Carbon tax is inflationary

With the House of Common back in session, Opposition Day is back. Opposition days, also known as 'supply days'  are where the opposition parties can table a motion for debate in the House.

For the Official Conservative Opposition, the motion we tabled this week read as follows:

“That, in the opinion of the House, given that the government's tax increases on gas, home heating and, indirectly, groceries, will fuel inflation, and that the Parliamentary Budget Officer reported the carbon tax costs 60% of households more than they get back, the government must eliminate its plan to triple the carbon tax.”

Triple the carbon tax?

I have found that many Canadians are unaware that the Trudeau Liberal Government plans to raise the carbon tax from the current level of $50 a tonne to $170 a tonne by 2030, with increases each and every year.

This breaks the promise the Trudeau Liberals made in 2019 when they stated that “The plan is not to increase the price(carbon tax) post-2022”.

This new rate will also apply to carbon taxes created under provincial law, such as British Columbia.

Should a provincial government refuse to increase their carbon tax in step with the federal government, the Supreme Court of Canada has confirmed that the federal government can impose its own carbon tax as a backstop.

Why does the Official Opposition believe this is a problem? 

As we have watched 40-year high inflation take hold in Canada, one of the key drivers of inflation is the high price of gasoline.

Higher gas prices not only harm household budgets, but they also increase transportation costs and in turn raise prices on groceries and other consumer goods – all increasing inflation.

Earlier this year the Bank of Canada was asked to calculate the cost of the carbon tax ,at current levels, and how that affects inflation here in Canada.

The answer from the Bank of Canada was alarming: “if the charge (carbon tax) were to be removed from the three main fuel components of the consumer price index (gasoline, natural gas and fuel oil) it would reduce the inflation rate by 0.4 percentage points. In other words, if that policy had come into effect at the start of the year, January’s inflation rate would have been 4.7% instead of 5.1%.”

Defenders of the carbon tax will often reference that there are rebates. 

Unfortunately, rebates do not fairly reflect the differences in services available here in Canada.

For someone in Toronto who does not own a car they will likely come out ahead under any carbon tax. 

However, for someone living in a rural community, like Hedley B.C., where there is no high school, no middle school, no hospital, no major grocery stores, and very limited transportation options, they are forced to drive to communities such as Princeton and Keremeos and are much more severely impacted by the carbon tax as a result.

There is also a larger problem that our major trading partners, the United States and Mexico, do not have a carbon tax which means that producers located in those countries can undercut Canadian producers and at the same time there is no actual emission being reduced. 

Finally, we must also recognize that not every factor that drives inflation is within the control of the Canadian Government. 

International supply chain factors and Putin’s war against the Ukraine are all outside of the control of the Bank of Canada,  when the Bank raises interest rates.

This leaves the question what can the Government of Canada do to help increase affordability and reduce inflation? 

As the Bank of Canada has confirmed the carbon tax is inflationary, the Official Opposition is calling on the Trudeau Liberal government to stop its planned tripling of the carbon tax.

​My question this week:

Do you agree?

I can be reached at Dan.Albas@parl.gc.ca or call toll free 1-800-665-8711.