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By Julio Mejía and Elmira Aliakbari
Once again, war in the Middle East is destabilizing global energy markets, increasing energy costs (including at the pumps) and threatening Canada’s already fragile economy. Yet at a moment when policymakers should do everything possible to unlock Canada’s economic potential, the Carney government is doubling down on the Trudeau-era industrial carbon tax, which further raises energy costs, dampens investment and job growth—and all for negligible environmental benefits.
The industrial carbon tax sets an emissions limit for large facilities including oilsands operations and refineries. If facilities exceed their limit, they must either pay a fee to the government or buy credits from firms that emit less than their allowed amount. In either case, they face higher costs.
This year, the Carney government increased the tax to $110 per tonne of CO2 emissions, up from $95 in 2025, and the tax is set to reach $170 by 2030. Because virtually every economic sector relies on carbon-intensive energy (e.g. oil and natural gas), these increases will impose widespread economic costs on Canadians. For example, according to a 2026 study published by the Fraser Institute, if the tax reaches $170 per tonne by 2030, the Canadian economy would shrink by 1.3 per cent, create 50,000 fewer jobs, and leave workers earning about $1,160 less each year (on average) compared to a scenario where the tax remains at its 2025 level.
Of course, Ottawa sold the tax to Canadians on environmental grounds. But what actually will it achieve? According to the same study, the tax could cut emissions by around 100 million tonnes—that’s less than 0.17 per cent of projected global emissions in 2030.
Meanwhile, due to the tax, capital earnings—including capital gains, interest on investments, and dividends—will fall by an estimated 8.0 per cent by 2030, which will likely prompt firms to scale back or cancel investment plans in Canada. Less investment means fewer resources to launch projects, build infrastructure, develop technology, boost productivity, create jobs and improve living standards for Canadians.
And the timing couldn’t be worse. Investment in Canada’s oil and gas sector—the country’s largest export industry and the most exposed to the industrial carbon tax—has collapsed from a peak of $37.3 billion in 2014 to just $10.9 billion in 2024, a 70.6 per cent decline (inflation-adjusted), with the downward trend continuing this year. And in April, a Royal Bank of Canada report found that more than $1 trillion in investment left Canada between 2015 and 2024—the largest investment outflow in our country’s history. According to the report, for every dollar that entered the economy over that decade, two left.
Not surprisingly, the latest OECD investment report ranked Canada as the most restrictive jurisdiction for foreign investment in the G7 and North America, behind both the United States and Mexico. The tax will add cost pressures to companies and further weaken Canada’s attractiveness, pushing investment (and emissions, which cross borders regardless of where they originate) to other jurisdictions.
The industrial carbon tax hurts Canadian workers and businesses in exchange for virtually no meaningful environmental benefit. When he announced his plan to scrap the consumer carbon tax—which his government did last year—Prime Minister Carney said, “When I see that something’s not working I will change it.” Carney should apply that same logic to the industrial carbon tax.
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