The Liberal government defended its carbon-pricing plan Monday, with an analysis that concludes the federal and provincial levies would reduce greenhouse gas emissions by up to 90 megatonnes by 2022, the equivalent of shutting down more than 20 coal-fired power plants.
The Environment and Climate Change Canada report provides the Liberal government’s answer to a longstanding demand from Conservative MPs to reveal the impact and cost of the federal carbon pricing legislation that is currently working its way through Parliament as part of the 2018 budget bill.
“Our analysis confirms that carbon pricing works, and that it is critical to any credible plan to fight climate change,” Environment Minister Catherine McKenna said in an interview on Monday. “It’s cost-effective, and, also it creates the incentive to choose cleaner solutions … which not only saves you money, but it also creates good jobs here in Canada.”
The Environment Canada analysis also concluded it would cost the Canadian economy $2-billion – or less than 0.1 per cent of gross domestic product in 2022 – if Ottawa imposes a carbon price on provinces and territories that have not adopted their own or met federal standards. It did not include the economic impact of carbon pricing in provinces that have implemented their own plans.
Saskatchewan Premier Scott Moe last week revealed that his government will ask a federal court to rule on whether Ottawa has the jurisdiction to impose a carbon tax in one province but not another. Conservative opposition leaders in both Ontario and Alberta vowed to scrap the provincial carbon levy if they win power in elections to be held in June in Ontario and next spring in Alberta.
The four largest provinces – Ontario, Quebec, Alberta and British Columbia – have all adopted some form of carbon pricing – a tax in Alberta and B.C. and a cap-and-trade system in Ontario and Quebec. In line with the federal plan, the two Western provinces have committed to increasing their levies to $50 a tonne by 2022, while Ontario and Quebec expect to keep prices in the $25 range by allowing businesses to purchase cheaper credits from California.
The Liberals point to strong economic growth in the four provinces that currently have carbon prices.
Conservative MP Ed Fast said the government’s analysis looked like it was done “on the back of a napkin” as he questioned the effectiveness of carbon pricing in driving down emissions.
The levy “is going to cost the average Canadian family a lot of money, and there is no guarantee that this tax is going to achieve the purpose for which it is established – which is to reduce greenhouse gas emissions,” Mr. Fast told reporters Monday.
The Parliamentary Budget Office last week estimated that a $50 a tonne levy in all provinces would cost the economy $10-billion in lost GDP by 2022, though that figure could be dramatically reduced if provinces and the federal government returned the carbon-levy revenue to households and businesses through other tax cuts.
The Liberal government has made no decisions on the trajectory of carbon prices after 2022, though many environmental economists say it would have to be considerably higher than $50 if Ottawa is going to hit its 2030 target to reduce GHG emissions by 30 per cent below 2005 levels.
Federal and provincial governments are relying on a mix of carbon pricing, subsidies and regulations to meet their targets.
Conservative Leader Andrew Scheer said on the weekend that his party would meet Canada’s 2030 target without relying on a carbon tax, but would not say what measures it would adopt if it formed government. Under former prime minister Stephen Harper, the previous Conservative government adopted the 2030 target – as well as a pledge to cut emissions by 17 per cent below 2005 by 2020 – but implemented few policies to achieve those goals.
Ms. McKenna described Mr. Scheer’s pledge to meet GHG targets without imposing a price on carbon as “magical thinking.”