CHARLEBOIS: Mark Carney’s carbon tax rebrand won’t stop food prices from rising​on March 15, 2025 at 3:57 pm

Prime Minister Mark Carney has signed an executive order eliminating the so-called “consumer carbon tax,” leading many Canadians to believe they will no longer feel its financial burden.

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But make no mistake – the most damaging aspect of the carbon tax for our food economy remains intact.

Carney’s plan appears to shift toward what some call a “shadow” tax system – continuing to tax major polluters in the same way as before. While this version of carbon pricing may be less visible to consumers, its economic impact is no different.

Most Canadians support strong environmental policies that promote sustainability, but if those policies undermine food affordability and competitiveness, they warrant serious scrutiny.

At its core, the carbon tax accumulates costs at every stage of the food supply chain. It starts with farmers, who pay carbon taxes on fuel, fertilizers, and equipment – taxes that are further compounded by GST. Despite government rebates, production costs continue to climb.

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The cost burden doesn’t stop there.

When wheat is transported to a mill, the trucking company pays carbon taxes on fuel, which gets passed on through shipping fees. The mill then incurs additional costs for electricity and operations. These costs continue to stack up as the flour moves through distribution, into bakeries, and onto grocery store shelves.

By the time a loaf of bread reaches the consumer, multiple layers of carbon tax have been applied at different stages, increasing the final retail price.

Consider a hypothetical scenario: If a farmer starts with a $100,000 base production cost and each intermediary pays an additional $5,000 in carbon tax, the final price could increase by as much as $89,513 – of which $67,230 consists solely of carbon tax and GST on the tax itself.

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While politicians often focus on the direct tax that consumers see at the register, the real economic pressure accumulates throughout the supply chain. And Carney’s policy shift does little to alleviate this burden.

The impact of the carbon tax on food prices is even more evident when analyzing the growing disconnect between wholesale and retail food prices.

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Since the carbon tax was introduced at $20 per metric ton in 2019, Canada’s agri-food sector has struggled with declining competitiveness. The narrowing gap between wholesale and retail prices suggests grocers are increasingly forced to import food from abroad to mitigate costs.

Since 2022, with annual carbon tax hikes of $15 per metric ton, the effects have become even more pronounced. Wholesale food prices temporarily outpaced retail prices, forcing grocers to absorb additional costs. This year, another $15 increase is scheduled for April 1, further amplifying cost pressures that will inevitably trickle down to consumers.

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Yet, despite the economic fallout, Ottawa has failed to produce any meaningful evidence that the carbon tax has improved Canada’s environmental outcomes. Since its inception, no study has been conducted to evaluate its impact on food affordability. Not one.

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Many academics have called it a blind-sided policy – one that weakens our economy and erodes competitiveness without measurable proof that it effectively addresses climate change.

With a new prime minister in office and potentially a new government on the horizon, it is time for Ottawa to facilitate a real, evidence-based debate on how best to tackle climate change without compromising food security and affordability.

There are better solutions than the carbon tax – or its “shadow” equivalent – regardless of what Prime Minister Carney chooses to call it.

– Dr. Sylvain Charlebois is the Director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast

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