Eight communications lessons from Canada’s carbon tax failure
Why a policy that put money in people’s pockets and helped combat climate change failed... And eight ways to make sure it doesn't happen again.
O Canada. What have you done? Mark Carney’s very first act when he became Liberal Party leader and Canada’s Prime Minister in March was to remove the country’s consumer carbon tax and rebate system.
Under that policy, a federal fuel charge was imposed to price pollution, with proceeds returned to individuals and businesses via a rebate, ensuring most households received more in rebates than they paid in higher prices at the fuel pump and on their heating bills.
Its defenestration was a blow to anyone championing carbon pricing as a way to accelerate solutions to the climate crisis. In part because it was a Liberal government that implemented the policy, celebrated by climate economists and advocates everywhere, on a country-wide basis in 2018. And particularly because Carney is himself a renowned economic policymaker and climate advocate.
What went wrong? According to Carney, “misinformation and lies” from the opposition Conservative Party and its supporters had made the tax too “divisive” to save. That misinformation has been widely covered and debunked, but it was brutally effective. Sacrificing the carbon tax was a politically expedient way to distance himself from his predecessor Justin Trudeau, one that paid off in last week’s election.
Nevertheless, Carney’s retreat has set the global cause of carbon pricing back significantly.
Before getting into what we can learn from the political failure of Canada’s consumer carbon tax, it’s worth keeping in mind two facts that tend to get lost amid the post-mortems. First, the consumer carbon tax was politically successful in Canada for a long time. The Liberal Party was elected in two consecutive elections in 2015 and 2019 with the carbon tax at the centre of its raft of policies. If it was a vote-winner in Canada, it can be a vote-winner elsewhere.
Second, the carbon tax was successful in reducing Canada’s emissions, as well as making the vast majority of households better off. Some have argued that these emissions reductions would have happened anyway. Perhaps, but with the tax (and rebate) due to rise over time, the policy would have reduced both carbon consumption and emissions further still.
The key take-away from Canada is that carbon pricing – even with consumer payments that act progressively, i.e. helping poorer households most – is politically really, really difficult. So, how can it be done differently next time? Here are eight suggestions for starters, all focused on communications. In other words, framing it, explaining it and selling it better.
Lead with the dividend. Taxes, like death, are universally unpopular. So, dividends should be the primary feature of the policy. Policy makers should make improving the lives of the majority of citizens the primary goal of a carbon tax. This isn't difficult: the rich emit the most carbon in any country, so increased costs will naturally fall most heavily on the wealthy minority and be redistributed to the less-affluent majority. Lower emissions are an integral feature of the tax, but not its primary purpose.
Don’t say the “T” word. It’s superficial, and some might argue intellectually dishonest, but the word “tax” has become so loaded in most developed economies it is just too easy to attack. And, as seen in Canada, it rhymes way too well with “axe”. Instead, find a better word (perhaps “charge,” “levy,” or “duty.” Or even “tariff.”) and stick to it. As opponents to tariffs on international trade are finding out, the “but it’s really a tax” objection might be true, but it doesn’t necessarily register with voters.
Don’t say rebate, either. Rebates are boring and bureaucratic. They’re a downer. A rebate suggests being compensated for something you’ve lost. With a carbon tax, the whole point is to incentivise people to spend less on fossil fuel-intensive things. Those who do get free money. So, call it that: a cashback, a bonus, or a dividend.
Cash first, clearly labelled. Remarkably, for much of the life of the policy in Canada, rebates were deposited into household bank accounts without clear labelling. Unless you were looking for them, they were essentially invisible. Insert face-palm emoji here. Policy makers need to do much better in future. First, announce and celebrate the dividend before the tax. Second, make sure that dividends land in people’s accounts before the tax takes effect (yes, there will be a cost to this compared with paying dividends in arrears, but it can be built into the overall financing of the policy). Third, compel banks to label payments clearly.
Be at the point of sale. While dividend payments may be greater than price increases for most people, they are occasional events. In Canada’s case, rebates were paid quarterly (and moreover were – as above – hard to see). By contrast, people feel the pain of increased gas prices every time they fill up. As a researcher with the Canadian Centre for Policy Alternatives put it, “You’re making everybody pay a little bit all the time, and so it’s a highly visible policy… Psychologically, it’s just not a winning equation.” While there’s no easy fix, policy makers should use active, creative communications at the point of sale (for gas) or billing (for heating) to drive home the idea that the policy yields a net gain for households, not a net drain.
Talk about making polluters pay. Canada’s then Environment Minister Catherine McKenna, who was in charge of the carbon tax’s implementation, said in 2023 that the concept of “making polluters pay” resonated with voters across the political spectrum. According to McKenna (in conversation with Bloomberg), “If you say, ‘do you want a carbon tax?’ Terrible, terrible, terrible. What about carbon pricing? A little bit better. What about putting a price on pollution? Better. No longer free to pollute? Best.” This messaging allows climate action supporters to avoid using the sometimes equivocal and even passive term “climate change” and sidesteps the politicisation of that term among sceptics and the undecided.
Flood the zone with well-framed data. Canada’s carbon tax opponents used skewed analysis to argue against the tax on purely financial grounds. In doing so, they were able to prove that a policy designed to make some things cost more made things some cost more. Well, duh. Carbon tax advocates need to “flood the zone” with research demonstrating how the policy will leave the majority better off, and with analysis that highlights the social and future costs of climate change. This won’t silence the critics. But it will set the bar much higher for those trying to undermine the policy on financial or economic grounds. There’s no shortage of real-world, objective data demonstrating carbon pricing’s effectiveness, nor of renowned economists who support it.
Don’t stop selling. McKenna, interviewed more recently, offered a clear-eyed post-mortem. “We failed to properly advertise,” she said. “You have keep on explaining… and you have to be tough and you have to fight all the time.” It’s clear, then, that policy makers should in future focus much more on an integrated and ongoing communications campaign to maximise public support. They should not always be on the defensive. Celebrate dividend payments. Engage the media at multiple levels, from consumer education to policy thought leadership. Get companies to offer deals for low-carbon alternatives. Communicate more and better, and – whatever you do – don’t stop.
These suggestions are all about communications. In other words, the packaging. There are also myriad ways to tweak the implementation of the policy itself to maximise public support. For example, make it easier for consumers to substitute fossil fuel-intensive products like cars and home heating for low carbon alternatives by offering incentives for EV leasing and heating-as-a-service. Build in ways to tweak carbon tax and dividend rates to adjust to inflation. Give away additional consumer dividends from the proceeds of incremental industrial carbon taxes and emissions trading schemes.
Carbon taxes are down, but not out. More innovative policy ideas combined with much more effective communications will make carbon pricing a vote-winner again.
We should be grateful to the many courageous Canadian politicians (not all of them Liberals) for making such a visionary and, ultimately, effective policy a reality. We might also give (very much backhanded) thanks too to the populists and their backers for showing their hand and revealing the opposition playbook.
The good news is that carbon pricing is alive and well in Canada. The newly elected Carney government remains committed to pricing carbon by increasing the scope of the country’s industrial carbon taxes. Moreover, 89% of people globally (and a large majority in almost every developed economy) demand that their governments do more to address global warming. Consumer carbon taxes cash payments will have their day again.