Last week 175 world leaders signed a landmark agreement for global climate action. This is historic. But as we have come to know, the proof is in the ratification, and ultimately the implementation. Particularly if Canada is expected to deliver on its reduction commitment of 30% below 2005 levels by 2030.
But what will it take to get Canada there, and importantly, at what costs? Most have remained quiet on this burning question, fearing that once costs and trade-offs are widely known and understood, public support will wane.
These questions were boldly addressed by Canada’s Parliamentary Budget Officer (PBO) and there is good news: we can deliver on our climate commitments without breaking the bank. Last week the PBO released a significant report on the economic impacts and potential costs of meeting Canada’s climate targets, with key learnings for Canadians:
- Carbon pricing works but the price has to be right: Increases in price impact the behaviours of businesses and consumers. Significant reductions in emissions can be achieved through carbon pricing, but the price will eventually have to be around $100/ tonne to meet Canada’s 2030 target. This would mean an increase of 24 cents for every litre of gas purchased. (Page 17, 25).
- Carbon pricing will impact the economy but the burden can be alleviated by reducing existing taxes: Under a carbon pricing system the cost of meeting Canada’s target is expected to be between 1-3% of GDP. The loss to our economy depends on whether revenue recycling tools are used. For example, if the revenue collected is used to reduce existing taxes, smaller losses are seen. Revenue-neutrality will help mitigate economic impacts. (Page 3,25).
- To keep costs low emissions should be priced the same across Canada: A standard (read: national) price on carbon is the lowest cost solution, as the report finds that a patchwork of programs across different sectors and provinces leads to unnecessarily high costs. Provincial coordination with national leadership is needed to bring down costs. (Page 3-5, 27).
The report affirms that emission reductions can be made in an economic manner by adhering to a coordinated and revenue-neutral approach; a position that Canadians for Clean Prosperity has been advocating for. The significance of this report extends well beyond these findings, as it continues to shift the environment and economy discussion away from the “either or” rhetoric, to a more constructive discussion of two priorities that ought to be addressed in tandem.