Carbon Tax Rollback: Short-Term Relief, Long-Term Risk?
What Canada’s provinces are doing — and why it may cost more than it saves
In the last two months, three Canadian provinces — Alberta, Saskatchewan, and New Brunswick — have either paused, scaled back, or publicly rejected aspects of the federal carbon tax. Their arguments are familiar: affordability, fairness, and voter pressure. With fuel prices high and household budgets tight, the idea of pulling back on carbon pricing polls well. Politically, it makes sense. Economically and environmentally, the picture is less reassuring.
The federal carbon pricing system is designed to reduce emissions by gradually increasing the cost of greenhouse gas-producing fuels. It also comes with rebates. The government insists that most households receive more back in rebates than they pay in direct costs. But the visibility of the surcharge at the pump — and the delayed nature of rebates — has made it an easy target.
In Alberta, Premier Danielle Smith has framed the tax as a federal overreach. Saskatchewan’s Premier Scott Moe has said his government will not remit the portion of the tax collected on natural gas. In New Brunswick, opposition leader Susan Holt recently floated a provincial rebate alternative, suggesting Ottawa’s plan is too blunt for local needs. In all three cases, the pushback is framed as protecting working Canadians. The question is whether the rollback helps or harms them.
In the short term, the average Canadian might save a few cents per litre. But those savings are marginal — and they don’t account for the cost of climate damage. Floods, fires, and extreme heat events are already rising, and insurance losses have skyrocketed. According to the Canadian Climate Institute, every dollar spent avoiding carbon now prevents multiple dollars in future costs — from infrastructure collapse to emergency response to lost productivity.
There's also the legal issue. The Supreme Court of Canada upheld the federal government’s right to impose carbon pricing in a 6–3 ruling in 2021, arguing that climate change is a national concern requiring coordinated action. Provinces can design their own systems, but they must meet the federal benchmark. Non-compliance, while politically effective, opens the door to fines, court battles, and strained federal-provincial relations.
The real risk is long-term. Rolling back the carbon tax doesn’t reduce emissions — it just delays the shift away from high-emission behaviours. Economists call this a “regressive deferral.” By postponing a tough but necessary transition, the burden ultimately lands harder and later. That includes costs to health, agriculture, infrastructure, and energy systems.
Ironically, most Canadians still say they care about climate action. But when it comes with visible price tags, the support wavers. That gap — between values and votes — is what federal climate policy keeps crashing into. And with an election expected in 2026, the political cost of sticking to carbon pricing may outweigh the policy logic. That’s the danger.
Carbon pricing isn’t popular. But in a system that rewards short-term gains and punishes long-term strategy, popularity isn’t the best metric for judgment. It’s worth asking: will removing the tax today lead to real solutions tomorrow — or just more expensive problems?
Sources:
Canadian Climate Institute – Reports on the economic impact of climate-related disasters and cost-benefit analysis of carbon pricing
Supreme Court of Canada – 2021 ruling on federal carbon pricing powers
CBC News – Coverage of Alberta, Saskatchewan, and New Brunswick carbon tax responses (April–May 2025)
Statistics Canada – Fuel price trends and inflation data, 2024–2025
Department of Finance – Carbon tax rebate schedule and provincial equivalency standards
The Globe and Mail – Op-eds and political analysis on carbon pricing strategy
Parliamentary Budget Officer – Data on projected climate costs and household rebate distribution
