Carbon pricing has long shaped environmental strategies in Canada and the United States, but recent political developments are triggering major shifts. While Canada is debating an overhaul of its consumer carbon tax, the US has eliminated the social cost of carbon (SCC) from federal regulations. These changes could significantly impact emissions policy across North America.
Introduced in 2019, Canada’s carbon pricing system was designed to curb emissions by making polluters pay per tonne of carbon dioxide. The fee has increased annually, starting at $13 (CAD 20) per tonne and reaching $55 (CAD 80) in 2024, with a scheduled rise to CAD 170 by 2030.
Despite its intended environmental benefits, the policy has faced growing opposition. Critics argue that rising costs—such as an expected 3.3-cent-per-litre increase in gasoline prices—are adding financial pressure on households, especially amid inflation concerns.
In response, Liberal leadership candidate Chrystia Freeland has pledged to replace consumer-facing carbon pricing with new mechanisms developed through consultation. While she remains committed to emissions reduction, her approach prioritizes alternative strategies, such as carbon credit markets, stricter building codes, and incentives for clean energy adoption.
Her leadership rival, Mark Carney, has also voiced support for scrapping the consumer carbon tax, citing misinformation and public division over the issue. With the Liberal Party set to select its new leader on 9 March, the decision could signal a major shift in Canada’s emissions policy.
Unlike Canada, the US has never implemented a national carbon tax. Instead, state-level initiatives have played a key role in emissions regulation. Programs like the Regional Greenhouse Gas Initiative (RGGI), launched in 2009, and California’s emissions trading system (ETS), established in 2013, have helped reduce emissions through market-driven mechanisms.
At the federal level, the SCC has been a crucial tool for assessing the long-term economic impact of carbon emissions. First introduced during President Obama’s administration, the SCC provided a financial basis for regulations aimed at limiting pollution and promoting clean energy. The metric has fluctuated under different administrations—President Trump previously reduced it from $50 per tonne to as little as $7, while President Biden raised it to $190 per tonne to reinforce environmental policies.
Now, President Trump’s administration has taken another step, completely eliminating the SCC from federal policy. The ‘Unleashing American Energy’ executive order disbanded the working group responsible for setting the SCC and directed the Environmental Protection Agency (EPA) to remove it from future regulations. This move aligns with a broader push to deregulate emissions policies, benefiting fossil fuel industries while reducing federal oversight on pollution.
The recent policy shifts in Canada and the US highlight an evolving debate over how to regulate emissions effectively. If Canada eliminates its consumer carbon pricing model, it will need to introduce alternative strategies to ensure that polluters remain accountable while keeping costs manageable for households. Freeland’s proposed measures—including home energy rebates and investments in renewable energy—could help bridge this transition.
In the US, the removal of the SCC weakens a key regulatory tool for addressing emissions, potentially making it harder to justify new environmental policies. Without a formal economic measure for carbon’s long-term damage, the financial burden of climate impacts may shift to taxpayers through rising disaster recovery costs and higher energy prices.
As both nations reassess their environmental policies, the challenge will be balancing economic stability with the need for effective emissions reduction strategies. With extreme weather events becoming more frequent, the coming months will be crucial in shaping the future of North America’s approach to environmental regulation.