After building up massive opposition to the consumer carbon tax, to the point that even the federal Liberals had to get rid of the tax they insisted for years was absolutely necessary, Conservative leader Pierre Poilievre now has set his sights on what he call Carbon Tax 2.0. This tax is actually called the Clean Fuel Regulations (CFR), and it is expected to add 17 cents to a litre of gasoline and 16 cents per litre of diesel by 2030. This tax is much sneakier than the consumer carbon tax, as it is not visible as the consumer tax was.
The CFR is supposed to reduce greenhouse gas (GHG) emissions by requiring producers and importers of gasoline and diesel to lower the carbon intensity of these fuels, which is a measure of the emissions generated per unit of energy. It came into effect in mid-2023. It aims to reduce GHGs via a credit market system in which carbon intensity is supposed to be reduced by 15 per cent by 2030 by such actions as increasing the use of lower carbon fuels such as the more expensive ethanol or biodiesel or replacing conventional fossil fuel vehicles by electric vehicles (EVs).
If producers do not meet these goals, they have to buy credits which will be passed on to the ultimate consumer in higher prices. So businesses will not only face higher costs but will have to deal with more red tape in a credit trading market as well. As pretty much everything we consume must be transported, the overall cost of goods and services will increase as well. Despite the Liberals’ claim they are concerned about lower income earners, the impact of this tax will fall most heavily on them as they tend to be more affected by energy cost hikes and can’t afford substitute goods such as EVs.
Dan McTeague of Canadians for Affordable Energy estimates that this tax could end up costing every Canadian about $1,300 annually, adding even more pressure to the already-high cost of living. When the Liberals first imposed the consumer carbon tax, Canadians were told it would be the only measure necessary to reduce GHGs. Yet since then, the Liberal government has layered on even more taxes and regulations such as the CFS.
Members of the Liberal Cabinet have boasted that no other country has tried to implement anything like the CFS, claiming that Canada is being a leader. It seems more likely that no other country has pursued anything similar because they are well aware that such a measure will further fuel inflation and damage their economic competitiveness. In addition, to date many vehicles, manufacturing equipment, airplanes and other machinery have not been able to operate using only batteries, hydrogen or ethanol. As a result, there are serious questions about the reliability and feasibility of this policy’s goals and whether or not it will have any impact on GHGs.
The Parliamentary Budget Office (PBO) studied the impact of the CFR and found that the tax will have different impacts regionally. The study concluded that people in Saskatchewan, Alberta and Newfoundland and Labrador will have to deal with higher costs than other regions as a result of their economies being more affected by their greater fuel production. This likely wasn’t much of a concern to the Liberal government as they have no qualms about implementing policies that hurt the parts of Canada that do not vote Liberal.
One of the attractions of the CFR to the Liberal government was likely the fact it was buried in prices and not transparent to Canadians. This was emphasized in some recent research conducted by the Department of Natural Resources, which found very few Canadians were aware of the impact of these regulations. This is undoubtedly why Poilievre is making it a priority for the Conservatives to emphasize the negative impact of this tax, as increased awareness will undoubtedly lead to more opposition among Canadians. Poilievre has said he wants to “axe all carbon taxes for good.” Given our history of carbon taxes in Canada, this is a commendable objective.
Unfortunately, the enormous spending plans the Carney government has outlined to date, and the current dismal state of fiscal finances with debt service payments themselves over $50 billion annually, suggest that Canadians are in for even more tax increases if Liberals prevail. Canada is already a very highly taxed country, which has damaged our standard of living and our economy. We should all hope Poilievre is successful in getting rid of the Clean Fuel Standard to provide at least some relief from the tax burden on us all.
She has published numerous articles in journals, magazines & other media on issues such as free trade, finance, entrepreneurship & women business owners. Ms. Swift is a past President of the Empire Club of Canada, a former Director of the CD Howe Institute, the Canadian Youth Business Foundation, SOS Children’s Villages, past President of the International Small Business Congress and current Director of the Fraser Institute. She was cited in 2003 & 2012 as one of the most powerful women in Canada by the Women’s Executive Network & is a recipient of the Queen’s Silver & Gold Jubilee medals.
