June 13, 2024 – Gatineau (Quebec)
Today, Environment and Climate Change Canada published the data provided to the Parliamentary Budget Office (PBO) on carbon pollution pricing relative to national and provincial gross domestic product for the 2022–2030 period.
The data published today does not represent a comprehensive economic overview of the impact of carbon pricing. Instead, it is background data related to specific economic impacts that respond to the PBO’s request, which was then used to develop some of its analysis.
The Government of Canada has a collaborative relationship with the Parliamentary Budget Officer. It always has and will always collaborate fully with the PBO’s requests, including by providing the PBO with all the specific documents and information that respond to their requests. The PBO plays an important role in our democratic institution, assisting senators and members of Parliament in their day-to-day work for the purposes of raising the quality of parliamentary debate and promoting greater budget transparency and accountability.
Environment and Climate Change Canada estimates that the fuel charge and industrial carbon pricing systems together will account for almost 80 million tonnes (Mt) of greenhouse gas emissions reductions in 2030 compared with what would have been emitted without carbon pricing. That represents about one third of the currently projected total reductions that will result from the various actions being undertaken pursuant to the 2030 Emissions Reduction Plan.
A full economic assessment of carbon pricing cannot be done without considering the benefits of reducing emissions and the costs of not taking action. Canadians are already feeling the cost of climate change, through losses to communities and livelihoods from wildfires and floods. To estimate the economic benefit of emissions reductions, the Government of Canada uses a value known as the Social Cost of Carbon. It quantifies the damages at $294 per tonne of carbon dioxide (CO2) emitted into the atmosphere in 2030. Canada’s current Social Cost of Carbon is the same value used by the United States government. Using that metric, the avoided costs from climate change in the year 2030 associated with the projected emission reduction benefit of carbon pricing are about $23.1 billion. The Social Cost of Carbon analysis is a core part of climate policy assessments used by many countries, as it reflects the reality of the growing impacts of climate change on current and future generations and is a standard methodology internationally for estimating the benefits of reducing emissions.
Abandoning carbon pricing without replacing it with other actions would forego those benefits, and replacing it with more costly policy measures would significantly and unnecessarily increase costs for Canadians. In fact, a report from the Ecofiscal Commission concluded that carbon pricing would grow Canadian incomes on average by $3,300 more in 2030 relative to an alternative policy approach.
The increasing costs of climate change are well documented. For example, the Canadian Climate Institute’s report, Damage Control: Reducing the Costs of Climate Impacts in Canada, estimates that by 2030, Canada could face annual losses to real GDP of $35 billion. Studies consistently show that the costs of inaction on climate change significantly outweigh the costs of acting. The Institute for Sustainable Finance (PDF) states that it could cost Canada roughly double the amount of GDP by not investing in lowering emissions.
Any comprehensive analysis of the economic benefit of carbon pricing would also need to include the economic investments that result in part from carbon pricing regimes, the international competitive advantage of adopting low-carbon technologies, the jobs benefits in developing these technologies, and the economic benefits of technology innovation. Putting a price on carbon pollution encourages businesses to find ways to be more efficient, invest in cleaner technologies, and shift toward cleaner energy sources.
The Government of Canada estimates that between $15 to $25 billion of government and private investments are being made each year to cut greenhouse gas emissions in the Canadian economy. Since 2019, proceeds collected from the federal industrial carbon pricing systems have been reinvested into decarbonization projects totalling $2.5 billion in partnership with provincial governments, private sector, universities, and other entities. Examples of projects directly supported by industrial carbon pricing systems include the following, where on average every dollar of proceeds triples its impact by mobilizing an additional $2 of project investment:
- Modernizing the delivery of electricity to residential homes in Saskatchewan
- Improving infrastructure to tackle emissions at Ontario universities
- Helping homeowners make energy-efficient upgrades to their homes in New Brunswick
- Switching from diesel to electric-powered equipment at the Craig Mine Project
