Canada’s floor price on carbon will “generate a headwind” for the economy by taking $10 billion out of the increase in GDP through 2022, the Parliamentary Budget Officer reported earlier this week.
But the PBO says that impact could be mitigated, depending on how the government uses the revenues the carbon price will generate over the medium term.
- Concise headlines. Original content. Timely news and views from a select group of opinion leaders. Special extras.
- Everything you need, nothing you don’t.
- The Weekender: The climate news you need.
Under the pan-Canadian climate plan, the country’s minimum carbon price is set at $10 per tonne in 2018, rising to $50 per tonne by 2022. The Canadian Press says the “headwind” equates to 0.5% of the country’s GDP.
The PBO estimate was based on analysis released by the Ecofiscal Commission in 2016.
Conservative environment critic Ed Fast pounced on the report, maintaining “that the trend line is going down, down, down. So over the next two years, as the carbon tax (is implemented), that problem is going to be exacerbated.”
The PBO says the impact would be “significantly lower” if the government decided to “undertake more efficient revenue recycling, such as reducing corporate or personal income taxes,” rather than returning the revenues to provinces and territories.
Fast’s other question is whether the carbon price will actually achieve its objective.
“Canadians have made the assumption that when a carbon tax is implemented, that will actually deliver significant reductions in greenhouse gases so that Canada can meet its Paris agreement targets,” he told CP. “The federal government has been asked numerous times…what will be the greenhouse gas emissions reductions if we implement a carbon tax of $50 per tonne. They have not given us answers, other than to send us a fully redacted response.”
