Hub Podcasts The carbon tax is gone—now what?
May 22, 2025
Trevor Tombe, a Professor of Economics at the University of Calgary and a Hub contributor, dives into the implications of removing the carbon tax. He highlights the immediate benefits for consumers and links this removal to recent declines in inflation. Tombe discusses how the carbon tax's impact on inflation has been minimal compared to global energy prices and housing issues. He also explores the potential effects of this policy change as a climate strategy, emphasizing the need for fair alternatives.
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Carbon Tax Removal Dropped Inflation
- The entire recent dip in inflation is due to the removal of the carbon tax in April 2023.
- Without the carbon tax removal, inflation would have remained at 2.3%, showing no change.
Temporary Inflation Drop Explained
- The carbon tax removal causes only a temporary 12-month drop in headline inflation.
- After that, inflation comparisons reset and this effect disappears, like previous GST or tobacco tax changes.
Indirect Taxes Slightly Elevate Inflation
- Indirect taxes like carbon tax subtly raise headline inflation by about 0.1% annually over six years.
- Removing the carbon tax caused a sharp 0.6% drop in inflation reported in April 2023.