Carbon pricing has long played a pivotal role in Canada’s and the United States’ environmental policies. However, shifting political landscapes in both nations are now driving significant changes to how these strategies are applied. While Canada debates scrapping its consumer carbon pricing model, the US is eliminating the social cost of carbon from federal regulations—two moves that could reshape environmental policies across North America.
The vast Boreal Forest stretching across Canada and partially extending into the USA. AI generated picture.
Canada’s carbon tax
Since its introduction in 2019, Canada’s carbon pricing system has been a cornerstone of the country’s emissions reduction efforts. Designed to push businesses and consumers toward cleaner energy choices, the policy established a per-tonne fee on carbon emissions, increasing annually from $13 (CAD 20) in 2019 to $55 (CAD 80) in 2024, with a projected rise to CAD 170 per tonne by 2030.
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However, opposition to the policy has intensified, with critics citing the financial strain it places on households. The latest increase is expected to raise gasoline prices by approximately 3.3 cents per litre, further fueling public frustration—especially amid rising inflation.
Against this backdrop, Liberal leadership contender Chrystia Freeland has vowed to replace consumer-facing carbon pricing with alternative mechanisms developed through consultations. While she has not dismissed carbon pricing altogether, her approach focuses on ensuring ‘the biggest polluters keep paying’ while exploring carbon credit markets, enhanced building standards, and incentives for clean energy adoption.
Her leadership rival, Mark Carney, shares a similar stance, arguing that misinformation has made the consumer carbon tax a divisive issue. The Liberal Party’s leadership decision on 9 March could determine whether Canada takes a new approach to emissions reduction.
US drops social cost of carbon from federal regulations
Unlike Canada, the United States has never implemented a nationwide carbon tax. Instead, environmental efforts have largely been shaped by state-level initiatives. Programmes like the Regional Greenhouse Gas Initiative (RGGI), established in 2009, and California’s emissions trading system (ETS), launched in 2013, have served as key drivers of emissions reductions, with California’s carbon price rising above $40 per tonne in early 2024.
At the federal level, the social cost of carbon (SCC) has been a critical policy tool, placing a dollar value on the economic harm caused by carbon emissions. First introduced under President Barack Obama, the SCC was used to justify regulations aimed at reducing pollution and promoting clean energy. The metric underwent drastic changes in subsequent administrations—President Trump previously lowered it from $50 per tonne to as little as $7, while President Biden increased it to $190 per tonne to reinforce emissions regulations.
Now, President Trump’s administration has taken the next step, completely removing the SCC from federal policy. The ‘Unleashing American Energy’ executive order dismantled the working group responsible for setting the SCC and directed the Environmental Protection Agency (EPA) to cease using it in future rulemaking. This move aligns with a broader deregulatory strategy, benefiting the fossil fuel industry while reducing federal oversight of emissions.
Read more: How Trump’s comeback to the White House influences the carbon market
What’s next for climate policy in North America?
The recent policy shifts in both Canada and the US signal a reevaluation of how governments manage carbon emissions. If Canada abandons its consumer carbon pricing model, it will need to develop alternative mechanisms to hold polluters accountable while maintaining affordability for households. Freeland has proposed incentives such as home energy rebates and expanded renewable energy infrastructure to ease the transition.
Meanwhile, the US’s decision to eliminate the SCC removes a key economic justification for emissions regulations, potentially making it harder to enforce pollution limits on industries. Without this metric, policymakers may struggle to implement new environmental regulations, shifting more costs onto taxpayers through higher disaster recovery expenses and rising energy bills.
As both countries navigate these changes, the challenge will be balancing economic concerns with the urgency of emissions reductions. However, shifting regulations do not mean an end to environmental action; they rather open the door to market-driven solutions. As consumer and investor demand for sustainability grows, businesses are likely to turn to voluntary carbon markets to uphold their sustainability targets. From carbon credit trading to nature-based solutions, companies are already adapting to meet the expectations of consumers in an evolving policy landscape. How industries respond to these policy shifts will ultimately define the upcoming phase of environmental action in North America.
Read more: Huge UN green investment targets 42 nations for carbon mitigation
As Canada and the US rethink carbon pricing, one thing remains clear: Businesses and investors must take the lead in driving real, lasting change. With shifting policies and evolving regulatory landscapes, nature-based solutions stand out as a resilient and effective way to reduce emissions while delivering tangible economic and environmental benefits. At DGB Group, we develop large-scale projects that generate high-quality, verified carbon credits—restoring ecosystems, supporting biodiversity, and empowering local communities. For investors seeking both financial returns and lasting impact, our green bonds and impact investment opportunities provide a strategic path forward. Learn more about how you can invest in a sustainable future today.
