Ottawa cut the carbon tax but your grocery bill didn’t get the memo

The consumer carbon tax is gone but industrial carbon pricing isn’t. You pay it every time you buy food

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Let’s talk about the carbon tax.

Last year, Prime Minister Mark Carney reduced the consumer portion of the carbon tax to zero. That left many Canadians with the impression that carbon pricing had disappeared. It has not.

The industrial carbon price remains in place. And an increase from $95 per tonne to $110 per tonne scheduled for April 1 will raise the cost of transporting food across Canada’s supply chain.

On top of that, global energy markets are once again facing geopolitical uncertainty. With tensions in the Middle East and disruptions to oil supplies, higher fuel costs appear increasingly likely unless the current conflict de-escalates quickly.

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, costs that pass through the supply chain to consumers.

On April 1, the carbon price will more than double what it was when the Ukraine war began. For that same weekly Toronto to Montreal route, the additional carbon-tax cost alone rises to roughly $6,000 per year compared with 2018.

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, built into the price of food by the time it reaches store shelves.

This estimate excludes additional costs such as clean fuel regulations, refrigeration units, empty backhauls, secondary distribution routes and warehousing operations. Food distribution depends heavily on transportation and refrigeration, both of which are energy-intensive, so these additional costs compound quickly.

In a country as large as Canada, regions located far from major population centres, such as the Prairies or Atlantic Canada, face higher transportation costs. Distance already makes food logistics expensive, and added policy costs compound the challenge.

By the time food reaches a distribution centre, its price already reflects higher costs at earlier stages, from farming to processing to transportation.

Some industry observers have described carbon pricing in food logistics as a “silent killer” of competitiveness, and the description fits. Canada’s vast geography and relatively small population already make it a challenging market for food distribution. Adding further cost pressures does little to attract investment in grocery retail and food distribution infrastructure.

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 system should receive temporary relief.

When it comes to food, the stakes are too high to ignore the consequences, which are already visible in higher food costs across the country.

Research from the Agri-Food Analytics Lab at Dalhousie University has repeatedly shown that carbon pricing can disproportionately affect lower-income households through higher food and energy costs. Yet when the carbon tax was first implemented in 2018, Ottawa conducted little analysis of how the policy might influence food affordability.

Eight years later, Canadians are paying the price in real time.

Dr. Sylvain Charlebois is senior director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast.