Economists defend Liberals’ carbon price as political rhetoric heats up

OTTAWA — Dozens of Canadian economists issued an ardent defence of Canada’s price on pollution Tuesday, as the government faces increased pressure from the Conservatives and provincial premiers to cancel a planned increase to the levy.

The national carbon price is the cheapest way to cut the most emissions, they said, while disputing the notion that the carbon price is driving up inflation and the cost of living. They fear the debate about the policy has lost sight of what it really is and what it really does.

“There is plenty of discussion about carbon pricing in Canada today,” the letter reads. “Healthy public debate is good, but it should be based on sound evidence and facts.”

Abolishing the policy has become an almost singular focus for the Conservatives under Leader Pierre Poilievre. He’s held regular “axe the tax” rallies across the country to lambaste the Liberals for the levy, which he says makes it harder for cash-strapped Canadians to afford essentials like gas, food and home heating.

Several provinces have battled the government over carbon pricing for years and their anti-carbon pricing chorus is growing in volume as Poilievre’s campaign gained traction. Recently seven premiers publicly asked the federal Liberals not to raise the carbon price from $65 to $80 per tonne as scheduled for April 1.

“The issue has clearly been heating up,” said economist Chris Ragan, who helped draft the open letter defending the policy. He is the director of the Max Bell School of Public Policy at McGill University.

“The quality of the debate, I think, is not quite as good as it should be.”

Ragan is one of 100 economists who signed the open letter as of Tuesday afternoon, in an attempt to dispel some of the main arguments Poilievre and other opponents have raised against the controversial policy. 

While the main political criticism of the program is the cost to consumers, the economists say a carbon price is actually the least costly way to lower emissions. 

“Other methods, such as direct regulations, tend to be more intrusive and inflexible, and cost more,” the letter states. 

A recent analysis published by the Canadian Climate Institute found that the price applied to big industrial emitters plays a far greater role in cutting emissions than the consumer fuel levy, sparking questions about whether the consumer tax is worth the political headache.

Those questions are understandable given the political firestorm raging around the issue, but Ragan said it would have to be replaced with something else to avoid the much greater cost of climate change. 

“And what you’re going to end up replacing it with is probably a higher cost policy, and so I don’t think that’s a great idea,” he said.

The main opponents to the policy haven’t offered an alternative plan to cut emissions, and certainly haven’t put forward an idea that would be more affordable, the economists argue.

Much like the governing Liberals, they point out that 90 per cent of money the levy takes in is returning to consumers to protect families’ purchasing power. They acknowledge that the rebates can be confusing but explain that the idea is for most people not to be worse off as a result of the carbon price, and be able to actually improve upon their financial standing by lowering their fuel use and paying less carbon price.

Every province and territory in Canada has been subject to a carbon price since 2019, with a choice between enacting their own version that meets federal standards or using a federal program. Most use the federal version for consumers and small business, while most have their own system for big industry.

Poilievre has promised to make the carbon price the central issue in the next election. 

Ragan said he hopes the economists’ letter better informs that debate, and gives ammunition to politicians who are defending the policy. Ultimately he wants to see the carbon price become politically mainstream. 

“I’d like it to get there,” he said. “The only the only brilliant idea I have is: let’s talk more about it.”

This report by The Canadian Press was first published March 26, 2024.

Laura Osman, The Canadian Press