Canadian Manufacturing

Carbon pricing alone can’t meet Canada’s emission reduction targets: report

According to a joint report by The Conference Board of Canada and The Canadian Academy of Engineering, carbon pricing won't be enough to meet ambitious targets, and deep emission cuts will carry an exorbitant cost


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OTTAWA—Carbon pricing will help Canada reduce emissions but the reductions will fall short of the government’s goal of a 30 per cent reduction from 2005 levels by 2030, according to a joint report by The Conference Board of Canada and The Canadian Academy of Engineering.

The Conference Board says trillions of dollars in investment spending on clean energy infrastructure and significant changes to the way Canadians consume energy will be needed to achieve deep greenhouse gas (GHG) emission reductions.

“Simply pricing carbon and moving away from fossil fuels are insufficient measures to achieve deep GHG emission reductions. And while technology and innovation will play a role in the long term, it can’t get us to the 2030 target given the relatively short window available to develop and adopt these solutions,” said Louis Thériault, vice president, Industry Strategy and Public Policy, The Conference Board of Canada.

Thériault continued, “Given that the required investment will be in the trillions of dollars, policy makers need to communicate to Canadians the scale of how this transformation will impact everyday lives.”

The report, called “The Cost of a Cleaner Future”, finds that even if carbon taxes were to reach $200 per tonne by 2025, this would only result in a 1.5 per cent reduction in GHG emissions outside of the power generation sector.

The analysis also suggests that introducing a carbon tax will lead to higher prices across the economy, reducing Canadians’ purchasing power. Assuming a carbon tax of $80 per tonne in 2025, the report says the average annual cost to a Canadian household would be approximately $2,000—with the largest price increases in natural gas, gasoline and electricity.

The report finds business investment and trade volumes would be impacted by carbon taxes as well, with most industries’ exports declining as higher production prices reduce their competitiveness. Industries with a domestic focus and sensitivity to price changes, such as residential construction, are projected to be hard hit.

However, carbon tax revenue collected is expected to be put back into the economy through tax cuts and higher public spending and investment, offsetting some economic losses.

The report also quantified the economic impact of making the deep GHG emission reductions needed to close in on our Paris Climate Agreement target: with a 60 per cent reduction in emissions below 1990 levels by 2050 costing $3.4 trillion, or $100 billion annually (about half of current non-residential business investment in Canada).

The Conference Board says given that Canada is fast approaching its economic capacity, the Canadian economy would be challenged to absorb these new investments, which are expected to crowd out spending in other areas of the economy.


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