One year into the tenure of Prime Minister Mark Carney, it would be fair to say that his government is already flagging on its management of the economy, arguably the singular issue for why it was elected.
Unemployment is up. Deficits are high. Manufacturing is down. And the trade war with the United States – which Carney had once pledged to wrap up by last June – is now lurching into stalemate as U.S. negotiators pledge to take a hard line on renegotiations of the Canada-United States-Mexico Agreement (CUSMA).
Carney's Economic Strategy
Carney’s economic strategy has focused heavily on offices and documents pledging to reverse all of these trends. A memorandum of understanding to build a pipeline to the Pacific. A Major Projects Office promising to “unlock Canada’s economic potential.” And nearly a dozen non-committal trade “deals” with non-U.S. countries.
But all the while, his government is neglecting some of the country’s most obvious economic fixes — fixes that are often cited by economists and business leaders as to why Canada’s fiscal decline persists.
The Industrial Carbon Tax: An Easy Fix
As Carney demonstrated after his swearing in, repealing taxes is extremely easy for a prime minister to do. All he had to do was order the carbon tax to be zeroed, and gas prices across the country dropped almost immediately. As such, it would take about the same amount of effort to repeal Canada’s other, less well-known, carbon tax: The industrial carbon tax.
Although it isn’t itemized in the same way as the consumer carbon tax, a March report by the Fraser Institute estimated that it will slow down the economy just enough to equal $1,730 in lost income per employed Canadian by 2030. The Conservatives have put the industrial carbon tax at the centre of their messaging against the Carney government, although the campaign has never managed to seize the public’s imagination to the same extent as their crusade against the consumer carbon tax.
But businesses are indeed citing it as something that is scaring away investment. Just this week, Cenovus Energy CEO Jon McKenzie told a conference outside Montreal that no other oil-producing nation maintains a similar tax, so rather than its intended purpose of incentivizing decarbonization, it “incents industry to invest outside of Canada.” “We have created a set of national policies and regulations that make resource development and investment in Canada uncompetitive with the rest of the world,” he said.
Other Neglected Levers
Beyond the industrial carbon tax, there are other straightforward measures that economists argue could boost Canada's economic performance. These include reducing interprovincial trade barriers, streamlining regulatory approvals for major projects, and cutting corporate tax rates to attract foreign investment. Yet, the Carney government has been slow to act on these fronts, focusing instead on symbolic agreements and bureaucratic initiatives.
The result is a growing disconnect between Ottawa's promises and the reality faced by Canadian businesses and workers. As the trade war with the U.S. drags on and economic indicators worsen, the pressure is mounting on Carney to take concrete action on the easy fixes that remain within his reach.
