Mark Carney Ends Consumer Carbon Tax: What It Means for Canadian Businesses - March 17, 2025

Ryan Gowman
Mar 17
3 min read

Mark Carney Ends Consumer Carbon Tax: What It Means for Canadian Businesses

In a landmark policy shift, Prime Minister Mark Carney has officially ended the consumer carbon tax, a move set to reshape Canada's economic and environmental landscape. This decision, which eliminates the tax on fuel purchases for consumers and small businesses, replaces direct taxation with incentives for green choices and a tightened Output-Based Pricing System (OBPS) for major industrial emitters. It is important to note that the carbon tax can be easily re-implemented. The order-in-council removed the tax, but the underlying law, the Greenhouse Gas Pollution Pricing Act, is still in place. A future government could reverse this by issuing another order-in-council, a straightforward process. This is an unexpected detail: while the tax is gone now, the legal structure remains, making it simple to bring back without new legislation.

Policy Changes and New Framework

The consumer carbon tax, introduced by the Trudeau government in 2019, applied to gasoline, natural gas, and coal, increasing operational costs for small and medium-sized businesses. Carney's decision removes this tax, while introducing key measures aimed at maintaining Canada’s commitment to emissions reduction:

Elimination of Consumer Carbon Tax: Small businesses and consumers will no longer pay additional fees on fuel purchases.
Green Choice Incentives: A range of financial incentives will promote sustainable consumer and business practices, including rebates for electric vehicles and energy-efficient appliances.
Tightened OBPS: Industrial polluters will face stricter emission regulations, with the system extended to 2035.
Carbon Border Adjustment Mechanism: A new tariff on high-carbon imports will protect Canadian industries from competition with countries lacking comparable climate policies.

Business Sector Impacts

The policy shift has varied implications across industries, depending on fuel dependency, carbon emissions, and trade exposure.

Small and Medium-Sized Businesses

Benefit: Lower operational costs, particularly for transportation, agriculture, and logistics.
Challenge: Limited direct benefits for businesses not heavily reliant on fuel.

Large Industrial Emitters

Benefit: Encourages long-term sustainability and innovation.
Challenge: Increased costs due to a stricter OBPS, requiring investments in cleaner technologies.

Green Technology Industry

Benefit: Higher demand for electric vehicles, renewable energy, and energy-efficient equipment.
Challenge: Policy success depends on effective execution of incentives.

Export-Oriented Businesses

Benefit: Protection from unfair competition through the carbon border tariff.
Challenge: Compliance costs for exporters shipping to countries with similar environmental regulations.

Pros and Cons of Carney’s Approach

Pros	Cons
Lower fuel costs for businesses	Higher costs for large industrial emitters
Financial incentives encourage green adoption	Incentives must be effectively implemented to be impactful
Carbon border tax protects Canadian industries	Uncertainty over long-term climate target effectiveness
Boost to green tech and clean energy sector	Potential consumer reliance on cheaper fossil fuels

Reactions and Controversy

The policy change has sparked mixed reactions. Conservative Leader Pierre Poilievre welcomed the repeal of the consumer carbon tax, calling it a victory for affordability. Environmental groups, however, argue that while incentives are a step forward, the move weakens Canada’s ability to cut emissions effectively.

Studies indicate that industrial carbon pricing has a greater impact on emissions reduction than consumer carbon taxes. As a result, Carney’s approach may align with long-term climate goals, but its success will depend on execution and business adaptation.

Conclusion

Mark Carney’s move to eliminate the consumer carbon tax represents a significant policy shift with wide-reaching effects on Canadian businesses. While cost reductions will benefit small to medium enterprises, large industrial emitters will face new financial pressures. The long-term success of this policy hinges on the efficiency of green incentives and the effectiveness of the OBPS in maintaining Canada’s commitment to environmental sustainability.

Stay tuned for more updates as businesses and policymakers navigate this new economic landscape.