not taxes should be used to lower emissions.
Alberta Premier Danielle Smith has said Carney’s plan to shift costs to the industrial sector will damage the economy and raise costs for businesses.
Carney wants to keep “oil and gas in the ground,” said Smith, who has been critical of federal energy regulations that include limits on emissions in the oil and gas sector.
Her province has taken legal action against the federal Impact Assessment Act, which requires environmental evaluations be performed on major projects such as pipelines. The Alberta government says the act in effect kills major projects due to its regulatory burden.
Carney has defended the Impact Assessment Act on the campaign trail, saying it has the necessary provisions to fast-track projects as needed.
Low- and No-Carbon Projects
If Carney and Poilievre disagree on carbon taxes, they agree on the need to remove hurdles to developing emission-free energy projects. Poilievre has repeatedly called for getting rid of obstacles to building homes or energy projects, saying he would “give the green light to green projects.”Carney has promised in his climate plan to reform federal permitting through legislation and “cut red tape to speed up approvals of clean energy projects, including new electricity developments across generation, transmission, distribution, and storage.”
He wants to boost spending on low-carbon projects and industries using “Carbon Contracts for Difference,” under which the government offers financial guarantees for emission-reduction projects if the price of carbon doesn’t reach the $170 per tonne benchmark by 2030.
Carney would also mandate companies to disclose the “climate risk” associated with their activities in a bid to steer investments toward industries that emit less carbon.
Consumer Measures
Along with a plan for industry, Carney pledged to renew several incentives put in place by his predecessor to encourage consumers to lower their carbon footprint.The federal subsidy of $5,000 for the purchase of zero-emission vehicles was put on pause in January after all funds were depleted. The program was due to end on March 31, but Carney said he will reinstate the $5,000 subsidies, gearing them toward low- and middle-income households.
Carney wants to inject new funding into the Greener Homes Grant, a program now closed to applicants that provided up to $5,000 in grants to homeowners performing retrofits on their properties. The Carney plan would target the new money to lower income households.
