Here’s what will be cheaper after carbon tax cut on April 1

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Prime Minister Mark Carney’s decision to cut the consumer carbon tax to zero per cent has sparked a debate over whether Canadians will see relief from rising costs. While some prices — like gasoline and home heating — are expected to drop, experts say the change is unlikely to lower grocery prices or the cost of other goods.

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The federal consumer carbon price is active in all provinces and territories except British Columbia, Quebec and Northwest Territories, which have equivalent systems of their own. B.C. announced plans to kill its provincial consumer carbon price in the wake of Carney’s announcement.

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For many Canadians, the carbon tax has been a controversial issue, blamed for making everything from food to fuel more expensive. The Liberal government under Justin Trudeau had argued that carbon pricing helps fight climate change, but critics say it has driven up costs. Now, with this latest policy shift, consumers are asking: Will life actually get cheaper? The answer isn’t that straightforward. Here’s everything you need to know.

Will prices fall immediately?

The most noticeable impact will be on gasoline and home heating costs. The consumer levy is charged on the purchase of more than two dozen input fuels, including gasoline, natural gas, propane and coal. The amount of the charge is based on the greenhouse gas emissions of each when burned, sitting at $85 per tonne currently. The carbon tax has added more than 17 cents per litre to gasoline in most provinces, so drivers should see an immediate drop at the pump when the new rate takes effect on April 1.

Households using natural gas or heating oil can also expect lower monthly bills. A new report by Desjardins Economics predicts the price of natural gas will fall 12.8 per cent between March and April.

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But for grocery store prices and other goods, the situation is more complicated.

“The gas — people will actually see a difference because it’s just a tax applied to one commodity,” said Sylvain Charlebois, a food distribution and policy professor at Dalhousie University. “For food, however, the impact is harder to measure.”

Why grocery prices may not drop

The carbon tax was one factor in rising food costs, but Charlebois said it’s impossible to isolate its impact from other economic pressures. The tax has increased the cost to transport food, but there are other key factors affecting grocery prices.

“Labour, energy, capital investments, distances, currency, tariffs — of course. There are so many factors that can impact prices,” he said.

This complexity means that even though fuel prices will be cheaper, consumers likely won’t see lower prices elsewhere, at least not right away.

“Besides the gas pumps, and maybe energy bills, life will stay the same. It won’t get any cheaper,” said Charlebois.

Some Canadians might assume that lower transportation costs will lead to cheaper goods, but Charlebois says that’s not likely.

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“At the gas pump, that’s a retail tax – the carbon tax is retailed and that’s being eliminated,” Charlebois explained. “But at the grocery store, there’s no retail carbon tax. It’s not going to change anything.”

Will life get cheaper?

The Desjardins analysis suggests that the carbon tax cut will push overall inflation down over the next year. That could give the Bank of Canada a bit of breathing room on lowering interest rates and supporting the Canadian economy through the trade war with the United States.

But that’s largely due to lower gas prices.

The Desjardins report projects that, in the absence of federal consumer carbon pricing, inflation in April will be 0.7 per cent lower than it would have been otherwise.

That’s expected to bring the annual inflation rate down to 2.1 per cent for the month. February’s inflation figures, released Tuesday, showed a surprise jump in inflation to 2.6 per cent, driven largely by the end of Ottawa’s temporary sales tax break.

RSM economist Tu Nguyen said she thinks the coming price spike from the tariff battle will “outweigh” any impact of ending the consumer carbon tax. She said she sees prices on perishable goods at the grocery store rising first, followed by appliances and other durable goods in the months after.

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The Conservatives would also cut the industrial carbon tax

Conservative Leader Pierre Poilievre has long called for an end to the carbon tax.

While the Liberal government’s policy only eliminates the tax at the consumer level, Poilievre has vowed to scrap carbon pricing entirely.

The industrial carbon price has affected wholesale prices, which influences the food supply chain over time, Charlebois said.

“If wholesale prices go up, making our industry less competitive, it pushes grocers to import food from abroad because food here is getting too expensive,” Charlebois said. “And that’s really the big concern that we have.”

He said Carney’s consumer tax cut hasn’t addressed the major concerns that farmers have about carbon pricing.

“That’s probably why Mr. Poilievre actually came out the other day with a policy saying, ‘We’re eliminating all of it…. And that would certainly address some of the concerns in the industry.”

A full repeal would remove additional costs for farmers, manufacturers and transport companies.

National Post, with additional reporting from The Canadian Press

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