The overall inflation rate fell from 2.3 per cent in March after the removal of a federal consumer carbon tax, Statistics Canada said on Tuesday.

Analysts had forecast the annual rate would ease to 1.6 per cent while the Bank of Canada last month predicted it would fall to about 1.5 per cent, mainly due to the removal of the carbon tax and lower crude prices.

Effect of tariffs difficult to predict

After seven consecutive cuts since last June the Bank held rates on April 16 while saying it would be ready to move decisively if needed to keep inflation under control.

The bank – which is due to unveil its next rate decision on June 4 – says the effect of U.S. tariffs is hard to predict, while noting the measures in place are already hurting the Canadian economy.

The bank pays particular attention to the core measures of inflation, which strip out the prices of more volatile items and do not take into account the removal of the carbon tax.

CPI median, which shows the median inflation rate across CPI components, rose from 2.8 per cent in March to 3.2 per cent in April, the highest since March 2024.

CPI trim, which excludes upside and downside outliers, edged up from 2.9 per cent to 3.1 per cent, also a 13-month high.

“Signs of renewed weakening in the economy on one hand … but stronger core inflation on the other makes for a tough decision for the Bank of Canada,” said Andrew Grantham, senior economist at CIBC Capital Markets.

Odds for rate cut dip

The odds for a rate cut dipped to 40 per cent from 65 per cent before the release, currency swap market bets showed.

Overall energy prices plunged 12.7 per cent last month from April 2024 as gasoline prices fell by 18.1 per cent from a year earlier, while year-over-year prices for natural gas dropped 14.1 per cent.

Consumers, though, paid 3.8 per cent more for groceries than they had done a year previously, up from 3.2 per cent in March. Year over year, prices for travel tours rose 6.7 per cent in April.

On a month-by-month basis, inflation dipped by 0.1 per cent compared to analysts’ forecasts of a 0.2 per cent drop.

Andrew Kelvin, head of Canadian and global rates strategy at TD Securities, said the data right now did not suggest the bank needed to cut rates.

“But obviously the significant uncertainty around trade tensions would be supportive of additional fiscal signals, so it creates a very difficult balance,” he said.

The Canadian dollar strengthened 0.1 per cent to C$1.3930 to the U.S. dollar, or 71.79 U.S. cents.

The inflation figures were the penultimate major release before the June 4 rate announcement. Statscan is due to publish first quarter GDP figures on May 30.

— Additional reporting by Fergal Smith and Nivedita Balu in Toronto

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The Agricultural Producers Association of Saskatchewan had long advocated for the removal of the surcharges, saying they affected farm profitability.

Carbon surcharges were implemented to cover costs associated with emissions and fuel consumption.

Both Canadian National Railway and Canadian Pacific Kansas City eliminated the surcharges as of April 1 in Alberta, Saskatchewan, Manitoba, Ontario and New Brunswick after the federal government ended consumer carbon pricing.

“This is massive for farmers,” said APAS president Bill Prybylski in a news release. “Axing the surcharges puts more cash where it belongs, in our pockets and back into our rural communities.”

APAS said since 2019, Saskatchewan farmers paid about $200 million in the fees. It estimated that the bill in 2025 would have been $80 million.

“We’ve fought tirelessly for relief and seeing it finally come to an end is incredibly rewarding,” Prybylski said.

The move comes at a time of incredible trade uncertainty.

A CN notice to producers said the Low Carbon Fuel Standard is still in place in British Columbia and “will remain unchanged per the tariffs issued effective April 1, 2025.”

APAS said it remains concerned about that and whether it will increase shipping costs to B.C. ports. The organization is also advocating for transparency of how the federal Output-Based Pricing System, or industrial levy, impacts farm input costs.

CN said it would follow legislation closely and re-adjust if necessary.

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“Farmers are being squeezed from seemingly all sides at once with inflation and tariffs from both the US and China. The long-awaited removal of the carbon tax will provide farmers a bit of relief from this pressure and can be seen as recognition for the difficult place Canadian farmers and consumers find themselves in today,” said CFA president Keith Currie in a news release.

On Friday, new Prime Minister Mark Carney said the consumer carbon price would be canceled, effective April 1. This will set “the applicable fuel charge rates for all types of fuel and combustible waste to zero,” according to the text of the order in council.

The federal carbon pricing system has two parts: the charge on fuels and a system for industrial emitters, as per the government’s website.

The CFA said that, based on estimates in 2023 from the Parliamentary Budget Office, farmers would save over $100 million a year with the removal of the consumer carbon levy.

The CFA has long lobbied for exemptions from the carbon pricing system for farmers. Gasoline and diesel for farm use were exempted from the levy. Farm businesses may also apply to receive a refundable tax credit on eligible fuel charges, as per the federal government’s website.

Efforts by farm organizations to have propane and natural gas for heating and grain drying exempted stalled in late 2023.

“The signing of this order-in-council is a reassuring step in the right direction, but we need to see Parliament reconvene and provide a long-term solution that removes the consumer carbon price from legislation and ensures farms of all sizes are exempt from the carbon price,” said Currie.

“We look forward to continuing to work with the Government of Canada to ensure future environmental policies enable long-term sustainable productivity growth and the competitiveness of Canadian agriculture.”

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Just hours after he and his cabinet were sworn in March 14 and held their first meeting, he made good on his election promise to cut the price on pollution.

“This is a cabinet focused on action. It’s focused on getting more money in the pockets of Canadians,” he said.

“Based on the discussion we’ve had and consistent with the promise I made and others supported during the leadership campaign, we will be eliminating the consumer fuel charge immediately and we will be ensuring that those Canadians who have received rebates will continue to receive rebates in the next quarter.”

Those rebates are due to arrive before the end of April.

Carney said this will help Canadians who are struggling to make ends meet. But he also said it is part of a much bigger set of measures the government will take to “ensure we fight against climate change, that our companies are competitive and the country moves forward.”

The Canadian Taxpayers Federation noted the tax is currently 17 cents per litre of gasoline, 21 cents per litre of diesel and 15 cents per cubic metre of natural gas, and that the Parliamentary Budget Officer found it cost the average family $399 more than the rebates they received.

Conservative leader Pierre Poilievre said Carney is only pausing the tax until after the election.

“He’s flip-flopping on his beliefs to trick Canadians into a fourth Liberal government,” he said on social media.

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“Alberta strongly opposes the federal carbon tax exemption on heating oil, as the federal government is no longer creating minimum national standards that apply evenly across the country, and is instead creating a regime that favors one region and fuel type over others,” the provincial government said in a statement.

Last year, Prime Minister Justin Trudeau’s Liberal government announced a three-year exemption for home heating, measures he said were intended to relieve affordability concerns.

The move drew widespread criticism from a number of provincial premiers, who said it unfairly benefited voters in Atlantic Canada where home heating oil is more widely used. Climate advocates argued it undermined the carbon pricing policy.

The court challenge from Alberta’s conservative government, which frequently clashes with the federal Liberals on climate and energy issues, is the latest attack on consumer carbon pricing ahead of a federal election due to take place within the next year.

Opposition Conservative leader Pierre Poilievre, whose party is polling far ahead of Trudeau’s Liberals, has vowed to “axe the tax” if elected.

Canada’s carbon price is currently C$80 a tonne, and will increase by C$15 every year until it reaches C$170 a tonne in 2030.

—Reporting by Nia Williams in British Columbia

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The Canada Carbon Rebate for Small Businesses was announced in this year’s federal budget, and while details are still scant, it will return a portion of the price on pollution through a refundable tax credit.

The Canada Revenue Agency estimated the retroactive payments total $2.5 billion, beginning in the 2019-20 fuel charge year until the 2023-24 year.

A spokesperson said the payment amounts and when they will be made are still undetermined, but it’s critical that taxes be filed on time to qualify.

Technically, those taxes had to be filed June 30, but Ottawa implemented a two-week extension.

CRA said the rebate will equal the number of people employed by the eligible “Canadian-controlled private corporations” multiplied by the payment rate. The employees must have received T-4s.

To be eligible, the business must have employed at least one person in a designated province in the calendar year, had 499 or fewer employees throughout Canada and filed its taxes.

There is no application for the rebate; it will automatically be calculated and issued.

The designated provinces include Saskatchewan, Manitoba and Ontario for all fuel charge years, Alberta for 2020-21 and beyond and the four Atlantic provinces for 2023-24.

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A tax was first proposed in February by government-commissioned experts to help Denmark reach a legally binding 2030 target of cutting greenhouse gas emissions by 70 per cent from 1990 levels.

The centrist government late on Monday reached a wide-ranging compromise with farmers, industry, labour unions and environmental groups on policy linked to farming, the country’s largest source of CO2 emissions.

“We will be the first country in the world to introduce a real CO2 tax on agriculture. Other countries will be inspired by this,” Taxation Minister Jeppe Bruus of the centre-left Social Democrats said in a statement on Tuesday.

While subject to approval by parliament, political experts expect a bill to pass following the broad-based consensus.

The deal proposed taxing farmers 300 Danish crowns (C$58.77) per tonne of CO2 in 2030, increasing to 750 crowns (C$146.92) by 2035.

Farmers will be entitled to an income tax deduction of 60 per cent, meaning that the actual cost per tonne will start at 120 crowns and increase to 300 crowns by 2035, while subsidies will be made available to support adjustments in farm operations.

The tax could add an extra cost of 2 crowns per kilo (2.2 pounds) of minced beef in 2030, Minister for Economic Affairs Stephanie Lose told public broadcaster DR. Minced beef retails from around 70 crowns per kilo (C$13.71) at Danish discount stores.

New Zealand this month scrapped plans to introduce a similar tax after facing criticism from farmers.

But while Danish farmers had expressed concerns that the country’s climate goals could force them to lower production and cut jobs, they said the compromise makes it possible to maintain their business.

“The agreement brings clarity when it comes to significant parts of the farmers’ conditions,” the L&F agriculture industry group said.

—Additional reporting by Alison Withers and Stine Jacobsen

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Finance Minister Chrystia Freeland made little mention of agriculture in her speech following the tabling of the budget this afternoon, though she touched on issues like carbon pricing and green technology.

However, chapter three of the budget, titled “lowering everyday costs” features three sections on reducing costs for farmers.

The first, “Lower Costs and Fairer Treatment for Farmers” announces that the government will be launching consultations on interoperability in June.

“This is part of broader work the government is undertaking to support the right to repair and interoperability,” the section reads.

The section “Interest Relief for Farmers” proposes $64 million in funding to Agriculture and Agri-Food Canada “to support a $250,000 interest-free limit on Advance Payments Program loans for the 2024 program year.”

Finally, “Protecting Farmers from the Costs of Climate Change” reads that “the federal government is committed to working with industry partners, such as the Canadian Cattle Association, to explore avenues to ensure farmers get support quicker and more efficiently in times of need.”

In her speech, Freeland highlighted the Canadian carbon rebate, which she said in French will be “delivering hundreds of dollars to Canadians every three months.”

“Eight out of 10 Canadians get back more than they pay in the provinces where the federal price on pollution applies,” she continued.

“We are delivering on our promise to return carbon pricing proceeds to small and medium-sized businesses.”

She said that the Canada Carbon Rebate for small businesses will “soon return over $2.5 billion directly.”

The budget’s primary focus is housing, though it also involves the launch of a new national school food program and the first phase of a national pharmacare plan.

On housing, Freeland said the government would be focusing on “making life cost less.” with a plan to build nearly four million news homes by 2031.

“It begins with building more homes at a pace and scale not seen since after the Second World War,” Freeland said.

The budget also includes an outlined electric vehicle supply chain investment tax credit, which will “introduce a new 10 per cent … tax credit on the cost of buildings used in key segments of the electric vehicle supply chain.”

Freeland said this is “to attract companies investing across the electric vehicle supply chain.”

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Many have opposed carbon pricing since it was implemented in 2019 but the rhetoric has been heating up due to cost-of-living pressures.

The hike in the consumer levy earlier this month added 3.5 cents to a litre of gasoline. Farmers do have an on-farm fuel exemption but say the carbon price affects their costs throughout the supply chain.

Saskatchewan has estimated its farmers will pay $137 million this year.

Ontario premier Doug Ford, speaking at a farm last week along with farm leaders, called for the end of “this awful carbon tax.”

Agriculture minister Lisa Thompson said the Ontario government is listening to farmers who say carbon pricing is eroding their ability to farm.

The price rose from $65 per tonne to $80 on April 1 and is projected to be $170 per tonne by 2030.

Despite the exemption, farmers still pay the tax on heating fuel, electricity, natural gas and propane for grain drying, and the indirect cost from others such as transporters.

The Agricultural Producers Association of Saskatchewan has calculated the impact of the federal tax since it was first applied at $20 per tonne.

Using an example of a 62-bushel wheat crop in the black soil zone, APAS found the tax added $1.93 per acre that first year.

This year, farmers will pay an extra $7.42 per acre, and by 2030 the additional cost will be $17.31.

President Ian Boxall said farmers always end up paying the extra costs.

“Take for instance the estimated staggering 50 per cent increase allocated to rail transportation costs, a massive $57 million that Saskatchewan grain producers are expected to shoulder,” he said in a news release. “This amounts to an overwhelming $21 million more than last year alone. Why should farmers pay the railway’s carbon tax?”

APAS applied its calculations to a 5,000-acre grain farm growing wheat, canola, barley, peas and oats in the black soil zone.

They found the total carbon cost ranges from $22,678 to $30,033 depending on specific grain drying practices.

Boxall said the consequences for Saskatchewan farmers are huge and negative.

APAS, and many others, have repeatedly called for Parliament to pass Bill C-234 in its original form. That would provide a carbon price exemption for natural gas and propane used to dry grain and heat barns and greenhouses.

That bill was amended in the Senate to remove farm buildings from a possible exemption and has been stuck in parliamentary debate for months.

There is a refundable tax credit available to eligible farms. For 2023 it is $1.86 per $1,000 of eligible expenses in Ontario, Manitoba, Saskatchewan and Alberta and $1.40 in the Atlantic provinces. But critics have said that amount covers only a fraction of what they pay and isn’t the correct way to address the problem.

—Karen Briere writes for the Western Producer

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It is difficult, even impossible, to change farming practices aimed at improving environmental sustainability when experiencing negative margins. That idea applies to every kind of business.

Even though this seems obvious, it is not always recognized by governments. Governments’ most frequent policy tool is regulation. Imposing costly restrictions and penalties on businesses is often the default action.

That shouldn’t be the case.

Take the carbon tax, for example. The stated policy objective is to reduce carbon emissions by discouraging the use of fossil fuels. This may work when the use of fossil fuels is a discretionary expense, but heating a hog barn in winter is not discretionary.

For hog farmers, energy costs are the second-highest operating expense after feed. At a time when farmers’ margins are written in red ink, the carbon tax is making it more expensive to raise pigs.

This is antithetical to the policy objective of reducing greenhouse gas emissions, because farmers are more likely to take on innovative business practices when their operation is profitable. The carbon tax has become a barrier to adoption of innovation that could improve environmental sustainability.

The carbon tax is also making Canadian hog farmers less competitive internationally. Manitoba exports 90 per cent of the pigs raised in the province every year, either as live animals bound for the United States or as packages of pork exported around the world.

Canadian farmers are competing against producers in other countries who do not face the added cost of the carbon tax. The reduction in our competitiveness impacts jobs in both urban and rural areas, which in Manitoba equals 22,000 jobs across the province, and discourages investment in every link of the industry’s value chain.

To summarize, when applied to the energy requirements for raising pigs, the carbon tax does not achieve its policy goals and it inhibits the adoption of alternative business practices that may improve sustainability, all while decreasing the competitiveness of Canadian farmers in world markets.

The cost and ineffectiveness of the carbon tax when applied to farming operations was recognized by the member of parliament who introduced bill C-234, “An Act to Amend the Greenhouse Gas Pollution Pricing Act.” This legislation, which was supported by a majority of MPs, would remove the carbon tax from essential agricultural operations like heating a barn in winter.

Unfortunately, the Senate disagreed and amended the legislation, removing the reference to barn heating.

How much will this change cost Canadian farmers? The Parliamentary Budget Office estimates this cost to be $910 million annually.

There is a better way. Not all government policy objectives need to be met using a regulatory hammer, as is being done with the carbon tax. Instead, governments should be adopting an incentive-based approach. The alternative policy approach is one rooted in collaboration with farmers and accepting that financial sustainability for producers must be at the foundation of any strategy.

The collaborative approach may not appear to be the easy path for those who are charged with implementing government policy.

Canada is a large, diverse country and innovative practices that drive fiscal and environmental sustainability in Quebec or the Maritimes or British Columbia may not work on the Prairies. The approach must have enough flexibility to account for differences in climate, soils and ecosystems across Canada.

Provincial and local governments need to be engaged when determining which new practices and technology will work in a specific region.

While this may sound messy and complicated when compared to a one-size-fits-all regulation, in the long run, it is incentives and collaboration, instead of costly regulations, that will deliver meaningful results.

The federal carbon tax is set to increase again on April 1. If this happens, Canadian farmers will be a little less competitive internationally and see a little bit more red ink on the bottom line. It does not have to be this way.

– Cam Dahl is the general manager of the Manitoba Pork Council, which represents that province’s pork producers.

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