Economists are steering clear of Ontario Premier Doug Ford’s wild, apparently unsubstantiated assertion earlier this week that the federal government’s floor price on carbon will trigger a recession. And it appears that the report his office cited to back up the statement draws the opposite conclusion.
“A carbon tax will be a total economic disaster,” Ford told an Economic Club of Canada luncheon in Toronto Monday. “There are already economic warning signs on the horizon,” he added, and “I’m here today to ring the warning bell that the risk of a carbon tax recession is very, very real.”
There were just a couple of problems for Ford’s headline-grabbing claim: the report that Ford’s press secretary cited as a reference raised no concerns about a recession, not a single economist from Canada’s four biggest banks was prepared to comment, and the economist who did talk to CBC said there’s no evidence to support the original statement.
Ford’s aide “pointed to a study by the Conference Board of Canada that suggests a federally imposed carbon tax would shrink the nation’s economy by C$3 billion. While that sounds like a big number, it is only a fraction of a percent of the country’s $2.1 trillion GDP,” CBC reports. “The report does not say the carbon tax will cause a recession. Nor do other economists.”
In fact, the report concluded that the transition off carbon is necessary, and will cost more if it’s delayed, The Energy Mix reported in September 2017, when the paper was released. “Its forecasts do not take into account the economic benefits that accrue from greater energy efficiency, either in industry or among households,” the Globe and Mail wrote, with the Conference Board explaining it “had no way to forecast the impact from the development and widespread deployment of innovative technology.”
But “if these new technologies can be commercialized, it is possible that new sectors will emerge focused on products and services that promote clean energy and emissions reductions,” the Conference Board stated. “These new sectors, not considered in this analysis, could help mitigate the negative effects of carbon pricing on the economy.”
“Yes, it will cost us to act, but it will cost us more to not act,” Public Policy Research Director and study author Len Coad told the Globe. “The eventual outcome [of not acting] means a different kind of adjustment: to a world that is hotter, drier, more violent, and with more frequent storms.”
In February 2017, Conference Board Chief Economist Craig Alexander said the Canadian economy could handle a $100-per-tonne carbon tax, far above the $50 ceiling the Trudeau government has in mind by 2022.
While four senior bank economists declined to comment when CBC contacted them about Ford’s remarks, Canada’s Ecofiscal Commission Executive Director Dale Buegin said his organization’s analysis shows only a modest impact from the federal carbon price. While the modelling points to a very slight reduction in economic growth, that’s “a very, very far step away from a recession,” he said.
“That money being collected is not being burned, it is being sent back into the economy in different ways,” Buegin explained. “He said the federal backstop model would keep the economy buoyant by sending carbon tax revenue back to households to be spent,” CBC states.