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Carbon tax could become a major drag on the economy

‘We’re pushing ahead of where the market economy is really ready to go’
FILE - Canadians are paying more for goods and services to incentivize them to transition to greener energy to help Canada lowers it carbon emissions to support meeting its climate targets. THE CANADIAN PRESS/Sean Kilpatrick

Canada’s carbon tax is not causing a huge economic headache today, but the pain will grow as the tax increases, says the local Chamber of Commerce.

CEO Scott Robinson, with Red Deer & District Chamber of Commerce, agreed with Pierre Cléroux, chief economist of the Business Development Bank of Canada, who recently said the carbon tax is not high enough to have a major impact on the economy.

Cléroux, who works for the commercial bank, which is a crown corporation, made the remarks during a chamber’s key speaker series lunch held last Friday.

But Robinson added that since the tax applies to so many things, it already has a drag on the economy, although hard to measure, and can impact the consumers’ decision to purchase when prices climb.

“We have to transition responsibly and slowly. If the taxes are put in too quickly and rise too quickly, it will absolutely slow the economy and hurt businesses and hurt consumers,” Robinson said.

“It’s not like we don’t need to transition to net zero by 2050. I think everyone now is saying that. It’s how quickly you can transition. We’re pushing ahead of where the market economy is really ready to go.”


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Dustin Quirk, an instructor at the Donald School of Business, Science and Computing, said any business tax will impose a drag on the economy, but the impact is difficult to calculate. The impact of the carbon tax will depend on the level to which industry invests in greener forms of energy, added expenses on profitability, and costs to the economy from climate change.

“Unfortunately with many government incentive programs, there will be winners, losers, and likely a few unintended consequences,” Quirk said in a statement.

He said the carbon tax introduced by the federal government in 2019 was designed to incentivize Canadians to transition to greener energy to help Canada lower its carbon emissions to support meeting its climate targets.

“While no one likes paying taxes, the vast majority of families in Alberta receive carbon tax rebates that exceed their carbon tax costs. Unfortunately, most people don’t realize this as the federal government has termed these ‘Climate Action Incentive Payments’ instead of the more obvious ‘Carbon Tax Rebate.’

“From this perspective, the carbon tax and its associated impact on the economy is net positive for consumers, especially lower income families due to the progressive nature of the tax and for consumers who take advantage of programs that can lower their energy bills through energy retrofits.”


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