While it makes good economic sense to tax pollution, and the federal government’s backstop price on carbon “will push consumers to reduce their purchases” of carbon-intensive goods, pricing alone won’t be enough to fulfill Canada’s obligations under the Paris Agreement, a senior Conference Board of Canada executive writes in the Globe and Mail.
Although “households would be expected to slowly substitute away from those more expensive polluting items” in response to carbon pricing, Conference Board research “suggests we’ll need to do more than reshape our tax bills,” writes Deputy Chief Economist Pedro Antunes. “In addition to steady incremental increases in carbon taxes, significant investments will be required to decarbonize electricity generation and add to clean energy infrastructure.”
Antunes acknowledges that “the combination of carbon taxes and additional investments will have implications for the economy—with some sectors losing out and others gaining. How energy-intensive exporters will maintain competitiveness with U.S. producers is the most significant concern,” with the Trump administration withdrawing from the Paris deal and slashing corporate taxes.
But he notes that Canadian businesses face an economic hit either way.
“Climate change is likely responsible for some portion of the significant increases in the cost of environmental catastrophes in Canada over the last 20 years,” he writes, which means that “carbon taxes are a necessary step. But to significantly change public behaviour, policy-makers will need to continue to clearly communicate their plans for reducing greenhouse gas emissions.”