Mark Carney, who is competing for the federal Liberal leadership, has made the introduction of a carbon tariff the number two promise in his 16-point industrial competitiveness strategy.
Key problems with a carbon tariff in Canada
1. Retaliation from other countries
A carbon tariff (also known as a Carbon Border Adjustment Mechanism, or CBAM) would not go unchallenged by Canada’s trading partners. Major exporters to Canada, such as the United States and China, are unlikely to accept this policy without a response. They could retaliate by imposing tariffs on Canadian goods, making it significantly harder for Canadian businesses to compete in international markets. This could be particularly damaging for key industries like oil and gas, mining, and manufacturing, which rely heavily on exports. A trade war over carbon tariffs could weaken the Canadian economy and lead to job losses across multiple sectors.
2. Canada is an exporting nation
Canada exports far more carbon-intensive goods than it imports. By introducing a carbon tariff on foreign products, Canada is effectively inviting other countries to do the same, targeting Canadian exports with similar carbon-based tariffs. This would make Canadian goods more expensive on the global market, reducing demand for them and harming the very industries that drive Canada’s economy. The result? A weaker economy, job losses, and higher costs for businesses that depend on trade.
3. Big business paying for consumers’ emissions
The Carney plan also proposes to make large businesses bear the cost of helping individual households lower their carbon emissions. While this may sound like a fair approach, in practice, these costs will be passed down to consumers. Businesses will need to offset these additional expenses, leading to higher prices on everyday goods and services. In the end, it is Canadian families who will bear the financial burden, facing increased living costs, higher taxes, and fewer job opportunities as businesses struggle to absorb the additional costs.
CBAM in context: implications for Canada
Has this been tried elsewhere?
The European Union’s Carbon Border Adjustment Mechanism (CBAM) is currently in effect. It entered its transitional phase on October 1, 2023, during which importers of certain carbon-intensive goods are required to report the embedded emissions of their imports without incurring financial liabilities. This phase is set to last until the end of 2025. The definitive regime, where importers will need to purchase CBAM certificates corresponding to the carbon emissions of their imported goods, is scheduled to begin in 2026.
However, Europe is not Canada’s largest trading partner—that is the United States. With Donald Trump back in the presidency, there is no chance that the U.S. will implement a CBAM of its own. If Canada were to move forward with a unilateral carbon tariff, if anyone prepared to argue that it would not face significant economic punishment from the Trump White House?
Moreover, with 91 percent of the world having no carbon tariff, other countries would impose countermeasures, leaving Canadian businesses struggling to remain competitive.
This raises the question: is the push for a carbon tariff in Canada more about political positioning than economic pragmatism? Given the unlikelihood of U.S. participation, a Canadian CBAM would amount to a unilateral economic sacrifice. While this may appeal to certain voter bases, the reality is that such a policy would carry immense risks without global coordination. Policymakers should carefully consider whether pursuing this path makes sense in a world where Canada’s largest trading partner is unlikely to follow suit.
Where do others stand?
Chrystia Freeland, the former finance minister and current Liberal leadership candidate, has not explicitly detailed her stance on carbon tariffs. However, she has emphasized the importance of defending Canadian interests against U.S. economic nationalism, particularly in response to potential tariffs from the U.S.
Conservative leader Pierre Poilievre is a vocal critic of carbon pricing mechanisms, including carbon taxes, and has pledged to repeal such measures if elected.
Elizabeth May, leader of the Green Party, has consistently advocated for strong environmental policies, including carbon pricing, but has not specifically addressed carbon tariffs in recent statements.
What it means to consumers
Here are some relatable examples of carbon-intensive exports and imports for the average Canadian:
Carbon-Intensive Exports from Canada
Oil & Gas – Canada is a major exporter of crude oil, natural gas, and refined petroleum products, particularly to the U.S. If a carbon tariff were applied to these products, it could make them more expensive and less competitive in global markets, affecting jobs in Alberta, Saskatchewan, and Newfoundland.
Lumber & Pulp – Canada is a leading exporter of forestry products, including lumber, paper, and pulp, which require significant energy and emissions to produce. If tariffs are imposed on Canadian wood products, the forestry sector could suffer.
Agricultural Products – Fertilizers, beef, and grain production all have significant carbon footprints. If trading partners retaliate with tariffs, Canadian farmers may struggle to compete in global markets.
Carbon-Intensive Imports into Canada
Steel & Aluminum – Canada imports a large amount of steel, primarily from China and the U.S., which is essential for industries like construction, manufacturing, and automotive production. A carbon tariff would drive up costs for these industries.
Consumer Goods from China – Many everyday products (electronics, clothing, appliances) are imported from countries with high-carbon electricity grids. A carbon tariff could increase the price of these goods for Canadian consumers.
Food Products – Imported produce, meats, and packaged foods from countries like the U.S. and Mexico often have high transportation-related emissions. A carbon tariff could increase grocery bills.
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“So we’re going to have an order on that pretty soon – we can’t do that to our farmers and leisure too, hotels, we’re going to have to use a lot of common sense on that.”
President Donald Trump said Thursday that changes are coming to his aggressive immigration policies after complaints from farmers and business owners.
“Our great Farmers and people in the Hotel and Leisure business have been stating that our very aggressive policy on immigration is taking very good, long time workers away from them, with those jobs being almost impossible to replace,” Trump wrote in a social media post Thursday morning. “In many cases the Criminals allowed into our Country by the VERY Stupid Biden Open Borders Policy are applying for those jobs. This is not good. We must protect our Farmers, but get the CRIMINALS OUT OF THE USA. Changes are coming!”
Later Thursday, Trump made it clear that businesses need workers.
“Our farmers are being hurt badly. They have very good workers – they’re not citizens, but they’ve turned out to be great. And we’re going to have to do something about that,” the president said.
He added: “We can’t take farmers and take all their people and send them back because they don’t have, maybe, what they’re supposed to have.”
Just how Trump may change his approach to immigration enforcement remains unclear, but he said he wants to help farmers and business owners.
“You go into a farm and you look and people, they’ve been there for 20 or 25 years and they work great and the owner of the farm loves them and you’re supposed to throw them out. You know what happens? They end up hiring the criminals that have come in, the murderers from prisons and everything else,” Trump said.
Trump said changes would be coming soon, but gave little detail on how policies could change.
“So we’re going to have an order on that pretty soon – we can’t do that to our farmers and leisure too, hotels, we’re going to have to use a lot of common sense on that.”
In a later post on Truth Social, Trump said illegal immigration had destroyed American institutions.
“Biden let 21 Million Unvetted, Illegal Aliens flood into the Country from some of the most dangerous and dysfunctional Nations on Earth — Many of them Rapists, Murderers, and Terrorists. This tsunami of Illegals has destroyed Americans’ Public Schools, Hospitals, Parks, Community Resources, and Living Conditions,” the president wrote. “They have stolen American Jobs, consumed BILLIONS OF DOLLARS in Free Welfare, and turned once idyllic Communities, like Springfield, Ohio, into Third World Nightmares.”
He added that deportations would continue: “I campaigned on, and received a Historic Mandate for, the largest Mass Deportation Program in American History. Polling shows overwhelming Public Support for getting the Illegals out, and that is exactly what we will do. As Commander-in-Chief, I will always protect and defend the Heroes of ICE and Border Patrol, whose work has already resulted in the Most Secure Border in American History. Anyone who assaults or attacks an ICE or Border Agent will do hard time in jail. Those who are here illegally should either self deport using the CBP Home App or, ICE will find you and remove you. Saving America is not negotiable!”
For years, Canada’s political class sold us on the idea that carbon taxes were clever policy. Not just a tool to cut emissions, but a fair one – tax the polluters, then cycle the money back to regular folks, especially those with thinner wallets.
It wasn’t a perfect system. The focus-group-tested line embraced for years by the Trudeau Liberals made no sense at all: we’re taxing you so we can put more money back in your pocketbooks. What the hell? If you care so much about my taxes being low, just cut them already. Somehow, it took years and years of this line being repeated for its internal contradiction to become evident to all.
Yet, even many strategic conservative minds could see the thinking had internal logic. You could sell it at a town hall. As an editorial team member at an influential news organization when B.C. got its carbon tax in 2008, I bought into the concept too.
And now? That whole model has been thrown overboard, by the very parties had long defended it with a straight face and an arch tone. In both Ottawa and Victoria in 2025, progressive governments facing political survival abandoned the idea of climate policy as a matter of fairness, opting instead for tactical concessions meant to blunt the momentum of their foes.
The result: lower-income Canadians who had grown accustomed to carbon tax rebates as a dependable backstop are waking up to find the support gone. And higher earners? They just got a tidy little gift from the state.
The betrayal is worse in B.C.
This new chart from economist Ken Peacock tells the story. He shared it last week at the B.C. Chamber of Commerce annual gathering in Nanaimo.
Ken-Peacock- B.C. Chamber of Commerce annual gathering in Nanaimo.
What is shows is that scrapping the carbon tax means the poor are poorer. The treasury is emptier.
What about the rich?
Yup, you guessed it: richer.
Scrubbing the B.C. consumer carbon tax leaves the lowest earning 20 percent of households $830 per year poorer, while the top one-fifth gain $959.
“Climate leader” British Columbia’s approach was supposed to be the gold standard: a revenue-neutral carbon tax, accepted by industry, supported by voters, and engineered to send the right price signal without growing the size of government.
That pact broke somewhere along the way.
Instead of returning the money, the provincial government slowly transformed the tax into a $2 billion annual cash cow. And when Mark Carney won the federal election, B.C. Premier David Eby, boxed in by his own pledge, scrapped the tax like a man dropping ballast from a sinking balloon. Gone. No replacement. No protections for those who need them most.
Filling the gas tank, on the other hand, is noticeably cheaper. Of course, if you can’t afford a car that might not be apparent.
Spare a thought for the climate activists who spent 15 years flogging this policy, only to watch it get tossed aside like a stack of briefing notes on a Friday afternoon.
Who could not conclude that the environmental left has been played. For a political movement that prides itself on idealism, it’s a brutal lesson in realpolitik: when power’s on the line, principles are negotiable.
But here’s the thing: maybe the carbon tax model deserved a rethink. Maybe it’s time for a grown-up look at what actually works
With B.C. now reviewing its CleanBC policies, here’s a basic question: what’s working, and what’s not?
A lot of emission reductions in this province didn’t come from government fiat. They were the result of business-led innovation: more efficient technology, cleaner fuels, and capital discipline.
That, plus a hefty dose of offshoring. We’ve pushed our industrial emissions onto other jurisdictions, then shipped the finished goods back without attaching any climate cost. This contradiction particularly helped to fuel the push to dump carbon pricing as a failed solution.
The progressives’ choice was made once the anti-tax arguments could no longer be refuted: to limit losses it would be necessary to deep six an unpopular strand of the overall carbon strategy. This, to save the rest. That’s why policies like the federal emissions cap haven’t also been abandoned.
To give another example, it’s also why British Columbia’s aviation sector is in a flap over the issue of sustainable aviation fuel. Despite years of aspirational policy, low emissions jet fuel blends remain more scarce than a long-haul cabin upgrade. The policy’s designers correctly anticipated that refiners would never be able to meet the imposed demand, and so as an alternative they provided a complex carbon credit trading scheme that will make the cost of flying more expensive. For those with a choice, nearby airport hubs in the United States where these policies do not apply will become an attractive alternative, while remote communities that have no choice in the matter will simply have to eat the cost. (Needless to say, if emissions reduction is your goal this policy isn’t needed anyways, since the decisions that matter in reducing global aviation emissions aren’t made in B.C. and never will be.)
I’m not showing up to bash those who have been genuinely trying to figure things out, and found themselves in a world of policy that is more complicated and unpredictable than they realized. Simply put, the chapter is closing on an era of energy policy naïveté.
The brutally honest action by Eby and Carney to eject carbon taxes for their own political survival could be read as a signal that it’s now okay to have an honest public conversation. Let’s insist on that. For years now, debate has been constrained in part by a particular form of linguistic tyranny, awash in terminology designed to cow the questioner into silence. “So you have an issue with clean policies, do you? What kind of dirty reprobate are you?” “Only a monster doesn’t want their aviation fuel to be sustainable.” Etc. Now is the moment to move on from that, and widen the field of discourse.
Ditching bad policy is also a signal that just maybe a better approach is to start by embracing a robust sense of the possibilities for energy to improve lives and empower all of the solutions needed for tomorrow’s problems. Because that’s the only way the conversation will ever get real.
Slogans, wildly aspirational goal setting and the habit of refusing to acknowledge how the world really works have been getting us nowhere. Petroleum products will continue to obey Yergin’s Law: oil always gets to market. China and India will grow their economies using reliable energy they can afford, having recently approved the construction of the most new coal power plants in a decade amid energy security concerns. Japan, which has practically worn itself out pleading for natural gas from Canada, isn’t waiting for the help of last-finishing nice guys to guarantee energy security: today, they are buying 8% of their LNG imports from the evil Putin regime.
Meanwhile, we’re in the worst of both worlds: our courageous carbon tax policy that was positioned as trailblazing not just for B.C. residents but for the world as a whole – climate leadership! – is gone, the poorest are puzzling over why things feel even more expensive, and nobody knows what comes next.
Ken-Peacock- B.C. Chamber of Commerce annual gathering in Nanaimo.
