Research: carbon pricing might not be feasible climate policy

OTTAWA — It was supposed to do the heavy lifting for Canada’s greenhouse gas emissions targets.

And it was supposed to remain a major part of Prime Minister Justin Trudeau’s legacy, both at home and abroad — part of an urgent global push to fight climate change.

But instead of fulfilling those Liberal hopes, carbon pricing has become a significant political liability.

Conservative Leader Pierre Poilievre’s crusade against the consumer carbon price and his promise to “axe the tax” should he win the next election has resonated with many Canadians amidst an affordability crisis.

The Tory leader has blamed the climate policy for driving up the cost of food and fuel, while dismissing or ignoring its purported benefits, including consumer rebates.

The government has struggled to respond to the Conservatives’ attacks, despite the carbon price enjoying widespread support among economists.

Did the Liberals drop the ball?

Or was the policy always destined for failure?

Research suggests the Liberals may be fighting a losing battle, and some experts are urging policymakers to look for alternative policies to lower emissions, warning the threat of climate change is too dire to delay action.

“It’s very hard to find places with high, economy-wide carbon prices that have not generated significant political backlash,” said Matto Mildenberger, an assistant professor of political science at the University of California Santa Barbara.

“That leads political scientists like myself to have real reservations about how viable carbon pricing is as a short-term strategy to confront the climate crisis.”

Consumers pay the cost of carbon pricing upfront in a very visible way, Mildenberger said. Its benefits are only enjoyed in the long run.

The federal government’s Canada Carbon Rebate is designed to compensate voters for the financial burden. According to the parliamentary budget officer, eight out of 10 families receive more in rebates than they pay in carbon taxes.

But Mildenberger’s research suggests the rebate is not as effective in shoring up public support as Liberals would hope.

One study analyzing public support for carbon pricing in Canada and Switzerland found people don’t know about the rebates they’re getting and tend to underestimate their value.

Another looked at the effect of rebates on public support for a carbon tax in the U.S. and Switzerland and found there was ultimately little impact.

“Our results indicate that, absent political messaging, rebates increase public support for carbon taxes in both countries by building support among lower income groups,” the 2022 paper said.

“However, policy is always politicized, and when respondents are exposed to political messages about carbon pricing the effects associated with rebates are dampened or eliminated.”

Mildenberger said it’s safe to conclude rebates have not been shifting people’s perceptions.

“People’s partisan, ideological preferences dominate their perceptions of carbon pricing, much more so than the objective costs or benefits that come from the policy.”

Proponents often blame the Liberal government for failing to effectively communicate the policy and the rebates to Canadians.

Mildenberger agreed the Liberals did not do a good sales job.

For example, they did not heed advocates’ advice to send rebates out in cheques, he said — something that would have connected the money with the policy in a “tangible” way.

But Katya Rhodes, an assistant professor of public administration at the University of Victoria, said blaming communication on its own is an oversimplification of the challenge.

Rhodes said some of her studies show that the more information people are provided about complex climate policies, the more confused they get.

“It’s really hard to be a politician when you introduce a carbon tax. Is it the ideal approach? I wouldn’t do it if I were a politician.”

Rhodes added that trust in government plays a significant role in the success or failure of the carbon tax, as seen in countries like Finland and Norway.

Economists say carbon pricing is the cheapest and most effective way to address climate change.

By putting a price on pollution, the government is not dictating how emissions should be lowered. Instead, it offers an incentive for polluters to invest in emissions-reducing technologies, they say.

It also incentivizes consumers to opt for goods and services that emit less greenhouse gases.

More than 300 economists signed an open letter in March supporting the consumer carbon price and trying to dispel misconceptions about the policy.

“I think there are many Canadians who say they care about climate change …. but they somehow think that we can reduce emissions without changing behaviour,” said Christopher Ragan, director of McGill University’s Max Bell School of Public Policy and one of the organizers behind the letter.

Mildenberger and Rhodes both said they recognize that the carbon tax is, theoretically speaking, the best choice for fighting climate change.

But both are advocating for governments to find other ways to reduce emissions because of how politically challenging it is.

Experts say carbon pricing that uses a cap-and-trade system like Quebec does might be more palatable because people don’t see its direct cost.

Such systems set an upper limit on the amount of greenhouse gases an organization can emit, but allow them to purchase unused credits from other groups or businesses that have not used their full allowance.

However, that form of carbon pricing isn’t politically foolproof, either.

Ontario Premier Doug Ford killed plans for a cap-and-trade system in 2018, arguing the policy would hurt businesses and raise costs.

Mildenberger is a proponent of U.S. President Joe Biden’s approach, which relies heavily on government investments and subsidies in the green economy.

He said that puts a focus on the economic benefits of fighting climate change “while sidestepping the politics of taxes.”

But while Canada has tried to keep up with the U.S. by rolling out a suite of investment tax credits, Rhodes said Canada cannot compete with the U.S.’s deep pockets.

Instead, she said Canada could lower emissions via flexible regulations, such as clean fuel standards.

In a statement, Environment Minister Steven Guilbeault defended the carbon tax as the most “cost-effective and efficient” way to reduce emissions. He cited departmental work that suggests replacing the consumer and industrial carbon prices with subsidies would cost taxpayers billions more.

“Pierre Poilievre has absolutely no plan to tackle climate change in Canada and would rather exploit people’s real anxieties for his own political gain than admit that eight out of 10 Canadians get more back than they pay through the Canada Carbon Rebate,” Guilbeault said.

A change in approach would come as a political blow to a Liberal government that has tried to push Canada to the forefront of the global fight against climate change.

In 2021, Canada launched an international challenge to encourage other countries to adopt a carbon price, with the goal of having 60 per cent of emissions worldwide covered by such a system.

But as the Conservatives maintain a double-digit lead in public opinion polls, carbon pricing’s future is in serious doubt.

“Canadians feel the pain of Justin Trudeau’s punishing carbon tax every day when they buy food, pump gas and heat their homes and don’t need the opinions of pointy-headed ‘experts’ and radical Liberal politicians to know they are far worse off,” Sebastian Skamski, a spokesman for Poilievre, said in a statement.

Conservatives would end carbon pricing, lower the cost of zero-emissions energy and approve green projects, Skamski said.

Poilievre has said little else about what he would do, though he has promised to prioritize “technology, not taxes.”

“I think it’s unfortunate that you’re going to lose what is fundamentally a good policy,” said Ragan.

“My big fear, actually, is that they will put nothing in its place.”

This report by The Canadian Press was first published June 1, 2024.

Nojoud Al Mallees, The Canadian Press