The debate over the Removal of Carbon Tax in Canada has grown to soaring heights in recent years. The Liberal government has pushed for and implemented a centralized and comprehensive system of carbon taxes in Canada. This controversial plan is seen as a means to get Canadians to reduce their greenhouse gas (GHG) emissions however, it has been argued that this scheme can do more harm than good if not implemented correctly. Those who oppose the carbon tax, however, have pointed to the fact that it could have a negative effect on the economy due to the inflationary pressures that it will create which, in turn, could cause the government to lose power.
The Carbon Tax was proposed by the Liberal government in April 2018 and was implemented across Canada the following year with the intention to reduce emissions equivalent to 207 MT of carbon in 2030. As such the carbon tax not only put renewable energy on an equal economic footing with conventional energy sources, but it was also designed to encourage Canadians to rethink their energy and transportation related carbon impacts through rewarding them for reducing emissions. The carbon tax was implemented through the imposition of taxes on many petroleum products such as gasoline, jet fuel, and diesel fuel. The rate of taxation varies from province to province, as not all provinces were on the same page in terms of the carbon tax. In provinces where a carbon tax was imposed, the government gave a subsidy or rebate to its residents to offset the increased costs as an attempt to make it financially more attractive for Canadians to reduce their emissions.
However, as the carbon tax has been implemented, criticisms began to pile up, such as the argument of its ineffectiveness in reducing emissions to a meaningful extent as well as its possible inflationary impact. It is widely accepted that the carbon tax is an effective lever for reducing emissions when applied correctly, however, it has been argued that the Liberal government’s policy suffers from the lack of balance between the costs it imposes on individuals as well as businesses. It has been argued that the levy does not address the biggest drivers of increased emissions, such as transportation and housing, and as such the revenues generated are not used to reduce emissions in a sustainable manner.
Most importantly, the government’s policies have failed to adequately reflect the economic effects of the Carbon Tax, such as high inflation. Inflation, which is caused by the decrease in purchasing power resulting from increases in price, has the side effect of placing those on lower incomes in a more vulnerable position, as they have to devote a greater percentage of their expendable income to paying for essentials.
The perceived failure of the federal government at keeping the taxation burden in check has increased fears that it could impact the Liberal government’s chances at staying in power. Many predict that the carbon tax will lead to a voter backlash against the Liberals and their carbon levy policy and that the push-back will have a major influence in the upcoming elections. As such the removal of the Carbon Tax within Canada is seen by many as the Liberal government’s best chance of staying in power.
Removing the Carbon Tax will certainly bring relief to many households who are struggling with the associated costs of the imposed tax and could open the door for economic growth prospects due to reduced taxation. Lower inflation will ensure that essential goods and services remain affordable and increase consumer spending, as income will not be as affected by the increased taxation rates. Further, some businesses have lobbied to be exempt from the Carbon Tax which will encourage further investment and economic activity which was previously stifled due to the imposition of the Carbon Tax. All of these factors have the potential to bring a surge in support for the Liberal government in the upcoming elections.
In conclusion, the removal of Carbon Tax could bring much needed relief to Canadian households that have been overburdened with increased taxation and help the Liberal government’s case in the upcoming election. The removal of the Carbon Tax could provide a greater chance of success for the Liberal government by offering economic relief to households, incentivizing businesses through reduced taxes, as well as reducing inflationary pressure. This should be duly considered by the Liberal government as it is a sure-fire way to help the party stay in power for years to come.