Perceptions and Realities of Canada’s Carbon Tax: Disconnect Between Climate Concern and Policy Support

By Denis Koshelev

What exactly is the Carbon Tax? After all these years, the public still isn’t sure. There’s a certain disconnect: while most truly do believe that climate change is real [1], they aren’t sure that the so-called Carbon Tax is good for anything. It divides the country, with 49% supporting it and about 44% opposing it. [1] The carbon tax had been a central tenet of climate policy in Canada for several years under various governments, and the split raised questions about why a policy with measurable environmental benefits faced such skepticism — and whether it was warranted.

The Effectiveness Gap: Perceived vs. Measured Outcomes

The federal carbon tax, introduced in 2019 at $20 per tonne and set to rise to $170 by 2030 [2], operates on a simple premise: increase fossil fuel costs to incentivize greener choices. However, Nanos Research data reveals only 21% of Canadians believe it effectively combats climate change, with 46% deeming it ineffective. [3]

This skepticism persists despite evidence from British Columbia’s provincial carbon tax, which reduced emissions by 5–15% since 2008 [3]. Regional disparities further complicate perceptions. Quebecers, whose province operates a cap-and-trade system exempt from the federal tax, rate its effectiveness highest at 4.4/10, while Prairie residents give it a dismal 2.6/10. This variance reflects economic dependencies: Prairie provinces, heavily reliant on oil and gas, perceive the tax as punitive rather than corrective.

It also doesn’t help that the rebate system’s complexity undermines its appeal. Low-income households in Alberta receive $1,800 annually, while higher-income Ontarians get $1,200, creating perceptions of inequity. Rural Canadians, who spend more on transportation, feel disproportionately burdened.

Does it work?

The thing about the tax is that many people aren’t sure if it helps anything. That’s partly because of a lack of transparency, and partly because it’s a political issue. According to the Canadian Climate Institute, the carbon pricing system is projected to reduce emissions by as much as 50% by 2030 [4]. However, there are significant differences between consumer and industrial carbon pricing effectiveness: industrial carbon pricing (OBPS) is estimated to deliver “three times the emissions reductions by 2030” compared to the consumer component [5]. Industrial pricing could cut between 53-90 million tonnes of emissions by 2030, while consumer pricing would only cut 19-22 million tonnes [5].

Some experts believe carbon pricing alone is insufficient to meet climate goals. A recent study found that relying only on carbon pricing “will not be sufficient” to limit global warming to between 1.5 °C and 2 °C by 2100, the goal set by the Paris Climate Accord. [7].

Political Landscape

The carbon tax has become a major political issue in Canada. Conservative Leader Pierre Poilievre campaigned to “axe the tax,” claiming it burdens Canadians during a cost-of-living crisis [4]. Following the 2025 federal election, Prime Minister Mark Carney announced plans to eliminate the federal consumer carbon tax and replace it with a more integrated cap-and-trade system. Critics argued Carney wasn’t eliminating carbon pricing but restructuring it by folding the consumer carbon tax into “an improved and tightened” industrial cap-and-trade regime covering large emitters.

Minister of Environment and Climate Change Julie Dabrusin, has made several public comments regarding the carbon tax. In a March 2025 update, she stated that while she has “long defended the consumer carbon price” and continues to believe it is “a strong, efficient policy tool to move our country to reduce emissions,” she supported its removal by Prime Minister Carney because “the policy had become too divisive” and was “not the best policy for this time.” [17]

The stance of the oil and gas industry on industrial carbon pricing in Canada has shifted recently as well. Previously, industry leaders saw carbon policy as crucial. However, a group of oil and gas companies, including five members of the Pathways Alliance, have called for the repeal of the federal carbon levy on large emitters, advocating for provincial governments to set their own carbon regulations.

There was always skepticism about the tax’s effectiveness, and the critics often argued that funds should directly subsidize green retrofits or transit instead of relying on rebates. The politicization of the issue was the final straw: conservative messaging framing the tax as a “cash grab” gained a lot of traction, in some way dooming the idea in the eyes of the majority.

Carbon Tax: The Future

With the consumer carbon tax now eliminated, the federal government is shifting its focus to carbon pricing for large industrial emitters. This system, often called industrial carbon pricing or large-emitter trading systems (LETS), will remain a central element of Canada’s climate policy. Under federal law, every province and territory can either develop its own carbon pricing system for large emitters or have the federal system imposed as a backstop. These systems are governed by minimum national standards, known as the federal benchmark. [13] [14]

The federal Output-Based Pricing System (OBPS) targets large industrial emitters, and revenues from this system have been used to support clean technology projects. For instance, in March 2025, the federal government announced nearly $150 million from the OBPS Proceeds Fund to support 38 clean technology projects aimed at reducing greenhouse gas emissions. [16]

Currently, there is no direct replacement for the consumer carbon tax. Instead, the government may consider other climate policies, such as subsidies or rebates for clean technology (like electric vehicles or energy-efficient appliances), but these are not as cost-effective as carbon pricing and are typically funded by taxpayers rather than through a pollution charge. [15]

With the elimination of the federal consumer carbon tax, the direct link between carbon pricing revenues and renewable energy investments has become less clear. The current focus is on industrial carbon pricing and clean technology incentives, but a comprehensive program that channels carbon pricing revenues directly into renewable energy projects is not uniformly implemented across Canada.

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