European carbon tax backlash grows while Ottawa doubles down

CALGARY — While Prime Minister Mark Carney and the Liberal government’s insistence on marching toward net-zero emissions by 2050 continues, a revolt against clean energy policies in Europe is rising.On Thursday, the Italian government called for the European Union (EU) to pause its 20-year-old climate law — the Emissions Trading System (ETS).Politico reports that the ETS caps overall emissions and requires power plants and heavy industry to purchase permits for every tonne of CO₂ they emit. The cap tightens annually, steadily increasing the cost of pollution.Italian Industry Minister Adolfo Urso has formally called for the ETS to be suspended pending a “thorough revision” later this year."The ETS mechanism, as currently designed, is nothing more than a tax, a levy on energy-intensive companies," Urso told reporters in Brussels on Thursday.The minister was in the Belgian capital for a "Friends of Industry" conference where Germany's minister for economic affairs, Katherina Reiche, hosted 13 EU member states.A joint statement issued by attendees cautioned that "decarbonization should not be achieved by deindustrialization" and demanded that revisions to the ETS support European industrial competitiveness and enhance investment in new, innovative technologies..Italy is now preparing domestic measures that would effectively neutralize parts of the system.The government has also announced plans to compensate gas-fired power plants for the cost of carbon permits — a move critics say undermines the ETS’s core principle of making polluters pay.Supporters argue it would reduce electricity prices by offsetting the higher costs that fossil fuel generators pass through to the broader energy market.According to S&P Global, European carbon tax rates have slumped by more than €20/mtCO₂e since January 15 after several EU states, including Poland and Slovakia, called for the system to be watered down to boost the bloc's industrial competitiveness and keep pace with China and the United States.Urso warned of what he called the “collapse” of sectors such as chemicals and steelmaking, arguing that Europe cannot afford to wait for lengthy EU negotiations while industries struggle with high energy costs.Italy currently faces some of the highest power prices in Europe, partly due to its heavy reliance on natural gas, which accounts for roughly 44% of its electricity mix.The Italians argue that revising or suspending the ETS would help alleviate those pressures.Proponents of the ETS, such as Sweden’s energy minister Ebba Busch, have called the system one of the EU’s most successful climate tools, arguing it has reduced emissions while supporting economic growth..For Canada — where a carbon tax system remains central to the net-zero strategy — the European debate offers a stark contrast to current federal government policy.Premier Danielle Smith and Prime Minister Mark Carney signed a memorandum of understanding (MOU) in November that, in addition to proposing a new bitumen pipeline to BC’s northwest coast, committed both governments to raise carbon tax prices under Alberta’s TIER system to $130 per tonne following an agreement on an industrial carbon tax by April 1.Europe is starting to question whether an aggressive carbon tax system risks hollowing out its industrial base.As the continent’s leaders debate subsidies and structural reforms to avoid decarbonization by deindustrialization, a political question looms over the Liberal government: will it reconsider its strategy — or is it still full speed ahead?

European carbon tax backlash grows while Ottawa doubles down

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