Government claims carbon tax could cut 90 million tonnes of CO2: report

A new Environment and Climate Change Canada analysis says the federal government’s carbon-pricing plan could eliminate up to 90 million tonnes of carbon dioxide by 2022, but whether that actually happens still depends on what the provinces do.

The report, made public this morning, is the latest government attempt to sell the politically divisive, carbon-pricing policy the Conservatives are hoping will become a ballot question during the 2019 federal election.

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“Our analysis confirms that carbon pricing works, that it significantly reduces pollution,” Environment Minister Catherine McKenna said.

The analysis used models of how carbon pricing affects human behaviour and economic growth to determine that by 2022, when the federally mandated carbon price has to be at least $50 a tonne, it will eliminate 80 million to 90 million tonnes of greenhouse gas emissions in Canada.

“That’s like taking every car off the road in Canada or closing 20 to 23 coal plants in a year,” McKenna said.

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Even with carbon pricing and other measures to cut emissions, including eliminating coal-fired power plants, cutting methane emissions from the oil industry and making cleaner fuels, Canada will still be 90 million tonnes shy of its international emissions targets made in 2015 under the Paris agreement.

The 13-page analysis also says a carbon price will cut about $2 billion from the Canadian economy, or 0.1 per cent of GDP, but that GDP growth will be about 1.8 per cent each year until 2022 with or without a carbon price. The GDP impact doesn’t take into account additional growth that could result from clean technology investments spurred on by a higher price on carbon.

Last week the parliamentary budget office estimated the GDP impact would be closer to $10 billion, however that report didn’t take into account what governments will do with the revenues, noting cuts to corporate and personal income taxes could lower that $10 billion figure.

Provinces can currently decide how to use the revenues from a carbon price if they implement the system on their own. B.C. cut income taxes to offset the carbon tax cost to individuals, while Alberta wrote rebate cheques to low- and middle-income families. Ottawa will decide how the revenues are spent if it imposes a carbon price in a province and has committed to returning all the money to the province, likely in the form of rebates to families and businesses.

The report notes the numbers are only preliminary, because the actual impact will depend on the kind of carbon-pricing systems provinces put in place, including what is done with the revenues.

Most economists and environmental experts who have studied the matter say carbon pricing will only work if the price rises significantly beyond $50. In British Columbia, emissions initially went down after a carbon tax was introduced there in 2008, but started creeping upwards again after the tax stopped rising in 2012.

The report marks the first time Ottawa has provided any real estimate of the impact of its $50-a-tonne carbon price, despite the fact the policy to enforce a national carbon price was unveiled 18 months ago. The Conservatives have been critical of the government for not producing such an analysis, arguing people don’t know what the tax is going to cost nor what impact it will have.

The Pan Canadian Framework on Clean Growth and Climate Change did identify the emissions cuts that could come from other government measures, such as eliminating coal as a source of electricity (16 million tonnes by 2030), regulating limits on methane that can be emitted by the fossil fuel industry (21 million tonnes by 2025) and introducing a clean fuels standard (30 million tonnes by 2030).

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However it specifically noted the impact of carbon pricing could not be separated from other measures.

Carbon pricing is a politically divisive policy. Most Conservatives argue against it, saying it will raise the price of almost everything without actually cutting emissions. Conservative Leader Andrew Scheer said over the weekend his party will find a way to meet the Paris commitment without a carbon price and has pledged that rescinding the carbon price law will be the first thing he does if he becomes prime minister in 2019.

The Conservatives voted in favour of Canada’s commitment to the Paris agreement last year, but Scheer says his party will have a credible plan that does not involve a new tax.

Saskatchewan Premier Scott Moe last week asked the Saskatchewan Court of Appeal to rule on whether imposing a carbon tax on his province would be unconstitutional.