Carney says he'll scrap the carbon tax, introduce green incentive program if he becomes leader
'The consumer carbon tax isn't working; it's become too divisive,' Liberal leadership candidate says
Liberal leadership candidate Mark Carney says he will abandon his party's consumer carbon tax and replace the policy with an incentive program that rewards Canadians for making green choices.
He also said that he would work with other like-minded countries to introduce a carbon border adjustment, effectively a tariff, that would ensure countries with weaker climate change policies face financial barriers when they try to export products to Canada.
In making the announcement, Carney took aim at U.S. President Donald Trump for his withdrawal from the climate policies of his predecessors, as well as his attacks on Canada, saying that while Trump steps back from the climate change fight, he will step up.
"With Canada now under attack, it is time to come together. And since Canada's current climate policy has become too divisive, it's time for a new, more effective climate plan that everyone can get behind," Carney said in Halifax on Friday.
"My government would immediately remove the consumer carbon tax, but we won't stop there," he said. "Instead, what we'll do is create a system of incentives to reward Canadians for making greener choices."
While the plan would see a Carney government immediately remove the carbon tax from households, as well as small- and medium-sized businesses, it would keep the output-based pricing system levied on large industrial emitters, which is scheduled to increase over the next decade.
"What that does is it provides a very clear signal to large companies to make the investments now to get their emissions down, to become more competitive," Carney said. "We, in effect, will provide them with more options to reduce emissions because they will be able to pay for the emission reductions of Canadian households."
Carney said the rebate program will be designed to reward Canadians for buying products such as energy efficient appliances, electric vehicles or better home insulation with a fixed dollar amount rebate.
Those consumer rebates will be packaged as a credit that large industrial emitters can purchase and use against their own emissions.
Conservatives call out Carney for winding back support for carbon tax
The Conservative Party reacted to the announcement by saying Carney is trying to "trick Canadians by claiming he hates the carbon tax and will roll it back" when he previously pledged support for the measure.
Sebastian Skamski, a spokesperson for Conservative Leader Pierre Poilievre, told CBC News that as long as the price on carbon remains, "Canadians will continue to suffer under a brand new name."
Carney said that he is abandoning the carbon tax he once supported not because it's ineffective, but because it's become too divisive an issue for Canadians — something that he blamed on Poilievre.
"It's been fed by misinformation and lies quite frankly by the leader of the Opposition, but OK, we are in this situation and it's important that climate policy has broad buy-in," he said.
"There's a better way to do things. We've worked on coming up with a better way to do things, which keeps an element on the price on pollution, the most important element which is the industrial price," he said.
Carbon border-adjustment mechanisms
Carney said his plan would ensure that Canadian companies can compete on a level playing field by penalizing "high-polluting foreign imports."
"We're going to develop a carbon border-adjustment mechanism," he said. "What that does is it promotes jobs here at home, it prevents carbon leakage abroad and it aligns Canada with our allies who are still engaged in the fight against climate change."
The EU began implementing its carbon border-adjustment mechanism in 2023 by collecting information about emissions generated by the production of different goods. It will begin collecting carbon tariffs in 2026.
Initially, the fees will be applied to materials that traditionally generate lots of emissions to produce and have a lot of global competition, such as iron, steel, cement, fertilizers, aluminum, hydrogen and electricity.
Imports from countries with comparable carbon pricing would not need to pay the EU's carbon border tariff.
Skamski told CBC News that adding a "carbon tax at the border guarantees prices for gas, heating and groceries [will] go up and lines at food banks [will] increase."
Carbon pricing falls out of favour
The consumer carbon tax began in April 2019 at a cost of $20 a tonne and increased by $10 a year to $50 by 2022, when it began rising by $15 a year. In April 2024, it increased to $80 a tonne, on its way to hitting $170 a tonne by 2030.
The federal carbon price, or backstop, does not apply in Quebec, British Columbia and the Northwest Territories because they have their own carbon-pricing systems that meet the federal standard.
In provinces using the federal backstop, the price on carbon is applied to emitting fuels through fuel charge rates that vary from fuel to fuel based on the amount of CO2-equivalent emissions they generate when burned.
Ninety per cent of government revenues from the carbon tax are returned to households through Canada Carbon Rebate payments issued every quarter.
The other 10 per cent of carbon tax revenue is directed to programs that help businesses, schools, municipalities and other grant recipients reduce their fossil fuel consumption.
The Office of the Parliamentary Budget Officer (PBO) has found that most households — particularly those at the lower end of the income scale — end up profiting when what they pay through the carbon price is offset by what they receive in rebates.
Erin O'Toole, who served as Conservative leader in the 2021 federal election, campaigned on his own carbon pricing policy. But current Conservative Leader Pierre Poilievre has made eliminating the tax a central part of his opposition to the Liberal government.
Former finance minister and deputy prime minister Chrystia Freeland, who is also running for the Liberal Party leadership, has told CBC News that should she win the contest she will also scrap carbon pricing.
Freeland's campaign said the policy replacing the tax would be developed in collaboration with the provinces and territories.
Despite the two front-runners in the leadership now pledging to cut the tax, Karina Gould, the former government House leader challenging them for the leadership, has only promised to hold the tax at its current level.
The Liberal leadership will be decided in a vote on March 9.
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