Read more in the March 21 edition of Invert Insights.
Canada’s newest Prime Minister wasted no time abolishing what has become known as the Canadian consumer carbon tax. In his first move as Prime Minister after being sworn in a week ago, Mark Carney signed a directive removing the federal consumer carbon pricing scheme on April 1 while still honoring the upcoming April consumer rebate. After becoming a point of contention among Canadians, Carney feels the current policy has become too divisive and promised a much bigger set of measures to ensure Canada participates in the fight against climate change while keeping Canada and Canadian companies competitive into the future.
Mark Carney, a long-time proponent of climate action, has previously stated that the goal of net zero is the greatest commercial opportunity of our time. Ahead of COP26 in 2020, Carney shared “Achieving net zero emissions will require a whole-economy transition – every company, every bank, every insurer and investor will have to adjust their business model. This could turn an existential risk into the greatest commercial opportunity of our time.”
When asked to elaborate by the United Nations in an interview he explained “Climate change is an existential threat. We all recognize that, and there’s increasing urgency around it. But the converse is, if you are making investments, coming up with new technologies, changing the way you do business, all in service of reducing and eliminating that threat, you are creating value. And what we have seen increasingly, spurred initially by the Sustainable Development Goals, accelerated by Paris, and then by social movements and governments, is societies putting tremendous value on achieving net zero. Companies, and those who invest in them and lend to them, and who are part of the solution, will be rewarded. Those who are lagging behind and are still part of the problem will be punished.”
When asked specifically about carbon credits, Carney replied “They play a complementary role in getting to net zero, which is fundamentally about absolute reduction of emissions. We know we have a limited carbon budget. On some measures we only have 10 years left at current emissions rates before we have blown through 1.5 degrees of warming and moved to more catastrophic levels. So we need to preserve and extend that budget as much as possible. Carbon offsets help do that. This is a market that is really being driven by corporate ambition and commitment to net zero. Companies need to know that offsets are real, that carbon is actually being reduced, or else they cannot put it in their annual reports and disclosure. The vast majority of offsets will flow to emerging and particularly developing economies for reforestation, for nature-based solutions and for the development of renewable power and other low-carbon sources, potentially on a scale of $100 billion plus a year for parts of the world that need it the most. So it is an incredibly important market, but as with everything with climate we need to put it in perspective. In no way is this a silver bullet that removes responsibility from anyone for reducing absolute emissions.”
As for what the future holds, experts say an election will be called this Sunday, March 23, setting up a vote on either April 28 or May 5. Currently, polling shows the Liberals even with the Conservatives, with some polls showing the Liberals entering into majority win territory. This week Poilievre announced that if elected he would repeal industrial carbon pricing under the Greenhouse Gas Pollution Pricing Act (GGPA), including the federal backstop that requires provinces to impose an industrial carbon tax. Instead, the Conservatives promised to use technology, not taxes to protect the environment by expanding the Clean Technology and Clean Manufacturing Investment Tax Credits (ITCs) incentivizing heavy industries to make products with lower emissions than the world average. It’s worth noting that when asked whether he would set or maintain any emissions targets for Canada, he did not specify, citing that his focus would be on the economy and helping hold global counterparts accountable for their emissions instead. Many groups including the Pembina Institute and the Canadian Climate Institute have highlighted how this plan puts an additional burden on Canadians rather than the highest emitters while slowing innovation and allowing for uncertainty around investments in Canada. Introducing instability into the economy by not having consistent emissions pricing and trading systems leaves the country open to a reduction of global competitiveness, and potentially a loss of longer-term investments in Canada’s economy.
In comparison, Mark Carney released A New Climate Plan, his proposed climate policy plan intends to lower costs for Canadians while investing in the economy, sparking innovation, and creating new jobs. The plan is incentive-based, rewarding Canadians for making carbon reductions specifically at home and with their transportation. Carney instead proposes shifting the focus to the biggest polluters through a tightened output-based pricing system (OBPS) and promises incentives toward green buildings and electrified transportation. He has also indicated he will work to develop a Carbon Border Adjustment Mechanism, a tariff applied on imported carbon-intensive products that helps keep Canadian products competitive while rewarding lower-emission producers.
Invert Insights.
💡 It’s refreshing to see climate action accepted as an economic advantage rather than an act of advocacy. There are real economic benefits to decarbonization and developing effective public policy to support this transition is very much needed. When done correctly, this has a chance to not only boost Canada’s decarbonization efforts but also strengthen and enrich the economy.
💡 Even with the ‘tax axed’, Canadians can still expect a very divisive and contentious federal election, largely due to the mounting pressure and economic instability caused by the United States and the Trump administration. It’s encouraging to hear that Mark Carney and the Liberals will work to reunite Canadians – something that’s already being felt as Canada responds to US tariff threats.
💡 This is Canada’s opportunity to shine on a global stage. With the relationship between their largest trading partner strained, Canada will seek to replace imports and exports with other countries opening up global opportunities for new relationships and allies. Further, investing in Canada’s economy and infrastructure to make Canada less reliant on external trade will provide much-needed safety and security over the long term. Through the lens of climate action, focusing on the development of new technologies like carbon dioxide removal (CDR) can provide significant economic benefits for Canada by positioning them as a global leader, fostering innovation, creating jobs, and enhancing global competitiveness.
