A man pumps gas in Montreal, on March 4, 2022.Graham Hughes/The Canadian Press
Normand Mousseau is a professor of physics at University of Montreal and scientific director of the Institut de l’énergie Trottier.
The decision to eliminate the federal consumer carbon tax was made by Prime Minister Mark Carney on his first day in office. It follows years of attack by the Conservatives. But this whole matter has received relatively little attention in Quebec, where the debate seems rather out-of-synch with the rest of Canada.
Indeed, with the elimination of the federal and B.C. carbon-emission taxes on fuels, Quebec is the only province with a carbon pricing scheme.
There is a broad consensus in Quebec that climate change is a real issue, that human-made greenhouse emissions are responsible for it and that they should be reduced. This position is supported by all parties represented at the National Assembly, with only the Conservative Party, which has no elected legislator, opposing this view. Moreover, all parties at the National Assembly supported the creation of the carbon market in 2013 and its integration with California’s starting in 2014. These provincial measures predated the federal carbon tax system by six years.
Why is there such great support for the carbon tax in Quebec? It’s because the province’s carbon tax is invisible and understated, and thus less prone to becoming a political target. We must keep this in mind. This would help understand how Canada can move forward on reaching its climate goals after dumping the carbon tax on fuels.
In Quebec, the carbon price is based on a cap-and-trade system. The price on carbon is determined by a market and, therefore, it fluctuates as a function of the equilibrium between availability and demand for emission credits; while a floor price is imposed by regulation, its actual value is determined by market forces. For example, after reaching a peak at $56 per tonne last year, the price for carbon-emission rights in the latest auction fell to a little above $41 per tonne.
The specific cost of the carbon price is largely invisible on a daily basis as the distributors – such as gasoline wholesalers, natural gas suppliers or electricity providers – are responsible for buying emission credits, not the consumers. This means that, even though consumers ultimately pay the carbon tax, the cost is hidden in the price charged to the retailer, which sells the fuel or energy to the public. The cost of carbon is therefore not visible on the final invoice.
Finally, the revenues from this market are set aside in the Electrification and Climate Change Fund (ECCF) to support mitigation and adaptation, instead of being sent back through quarterly payments to the taxpayer. This adds to the opacity and therefore, the resiliency, of the system.
Indeed, the price on pollution does not have to be singled out and shown to the public. The carbon tax does not have to be distinguished from, say, the cost of transporting oil by pipeline or the cost of refining it. A carbon tax serves only to make the fuel-based solutions ever less competitive with the low-carbon alternatives. We do not necessarily need to be drawing attention to the specific mechanisms.
These reasons explain why Pierre Poilievre’s “axe the tax” mantra had very little resonance in Quebec, outside of the relatively small right-wing community.
Of course, with the federal government abolishing its carbon tax, we have also seen some groups, from Quebec’s Conservative Party and the business world, suddenly pointing to the province’s carbon price system as decreasing Quebec’s competitiveness. While pressure might even mount in the coming months, it is, nevertheless, unlikely to succeed as the opacity of the system makes it difficult for the opponents to give visibility to the issue.
While Quebec and the rest of Canada have chosen two opposite paths on carbon pricing, both share the same challenge: as demonstrated by our most recent Canadian Energy Outlook, neither Canada as a whole nor Quebec are on a path to reach to GHG reduction goals.
The resilience of Quebec’s carbon pricing system shows that for such emissions mitigation programs to survive, especially in a system where climate-change deniers represent an important political force, they must not be easily transformed into a political target. This means that costs and constraints, such as carbon taxes and clean-fuel regulations, should be applied far away from citizens. More palatable measures, and subsidies such as those on zero-emission vehicles and heat pumps, should be the most visible aspect of the strategy.