OTTAWA — The federal carbon tax would need to rise to $102 per tonne in 2030 to meet Canada’s emissions targets under the Paris agreement, according to a new report from Canada’s budget watchdog.
On Thursday, parliamentary budget officer Yves Giroux said his office undertook the analysis because Ottawa’s own projections show that Canada will not meet its Paris targets. “The government has not said or announced exactly what it will do, and we thought it was important to put that number out in the public domain so that Canadians… have that number as an example of what could be done and how much it would cost,” he told reporters.
The report finds the Liberal government’s carbon tax, set to rise from $20 per tonne in 2019 to $50 per tonne in 2022, would need to more than double by 2030 to hit Canada’s targets. The Liberals have not said whether they would increase the federal carbon price past 2022.
The report estimates that an additional $6 per tonne would be required in 2023, rising to an extra $52 per tonne in 2030, to meet Canada’s goal of cutting emissions to 30 per cent below 2005 levels.
The report calculates that the higher carbon price would reduce the level of real GDP by 0.35 per cent in 2030, which translates to a reduction of 0.04 percentage points in annual real GDP growth over 2023 to 2030. It estimates the additional tax would amount to an extra 23 cents per litre of gasoline.
The federal government has estimated its existing policies will reduce carbon emissions to 616 megatonnes in 2030, with an additional 24 megatonnes of emissions cuts to come from land use change and forestry. That still leaves a gap of 79 megatonnes to meet Canada’s Paris Agreement target of 513 megatonnes. The Liberals have not said how they would make up the gap. In a report last year, the federal environment department said that “further reductions are expected from the investments made by federal, provincial, territorial and municipal governments in public transit and clean technology, which have not yet been modelled.”
The PBO report estimates the carbon price that would be required to cut emissions by a further 79 megatonnes, but makes a number of assumptions, including that all provinces would fall under the federal carbon price after 2022. Currently, the federal carbon tax applies to only those provinces that have not implemented their own form of carbon pricing: Ontario, Manitoba, Saskatchewan and New Brunswick.
The report also assumes that carbon pricing would be the only policy tool used to achieve the Paris target, but notes that any number of other policies could also be introduced, including regulations and subsidies. However, it notes that such measures “typically impose a higher, albeit less visible, economic cost compared to explicit carbon pricing.”
The report does not include the existing output-based pricing system for industrial emitters, assuming instead that the carbon tax would cover all sectors of the economy except for agriculture. If the separate pricing system for heavy emitters were retained, Giroux said, the carbon tax on the rest of the economy would have to be even higher.
However, the report finds that “oil sands production would remain viable even with the additional carbon pricing needed to achieve the Paris target in 2030.”
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Copyright Postmedia Network Inc., 2019
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