In a move that has raised concerns among business leaders, Finance Minister Mark Carney's latest budget imposes additional carbon tax increases on Canadian industries already facing significant economic challenges. This decision comes despite evidence showing these measures have done little to reduce the country's environmental footprint while substantially harming Canada's competitive position in global markets.
The Long Road to Net Zero
The foundation for Canada's current climate policy was laid in 2015 when the newly elected Trudeau government signed the Paris Agreement. The following year saw the implementation of the Pan-Canadian Framework on Clean Growth and Climate Change, which introduced more than 50 separate measures aimed at reducing carbon emissions and promoting clean technology development.
The centerpiece of this framework was economy-wide carbon pricing - what critics describe as a carbon tax by another name. Subsequent measures culminated in the 2030 Emissions Reduction Plan announced last December, which set ambitious targets of cutting emissions to 40 percent below 2005 levels by 2030 and achieving net-zero emissions by 2050.
This plan allocated $9.1 billion for various initiatives including building retrofits, subsidies for zero-emission vehicles, charging station construction, and support for solar panels and wind turbines. It also mandated the phase-out of coal-fired power generation and proposed stringent emission standards for vehicles and buildings.
Mounting Costs, Minimal Results
Additional green initiatives have included an on-farm climate action fund, a nationwide reforestation program aiming to plant two billion trees, the Green and Inclusive Community Buildings Program to promote net-zero standards in new construction, and a Green Municipal Fund to support municipal decarbonization efforts.
Despite this comprehensive approach and substantial financial investment, the results have been disappointing. According to researcher Bjorn Lomborg, fossil fuels' share of Canada's energy supply actually increased from 75 to 77 percent between 2015 through 2023, following the election of the Trudeau government.
The Fraser Institute has calculated that Ottawa and the four largest provinces have either spent or foregone a staggering $158 billion to create just 68,000 clean energy jobs. This investment increased the green economy's share of GDP by a mere 0.3 percentage points to 3.6 percent, at an eye-watering cost of over $2.3 million per job created.
Impact on Canadian Industry
The climate policies have taken a particular toll on Canada's energy sector, which remains a crucial contributor to the national economy. The Trudeau government cancelled the Northern Gateway oil pipeline to the northwest coast - which had received approval from the previous Harper government - costing project sponsors hundreds of millions of dollars in pre-construction expenditures.
The political and regulatory challenges created by the Liberal government eventually led to the cancellation of all but one of 12 proposed LNG export projects, representing significant lost economic opportunities for Canada.
The global context provides little comfort for proponents of aggressive climate action. A decade after the Paris Agreement, approximately 80 percent of the world's energy still comes from fossil fuels, with world energy demand up 150 percent. Achieving net zero emissions by 2050 would require removing the equivalent of the combined emissions of China and the United States in each of the next five years - a goal Lomborg describes as being in the realm of science fiction.
A recent U.S. Department of Energy report issued in July offers grounds for optimism about continuing fossil fuel use. The report finds that claims of increased frequency or intensity of hurricanes, tornadoes, floods and droughts are not supported by U.S. historical data. It further concludes that CO2-induced warming appears to be less damaging economically than commonly believed and that aggressive mitigation policies could be more detrimental than beneficial.
As Canadian businesses struggle with the latest carbon tax increases, questions remain about whether the economic costs of these climate policies are justified by their environmental benefits, particularly when they put Canadian companies at a competitive disadvantage in international markets.
