CHARLEBOIS: The inconvenient truth about the carbon tax and food prices
· Toronto Sun
Let’s talk about the carbon tax — more specifically, the industrial carbon price, which still exists.
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Last year, Prime Minister Mark Carney reduced the consumer portion of the carbon tax to zero. That decision may have left many Canadians with the impression that carbon pricing had disappeared entirely. It has not.
The industrial carbon price remains in place, and another increase is scheduled for April 1, when the price will rise from $95 per tonne to $110 per tonne.
At a time when global energy markets are once again facing geopolitical uncertainty, this increase risks amplifying the pressures already building within Canada’s food supply chain. With tensions rising in the Middle East and the possibility of disruptions to oil flows, higher fuel costs appear increasingly likely unless the current conflict de-escalates quickly. Anyone familiar with the region understands that predicting stability there is rarely straightforward.
We have seen how quickly energy shocks can ripple through food systems before.
At the start of Russia’s illegal invasion of Ukraine in February 2022, Canada’s carbon price stood at $40 per tonne. For a truck hauling food between Toronto and Montreal once a week, the additional carbon-tax burden amounted to roughly $2,000 per year.
Price will reach $110 per tonne
On April 1, 2026, the carbon price will reach $110 per tonne — more than double what it was when the Ukraine war began. For that same weekly Toronto–Montreal route, the additional carbon-tax cost alone rises to roughly $6,000 per year compared with 2018. That is more than three times the burden carriers faced when the Ukraine war began.
And that calculation excludes the obvious: higher fuel prices themselves, which inevitably accompany geopolitical shocks such as Ukraine in 2022 or the latest tensions involving Iran.
The cumulative effect becomes clearer when looking at the national logistics system. Canada likely sees 800 to 1,200 long-haul food truck trips each day, many covering distances of roughly 1,000 kilometres. At a carbon price of $110 per tonne, the diesel tax component alone represents approximately $34 million to $52 million per year in additional costs across those shipments.
And this estimate is extremely conservative.
It excludes the additional costs associated with clean fuel regulations, refrigeration units, empty backhauls, secondary distribution routes, and warehousing operations. When those factors are included, the financial impact across the food supply chain could easily be three or four times higher.
Geography also matters. In a country as large as Canada, regions located far from major population centres — such as the Prairies or Atlantic Canada — bear a disproportionate share of transportation costs. Distance alone makes food logistics expensive; layering additional policy costs on top of that reality compounds the challenge.
It is also worth remembering that carbon costs accumulate across the entire supply chain. By the time food reaches a distribution centre, its price already reflects higher input costs at earlier stages—from farming to processing to transportation. And margins do vary in food distribution. Each additional cost is applied to an already higher base price.
Consumers pay
Ultimately, consumers pay the difference at the grocery store.
Some industry observers have described carbon pricing in food logistics as a “silent killer” of competitiveness, and the description is not entirely misplaced. Canada is already a challenging market for food distribution due to its vast geography and relatively small population. Adding further cost pressures to logistics does little to attract investment in grocery retail and food distribution infrastructure.
To be clear, carbon pricing is not inherently misguided. In principle, it can be an effective tool to encourage innovation and reduce emissions. But when applied to the food system—an essential sector closely tied to affordability — the policy must be designed with particular care.
Varied approach
Not all provinces approach carbon pricing in the same way. Quebec, for example, operates a cap-and-trade system linked to California’s carbon market, where allowance prices are determined through auctions rather than through Ottawa’s annual price schedule. The mechanism is different, but the economic signal is similar. Carbon costs still work their way through transportation networks and food distribution systems.
If Ottawa genuinely wants to help the food supply chain cope with rising energy costs, it should at least consider pausing the scheduled April 1 increase, or examining whether parts of the food supply chain should receive temporary relief.
Putting a price on carbon can send an important environmental signal. But when it comes to food—an essential good that every household depends on—the stakes are simply too high to ignore the consequences.
Our own research has repeatedly shown that carbon pricing can disproportionately affect lower-income households, largely through higher food and energy costs across the food supply chain. Yet when the carbon tax was first implemented in 2018, Ottawa conducted remarkably little analysis of how the policy might influence food affordability.
Eight years later, Canadians are experiencing the consequences in real time.
– Sylvain Charlebois is director of the Agri-Food Analytics Lab at Dalhousie University, co-host of The Food Professor Podcast and visiting scholar at McGill University