Think Tank Calculates Cost Of Canadian Carbon Pricing

by Mike Godfrey, Tax-News.com, Washington

11 September 2017

A new report has argued that, by 2025, the impact of a CAD80 (USD66) per tonne carbon tax on the average Canadian household could reach CAD2,000 a year.

The report, by The Conference Board of Canada and The Canadian Academy of Engineering, stated that introducing a carbon tax will lead to higher prices across the economy, which will in turn reduce Canadians' purchasing power. The largest price increases are expected to be in natural gas, gasoline, and electricity.

According to the report, carbon taxes could also impact business investment and trade volumes. It said that higher production prices would reduce the competitiveness of most industries, which would then see their exports decline. Industries that have a domestic focus and are particular sensitivity to price changes, such as residential construction, would be hard hit.

The report also claimed that, even if carbon taxes were to reach CAD200 per tonne by 2025, they would result in a mere 1.5 percent reduction in greenhouse gas emissions outside of the power generation sector.

The report did nevertheless conclude that the impact on the broader economy would be only "modestly negative," due to the intended "recycling" of revenues back into the economy through tax cuts and higher public spending and investment.

The federal Government has proposed a benchmark for pricing carbon pollution, to be implemented by 2018. It will permit provinces and territories to implement either an explicit price-based system or a cap-and-trade system.

A Pan-Canadian Framework on Clean Growth and Climate Change, signed by the federal, provincial, and territorial governments (with the exception of Saskatchewan) last December stipulated that for jurisdictions with a price-based system, the carbon price should start at a minimum of CAD10 per tonne in 2018 and rise by CAD10 per year to reach CAD50 per tonne in 2022. Provinces with a cap-and-trade regime will be required to have a 2030 emissions-reduction target equal to or greater than the federal 30 percent reduction target, and more stringent annual caps to at least 2022.

British Columbia currently operates a carbon levy, while Alberta has a performance-based emissions system. Ontario and Quebec each have cap-and-trade systems.

Louis Theriault, Vice-President, Industry Strategy and Public Policy at The Conference Board of Canada, commented: "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."

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