Carney scraps parts of Canada’s carbon tax, GNWT sets out response

The NWT government suggested it will use regulatory amendments to swiftly match moves by Mark Carney on Friday that end most of Canada’s carbon tax.

On day one as Canada’s new prime minister, Carney signed an order-in-council reported to have the effect of killing the consumer portion of the federal carbon tax by the end of the month. Parts of the country receiving federal rebates would continue to do so through April.

The industrial elements of the tax, aimed at heavy emitters, remain in place. Ministers suggested the consumer reducing that part of the tax to zero.

How this will apply to the Northwest Territories is more complex.

The NWT does not rely on the federal carbon tax, which most of the country uses and which is also known as the backstop.

Instead, the territorial government manages its own version of the carbon tax that has to meet federal requirements.

From November 2024: How much carbon tax the NWT is paying and where the money goes

That means the GNWT retains some control of the tax’s finer detail – and can create specific measures for the likes of the territory’s diamond mines – but must ensure its tax plays by Ottawa’s rules.

The problem is that because the NWT has its own tax, enshrined in its own legislation, the territory must act separately to replicate anything Carney does to lift elements of the federal tax.

Late on Friday afternoon, the territorial government told Cabin Radio it would use regulations to match any removal of the federal carbon tax, getting around the requirement to recall MLAs (who don’t sit again until May) and repeal legislation.

“If the federal consumer carbon tax is removed while the Legislative Assembly is not in session, the Government of the Northwest Territories can act to effectively remove the carbon tax by introducing 100-percent carbon tax rebates on all fuels through regulations,” a spokesperson for the Department of Finance said by email.

“Respecting the legislative process, the GNWT would then be able to propose any required legislative amendments for consideration by the Legislative Assembly in an upcoming session.”

Finance minister Caroline Wawzonek had previously suggested her department could use the same strategy Carney appeared to use on Friday: dropping the tax to zero. Increasing rebates to 100 percent would have a near-identical effect.

In February, Wawzonek – asked by Yellowknife Centre MLA Robert Hawkins about the prospect of the tax being altered or lifted – said staff were monitoring developments.

“We have the option to zero out our values if it gets to a point where we are able to do that,” she said at the time.

Wawzonek said the department had been able to respond swiftly in the past when other changes were made to the federal rules.

“Until we know with some finality if we’re dealing with no carbon tax, if we’re dealing with a modified carbon tax, if we’re dealing with only an industrial tax, or if we’re moving entirely to a cap and trade system,” she said in February, “I’m not in a position to say what response we would have here.”

Range Lake MLA Kieron Testart said on Thursday that MLAs still did not “have clarity” on what will happen in the NWT in this situation.

It’s certain that the territory will move to drop some or all of the carbon tax if Ottawa is doing so.

Wawzonek and her predecessor as finance minister, Robert C McLeod, each said they believed the tax had not been appropriately designed for northerners and would not be something the territorial government imposed without being forced at the federal level.

Chrystia Freeland, who lost the Liberal leadership election to Carney but has a post in his cabinet, said on Friday that she agreed with the move to drop the tax.

“It’s a question of not being arrogant and telling people what’s good for them but about listening. What I heard was that this is not a policy that works for Canadians,” Freeland told reporters.

“I am very strongly in support of the decision he has taken today.”

Removing the carbon tax, which was introduced in 2019, had been a rallying cry of Conservative Leader Pierre Poilievre for years. Carney had made the same pledge during his Liberal leadership campaign, saying the tax was now too “divisive.”

Canada’s new prime minister – who was born in the NWT, where climate change is occurring at three to four times the pace measured elsewhere – has yet to set out in detail how he will address emissions, price pollution, and mitigate against climate change.

On Friday, Carney said dropping the consumer price on carbon would “make a difference to hard-pressed Canadians but is part of a much bigger set of measures this government is taking to ensure we fight against climate change, our companies are competitive and the country moves forward.”