Fact check: Doug Ford says carbon tax will cause ‘recession,’ but economists disagree

Doug Ford suggests federal carbon tax could plunge Ontario into a recession
WATCH: Ontario Premier Doug Ford renewed his criticism of a federal carbon tax, calling it a "total economic disaster" and said he would use "every tool" to fight it.

Ontario Premier Doug Ford warned in a speech to Economic Club of Canada on Monday that a carbon tax would be a “total economic disaster” for Ontario and Canada.

“There are already economic warning signs on the horizon,” he said.

But economists called the claim “hyberbole.”

The carbon tax, which was announced in the fall of 2018, will tax large companies $20 for each tonne of carbon emitted. That price will go up to $50 in 2022.

READ MORE: Doug Ford says federal carbon tax will plunge Canada into recession

“I’m here today to ring the warning bell that the risk of a carbon tax recession is very, very real,” Ford said Monday.

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Asked to clarify, Ford’s spokesperson Ivana Yelich pointed to a report from the Conference Board of Canada that said “a federally-imposed carbon tax would shrink the Canadian economy by $3 billion.”

The report in question, titled “The Cost of a Cleaner Future,” does in fact says Canada’s economy could be $3 billion less than it would be without the carbon tax.

It does not suggest there will be a recession in either the Canadian or Ontario economy, report co-author Matthew Stewart told Global News.

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Stewart, who is also director of economics at the Conference Board of Canada, called the $3 billion number a “pretty small” impact when compared to a $2.2-trillion economy. (It’s about 0.14 per cent.)

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The $3 billion number doesn’t mean there’s “negative growth,” explained Dale Beugin, executive director of Ecofiscal, a commission that studies the economic impacts of environmental policies.

Instead, it means the economy will grow to $3 billion less than it would have.

“There is a sense that that the economy might grow slightly less fast than it would have otherwise,” Beugin said.

“But that’s a cost relative to what the growth would have been absent the policy rather than a cost to where the economy has right now.

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He said even with a carbon tax, the projections show a strong growing economy in Canada.

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In apparent response to critics, Ford addressed the issue on Twitter Tuesday afternoon.

“It’s hard to believe economists with theories that making everything more expensive is a good idea. The threat of a carbon tax recession is real,” he reiterated.

Looking from a historical point of view, the economies of places with strong carbon taxes haven’t been affected.

“B.C.’s carbon tax has been in place since 2008,” he Beugin said. “Its economy is one of the strongest in Canada. And good economic research has found that the impacts of the tax on the economy have been negligible.

“It [may] have even slightly increased jobs in B.C.,” he said, citing a paper from the Journal of Environmental Economics and Management.
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Neither Stewart nor Beugin agreed with the statement that a carbon tax would cause a recession.

University of Calgary economist Trevor Tombe said there is no “credible analysis” to support Ford’s claim that the federal carbon tax will cause a recession.

“Politicians are going to engage in hyperbole, that’s what they’re best at on all sides of the political spectrum,” he said. “But there is no reason to believe that the federal carbon price would result in a recession.”

Stewart cautioned that the carbon tax alone would not be enough to meet climate targets set in the Paris agreement, and that more policies would be needed to stem carbon emissions.

READ MORE: Trudeau’s carbon tax on gas won’t motivate Canadians to switch to fuel-efficient transportation: Ipsos poll

  • With files from the Canadian Press