How Poilievre’s Energy Policies Could Cost Canada Money

With Canada’s consumer carbon price in the dustbin, the country’s biggest oil and gas companies recently asked prospective governments to scrap their industrial carbon price too. Conservative Leader Pierre Poilievre was happy to oblige.

“We will axe the tax for everyone, for everywhere, for everything,” he said during a campaign stop in Petty Harbour, Newfoundland, last week.

There’s just one problem: experts warn axing Canada’s industrial carbon price could ultimately cut off future trading partners, hurting industry more than it helps.

That’s because countries are cracking down on the carbon in the products they import. Next year, all European countries will impose an import tariff on goods made with less stringent or non-existent carbon taxes, and other countries may soon follow suit. That could mean Canadian exports like steel and aluminum could face new trade barriers.

“The markets where carbon can be emitted for free will start closing down,” said Ieva Baršauskaitė, lead of the trade and green transition team for the International Institute for Sustainable Development. “It’s not a very fast process, but it’s a process that is happening as we speak.”

As voters brace against the U.S. tariff roller-coaster and a long-brewing affordability crisis, climate policy has taken a back seat in this year’s federal election.

On his first day in office, current prime minister and Liberal candidate Mark Carney scrapped the party’s once-hallmark policy, the consumer carbon tax. That put the lesser-known industrial carbon tax in the Conservative party’s crosshairs.

But experts say cutting that price would forfeit Canada’s most powerful tool to cut emissions and close future doors to new trade prospects.

The vast majority of Canada’s steel and aluminum, for example, is currently exported to the United States — where they’re now subject to a 25 per cent tariff.

So far, the Conservatives are the only party proposing to scrap Canada’s industrial carbon price. The NDP and Liberal party have said they would maintain it.

Neither the Conservatives nor the Green Party responded to The Tyee’s request for comment.

How the industrial carbon price works

Awkwardly titled the “output-based pricing system,” Canada’s industrial carbon price allows companies to emit most of their emissions for free, but with limits designed to ratchet them down over time.

For each tonne of steel, for example, the tax sets a given amount of carbon deemed acceptable to burn. If the steel company uses more carbon than that limit, it pays for it by purchasing emission credits.

If the company cuts its emissions, say, by replacing its coal-powered furnace with an electric one, its tonne of steel might fall under the line. It can then convert those unused emissions into a side hustle, selling its leftover credits to a more polluting company.

In other words, the system is designed to reward companies that reduce emissions and punish companies that do nothing.

Despite oil and gas companies’ opposition, the tax is supported by other industries, including a recent letter from groups like cement, steel and renewable energy associations that described it as “the backbone of decarbonization across this country.”

What happens if Canada scraps it?

Canada’s federal industrial carbon pricing system currently acts as a backstop, as many provinces have their own systems. Provinces and territories could choose to keep their prices in place, but without the federal baseline they could also choose to relax their rules or scrap them altogether.

That could cause Canada’s emissions to rise, and it could also have negative economic consequences.

“It would be a catastrophic decision for climate policy and Canada,” incumbent NDP MP for Victoria Laurel Collins told The Tyee.

Canada’s industrial carbon price is its most powerful tool to reduce emissions, according to the Canadian Climate Institute, making up between 20 per cent and 48 per cent of the country’s emissions cuts before 2030 based on its current policies. The defunct consumer-facing carbon price, meanwhile, reflected only eight per cent to 14 per cent of the anticipated drop.

The full costs of runaway climate change will be catastrophic. But even bracketing those immeasurable losses, scrapping the industrial carbon price would also put a dent in Canada’s long-term trading options.

Around the world, countries’ carbon prices are rising, and they’re looking to protect their industries from a glut of imported goods made in regions that don’t have those prices in place. Many are considering rules called border carbon adjustments, which charge a fee on non- or less-carbon-taxed goods when they enter the country.

“The root for this trend lies within the rising carbon ambition globally,” Baršauskaitė, who co-authored a recent report on the state of these programs in 2025, told The Tyee.

The European Union’s border carbon adjustment is the world’s most developed.

The EU will begin charging import fees on aluminum, cement, fertilizer, hydrogen, iron, steel and electricity by the end of the year. A similar program will kick off in the United Kingdom in 2027.

Baršauskaitė’s research described border carbon adjustment tools as a “defining feature” of trade debates, including at the World Trade Organization.

The impact of axing the industrial carbon tax

As a thought experiment, imagine that two companies, one in Canada and the other in the EU, produced a single tonne of steel each, using the same amount of emissions.

If the Canadian tonne of steel was produced without the use of an industrial carbon tax, and the European tonne of steel faced a hypothetical carbon price of $200, the EU’s border carbon adjustment would impose a $200 import fee on that Canadian steel to level the playing ground.

But the European company would have a leg up: under the EU’s industrial carbon pricing system, the company can make money selling credits if it cuts its emissions. The following year, for example, it might pay just $150 for a tonne of steel because it polluted less. That puts the Canadian tonne of steel at a disadvantage, because it didn’t get the same incentive to decarbonize. It would likely still pay a $200 fee to the EU, and the European company could use its cost advantage to edge it out.

The European pricing system is also designed to get more stringent over time, meaning the $200 fee would rise, and the price gap between the European steel and the Canadian steel would get wider.

“The Canadian exporter might lose that market, or at least export much less than they would otherwise,” said Thomas Green, senior climate policy adviser for the David Suzuki Foundation, who described industrial carbon pricing as an “insurance policy” for companies facing the global push to transition to using greener energy.

In addition to committing to keeping the industrial carbon price, the NDP and the Liberals have made commitments to establish Canada’s own border carbon adjustment program.

In an emailed statement, the Liberal Party of Canada said this would “ensure fairness for Canadian industries, prevent carbon leakage, and better economically integrate Canada with allies in the fight against climate change.”

Loopholes in Canada’s industrial carbon tax

Dale Beugin, executive vice-president at the Canadian Climate Institute, wants to see Canada’s industrial carbon price strengthened, not scrapped.

Beugin said the system in many regions is too lax, leading to a glut of credits. That could make it cheaper to buy credits than to invest in technologies that reduce emissions.

“You make emissions reductions valuable by making credits valuable,” he said.

In some jurisdictions, including B.C., companies can avoid reducing emissions by purchasing offsets.

Others have questioned whether the design of Canada’s industrial carbon price — with its many incentives to support industries to decarbonize — should apply to oil and gas companies whose product inevitably results in more climate change when burned.

Oil and gas companies could soon face another carbon pricing system specific to them: the oil and gas cap. Once established, it would behave much like the industrial carbon price, with lots of allowances, incentives and even offsets — but unlike the carbon price, it will limit the total number of freebie credits companies can get. Groups like the David Suzuki Foundation have argued this system, while generally a positive move, is also rife with gaps.

Complications aside, Beugin does view the industrial carbon price as a powerful tool for both climate action and future trade success, particularly as rising U.S. tariffs underscore Canada’s need to find new trading partners.

“In a funny way, it emphasizes the competitive advantages of decarbonizing,” he said.