What We Know About How Much the Carbon Tax is to Blame for Spiking Food Costs in Canada


Prime Minister Justin Trudeau has ordered grocery executives to “stabilize” prices, but Conservative Leader Pierre Poilievre has suggested the Liberal government would be better off eliminating its own carbon tax to lower food costs.

While it’s clear that prices have spiked — Statistics Canada said there was an 11.4 per cent increase in food prices last year — when it comes to what’s actually causing food inflation, things are a bit more complicated. There are multiple factors at play. Everything from supply-chain disruptions to supply management and the war in Ukraine has contributed to an increase in costs. The carbon tax has also played a role, but experts can’t agree on how much.

The Bank of Canada said this month the carbon price contributes about 0.15 percentage points to inflation overall. That amount was the same whether inflation was at its peak of 8.1 per cent in June 2022 or 3.3 per cent in July. There is no clear figure for groceries. While the tax is not applied directly to food, and the bulk of carbon emissions from the agricultural sector are exempted, it can still indirectly raise costs of production and transportation of food.

University of Calgary economist Trevor Tombe estimates that the carbon tax is responsible for less than one per cent of grocery price increases.

“The best estimates we have show very clearly that carbon taxes do increase food prices, but do so modestly. Certainly not by an amount that’s in any way comparable to the magnitude, just the truly dramatic increase, in food prices that we’ve seen over the last few years,” he said.

Tombe used a Statistics Canada modelling program that analyzes the relationship between taxation and personal finances and takes into account, for example, increased costs of heating on a corner store, when figuring out how much grocery prices have been affected by the tax.


In Alberta, the carbon tax has increased prices by about 0.3 per cent, Tombe said. That’s just 30 cents on a $100 bill. In Manitoba it’s 0.9 per cent and in Ontario it’s 0.4 per cent.

“That doesn’t mean that we should or shouldn’t be concerned about small amounts. A variety of small contributing factors can add up,” Tombe said.

At present, Canada’s carbon tax is set at $65 per tonne of greenhouse-gas emissions. But it is set to increase to $170 by 2030, which would amplify its effects.

There could also be outlier products that are more expensive than other products.

“Especially in winter months, two-thirds of our fruits and vegetables in Canada are imported, and so have greater trucking distances or a little more fuel intensity. Different crops have different fuel intensities as well,” said Tombe.

Source : National Post