John Woodside, Local Journalism Initiative Reporter, Canada's National Observer

Conservative Party Leader Pierre Poilievre’s new promise to kill industrial carbon pricing  would  eliminate the central plank of Canada’s emission-reduction efforts, while making Canada’s economy less competitive in the long run,  experts say. 

Poilievre has long railed against the consumer carbon price, which Prime Minister Mark Carney removed  as one of his first actions in office on Friday. But following that  move, Poilievre is keeping the debate alive. On Monday, he drew new  battle lines over climate policy, saying that if elected, he would repeal the industrial carbon price (known as the output-based pricing system or large-emitter trading system), which is the single biggest driver of emission reductions in Canada. 

Even  heavy industrial companies and organizations have expressed support for  the system, which is projected to be responsible for as much as half of  Canada’s emissions reductions by 2030.

Close  observers note the decision does not make economic sense, and would  represent a massive blow to emission reduction efforts. As such, it is  far more likely to be a politically-driven decision than one guided by a  desire to lower prices for consumers or better position Canadian  industries, those interviewed by Canada’s National Observer say.

“It  reeks of desperation, to be honest,” said Chris Bataille, an adjunct  research fellow at Columbia University and expert on industrial  emissions. Conservatives have been dropping in the polls, as Liberals  have rebounded, leaving Poilievre in a position of wanting to catch the  public’s attention, he said. 

According to an Angus Reid poll  of voter intentions published Monday, Liberals under Prime Minister  Mark Carney have surged to 42 per cent support. The Conservatives have  dropped to 37 per cent support, after having held about a  20-percentage-point lead in polls only a few months ago. If those  numbers hold, Liberals are projected to secure a majority government,  having now picked up extremely valuable support in seat-rich Ontario. 

It’s  against that backdrop Poilievre pledged to repeal industrial carbon  pricing. He characterized it as a tax that, if removed, would make the  economy more competitive with the United States. 

“We  will take the carbon tax off your gas, heat and food,” he said. “But we  will also axe the tax on Canadian steel, aluminum, natural gas, food  production, concrete and all other industries.”

If  economic competitiveness is the goal, removing industrial carbon  pricing is the wrong approach, said Bataille. The European Union has  carbon pricing, and next year will implement a carbon tariff — called a “carbon border adjustment mechanism”  — that effectively imposes a tariff on goods imported into the EU that  have high carbon emissions. In other words, if Canada removes industrial  carbon pricing, then its exports to the EU would face the carbon  tariff, making those goods less competitive overseas. 

“What  [Conservatives are] effectively saying with this is we don’t care; our  bread is buttered with the Americans, and we don’t think the Americans  are going to move to significant carbon pricing or border carbon  adjustments anytime soon,” Bataille said. 

“Us  removing our industrial price is not only offside with the Europeans …  but we may end up offside with the Americans,” Bataille added. That’s  because even though U.S.President Donald Trump is a noted climate-change  denier intent on boosting fossil fuel production, legislation is  working its way through Congress that could see a carbon tariff  implemented. 

For years, Republican Senator Bill Cassidy has been trying to put into action his “Foreign Pollution Fee Act” that would see carbon tariffs imposed. While the goal is at least partly to curb greenhouse gas emissions, the policy is a direct shot  at Chinese manufacturing. By making it more expensive to import high  emission goods from China using a carbon tariff, the goal is to reshore  American manufacturing. 

Hadrian  Mertins-Kirkwood, senior researcher with the Canadian Centre for Policy  Alternatives, said, given Europe is moving towards carbon tariffs, it’s  counterproductive to ditch industrial carbon pricing.

“As  the rest of the world — not just the EU, not just Canada, not just  China — is trying to decarbonize, demand for cleaner goods is going up,  and I think we’re going to see more things like carbon border  adjustments among likeminded countries in the coming years,” he said.  “Getting rid of industrial carbon pricing aligns us with the U.S. at a  moment when we want to be moving in the opposite direction.”

If  the economics of ditching industrial pricing make little sense,  Mertins-Kirkwood said Poilievre’s latest pitch can be explained by the  Conservatives’ desire to return to a winning formula. 

“By  making this political shift from consumer pricing, which is now a moot  point, to industrial carbon pricing, they can keep the same line: ‘We  are against carbon pricing, and the Liberals support it, and you should  vote for us,’” he said. 

In October, RBC published an analysis of carbon pricing that found industrial pricing could be a strategic asset for Canada in an era of low-carbon trade. 

“As  countries fuse their economic, environmental and geopolitical  objectives, there is a growing imperative to link trade and climate  policies,” the bank said. “In the new trading paradigm, Canada has the  opportunity to compete in the exports of low-carbon goods, while also  navigating market disruptions caused by emerging clean tech  innovations.”

That’s because “Canada  already has a head start in this low-carbon competition,” the analysts  wrote — and Canada has the industrial carbon price to thank. “By  fine-tuning and crafting policy that delivers emissions reductions  domestically without compromising our competitiveness, Canada can gain  an advantage in the new low-carbon economy.”

‘Not a serious person’

Catherine McKenna, principal of Climate and Nature Solutions and Canada’s former environment and climate change minister, told Canada’s National Observer that Poilievre is simply trying to recycle “an old tired slogan.”

“Pierre  Poilievre is not a serious person, he’s never been a serious person,”  she said, contrasting the Conservative leader with Carney, who was in  Paris and London Monday, meeting with French President Emmanuel Macron  and U.K. Prime Minister Kier Starmer — two leaders she said were serious  about climate change, not just because of its massive societal cost,  but also because of economic opportunities presented by the energy  transition. 

McKenna said Poilievre is playing political games, and Canadians and politicians alike should not get sucked in. 

“I  say this as someone who cares greatly about climate change, but what  Canadians want is someone serious that can deal with Trump tariffs,  stand up for our economy, work with allies and also defend our  sovereignty, including and especially in the Arctic,” she said.

“He’s  going to continue to play games. He’s going to continue to use his  slogans, and I think we just need to be very disciplined and focus on  real concerns that Canadians have that are absolutely 100 per cent  legitimate.”

In a statement, Carney’s  office said it’s clear that Poilievre’s “opposition to having an  environmental plan has always been designed to let the biggest polluters  off the hook.”

“Instead of rewarding the  biggest polluters and making Canadians pay, our new climate plan will  reward Canadians for greener choices and make the biggest polluters pay  their fair share,” a spokesperson said. 

Laurel  Collins, the NDP environment critic, said in a statement that  Poilievre’s goal is to help oil and gas companies pay less tax, but  added that Carney is not the answer. 

“The  Liberals have been giving big oil and gas CEOs billions of dollars in  subsidies. That won’t change with Carney, who invested billions of  dollars in coal and oil,” she said.  

“We  can create good jobs by investing in building an East-West energy grid  for electricity transmission and Building and Buying Canadian —  including using 100 per cent Canadian steel,” she said. “We can fight  the climate crisis and make big polluters pay.”

Some  right-wing premiers are supportive of Poilievre’s proposal. On Monday,  Saskatchewan Premier Scott Moe, who last year bucked federal law by  ordering the province’s utility SaskEnergy to not collect the federal  consumer carbon price, said the industrial carbon price should be repealed. 

And on Friday, hours after Carney repealed the consumer carbon price, Alberta Premier Danielle Smith said  she was “gravely concerned that plans to significantly increase the  industrial carbon tax will be just as damaging to Alberta’s economy as  the consumer carbon tax has been.” 

A Timbit a barrel

Industrial carbon pricing is the workhorse  of Ottawa’s emission-reduction plan, by requiring companies to pay a  carbon price if they exceed a certain threshold of emissions intensity.  Companies that pollute more than they’re allowed must buy credits to  compensate, while companies that emit less than their threshold generate  credits to sell. 

A briefing note prepared for a federal deputy ministers’ meeting on the net-zero energy transition, obtained by Canada’s National Observer  using a federal access to information request, describes the  far-reaching impact of the carbon pricing systems as pushing costs up  for “poor performers,” while offering options to generate more revenue  for firms that can sell carbon credits. 

The  risk of companies passing the cost on to consumers in industrial  pricing is “minimal,” the briefing note reads, “because facilities  compete in international markets.” 

Industrial  pricing provides regulatory certainty over long time periods, which is  typically demanded by companies investing hundreds of millions, if not  billions, of dollars in decarbonization. 

In  October, representatives from heavy industries, including the Canadian  Steel Producers Association, Alberta’s Industrial Heartland, Canadian  Manufacturers and Exporters, cement giant Lafarge, and the Chemistry  Industry Association of Canada (representing plastics manufacturers and  other refineries), wrote to provincial environment ministers, calling industrial carbon pricing “the backbone of decarbonization.”

The  groups argued that industrial pricing is important, but should be  improved to deliver steeper emission reductions and improve global  competitiveness. 

The Business Council of  Canada declined to comment Monday, but it has been a longtime supporter  of carbon pricing. In 2007, the influential lobby group endorsed using price signals to achieve emission reductions in the Canadian economy. 

“Carbon pricing represents a market-based approach to reducing emissions. But carbon pricing alone is not the answer,” said Goldy Hyder,  president of the Business Council of Canada in 2021. “To prepare for  the future, businesses require a stable and predictable regulatory  regime that allows them to attract the capital they need to invest in  innovative technology and climate solutions.”

According  to the Canadian Climate Institute, industrial carbon pricing is the  most important climate policy for the federal government — expected to  be responsible for between 20 to 48 per cent of the country’s emission  reductions by 2030, compared to just 8 to 14 per cent for the  consumer-facing carbon tax. 

“Our analysis shows industrial carbon pricing adds next to nothing to the operating costs of large emitters — for example, it drives low-carbon innovation in the oil and gas sector at less than the cost of a Timbit a barrel,” said  Rick Smith, president of the Canadian Climate Institute in a statement.  “Large-emitter trading systems also create lucrative credit markets  that help attract investment to Canada for new, low-carbon projects —  from carbon capture and storage to clean steel to low-carbon chemical  manufacturing.

“Cancelling large-emitter  trading systems would ultimately hurt more than it would help,” he  added. “It would create profound uncertainty for businesses and  investors at the worst possible time, and jeopardize upwards of $5  billion in credit values in Alberta alone.”

Smith  said industrial pricing sends an important signal to businesses making  large investments, and relying on incentives like clean-technology tax  credits will not be enough to drive pollution down as required. Removing  a central plank of a climate plan like industrial carbon pricing would  make hitting Canada’s 2030 emission reduction target “impossible,” he  said. 

The federal industrial carbon price  is in place in Manitoba, Prince Edward Island, Nunavut and Yukon. Other  provinces have their own industrial pricing systems and would not  directly be affected by Poilievre’s promise, if it comes to pass.  Alberta was actually the first jurisdiction in North America to  introduce an industrial carbon price in 2007. 

However,  the risk is that with a federal backstop removed, provinces may begin  to abandon their versions of the policy, similar to how British Columbia  is now working to remove its consumer carbon price following Carney’s repeal of the federal fuel charge. 

John Woodside / Local Journalism Initiative / Canada’s National Observer

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