Carbon Pricing mechanisms are still new ideas in the scope of reducing carbon emissions. The EU and China both have outlined plans to tax carbon in different ways. Canada itself does have a carbon tax in place, however foreign carbon pricing could affect Canada’s industry in a negative way, according to a report by the Royal Bank of Canada.
The report states that foreign tariffs on carbon would hurt the Canadian economy. Extra fees on exporting goods are never good for the economy. As an example, the EU plans on tackling climate change involves tariffs on industries that produce high level of carbon emissions. The industries targeted are aluminum, cement, iron and steel, fertilizers, and electricity.
For now, none of those industries are major Canadian exports to the EU however times change and the race against climate change is heating up. The UN released a report urging significant actions to stop climate change. Further industries could be affected, ones that will reduce trade between Canada and the EU.
Another major concern is how the U.S. will apply its own carbon plans. Any carbon pricing or tariffs on Canadian exports to the U.S. would be a huge blow to the economy. Hindering any trade with the U.S. would reduce trade with Canada’s largest trading partner. Another possibility is a North American carbon tariff as to not isolate Canadian trade.