McKenna Promises $50 Carbon Tax Cap After Parliamentary Budget Officer Suggests Higher Charge
A carbon pricing report by Parliamentary Budget Officer (PBO) Yves Giroux set off a small flurry of pre-election posturing last week, with the Conservative opposition claiming the release was a stalking horse for future tax increases and Environment Minister Catherine McKenna promising to limit the levy to C$50 per tonne after it hits that scheduled threshold in 2022.
McKenna also announced last week that Albertans will pay the federal floor price on carbon as of January 1, 2020, while Manitoba introduced a new climate target that contains no carbon price and a watered-down emissions reduction target.
Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.
In Ottawa, Giroux reported that Ottawa would need an additional $52 per tonne in carbon taxes by 2030 to meet its Harper-era target under the Paris Agreement. “The PBO said the problem is the government’s current policies and measures just aren’t enough to get the country to that promised level,” CBC writes. “Under the PBO projections, based on the government’s current carbon tax and other promised policy fixes, Canada will only get to 592 megatonnes—leaving a shortfall of 79 megatonnes.”
The PBO’s proposed new tax would extend farther across the economy than the current one, start at $6 per tonne in 2023, and hit $52 per tonne in 2023.
“A total carbon price of $102 per tonne—which includes the government’s carbon price and this new, PBO-suggested levy—would result in an additional hike to gas prices of as much as $0.23 per litre by 2030,” CBC notes.
McKenna immediately distanced the government from the report, announcing that the Liberals have no plans to increase the current carbon tax above its current $50 ceiling if they’re re-elected this fall.
The PBO’s report “has nothing to do with our climate plan,” she said, and it “doesn’t represent the approach we’ve taken, which is to make sure life is affordable, that we’re growing the economy, and that we’re tackling climate change.”
Conservatives pounced on the report immediately, with leader Andrew Scheer tweeting that the analysis “confirmed Trudeau’s Carbon Tax will need to go up 5x—adding 22 cents per litre to the price of gas—for Trudeau to reach his Paris targets.” But there were a couple of key gaps in the initial news reporting and the Conservative reaction. “The watchdog defended his analysis of the carbon tax needed to achieve Canada’s Paris target, acknowledging that it did not include any non-tax measures or the cost of ignoring the climate crisis,” National Observer reports.
Giroux said his office had come up with the supplementary carbon tax number “for simplicity’s sake, and just for illustrative purposes,” in an analysis that left out other carbon reduction methods the government is pursuing—like controls on methane emissions (once they’re finally enacted), the 2030 coal phaseout, and the newly-announced ban on single-use plastics. It also contained no comparison between the cost of climate action and the much higher cost of ignoring a mounting crisis.
“By design, he did not look at any other measures that governments could take instead to crack down on pollution over the next 11 years, even though such actions are widely used across Canada,” Observer notes. “Nor did Giroux conduct any cost-benefit analysis of whether it was worth the price to pay to reduce Canada’s pollution compared to the costs of inaction, saying that such an undertaking is beyond the resources of the office.”
But “climate change is already making extreme weather more frequent and more intense, leading to more flooding, wildfires, heat waves, sea level rise, and other consequences, and provoking costly cleanups, ruined crops, less affordable insurance, damage to infrastructure, and the spread of disease,” Observer adds.
CBC Parliamentary reporter Aaron Wherry had a slightly different take on the same gap in Giroux’s analysis, pointing to economists’ contention that a carbon price is the least expensive way to regulate a toxic pollutant like carbon dioxide. “Of course, other policy measures (such as regulations) could achieve the same emissions target,” the PBO wrote, “but they would likely have a larger impact on the Canadian economy.”
Wherry notes that “though regulations—command-and-control policies that set out a hard limit or a new requirement on an industry’s activities—can cost more than a price on carbon, there can be both political and practical reasons for using regulations to attack a specific problem.” Which is why “governments likely will end up using some combination of all available options—both Alberta Premier Jason Kenney and Ontario Premier Doug Ford, for instance, have maintained elements of carbon pricing in their provincial plans, even while they condemn the federal price.”
He cites recent analysis showing that Ford’s regulatory approach will cost Ontario taxpayers half again as much as the federal carbon tax.
Amid the debate about the PBO report, McKenna announced Thursday that Ottawa will begin charging its floor price on carbon in Alberta, after the Jason Kenney government phased out the provincial carbon levy May 30. She said all the revenue will go back to the province where it was collected—90% to families, and 10% to schools, hospitalities, cities, and green initiatives.
“It’s unfortunate that we’re in this situation with another conservative premier…who doesn’t seem to understand that pricing pollution is proven, that provinces that have had a price on pollution have been the fastest-growing in the country, and pricing pollution is the most efficient way to reduce emissions,” she said. “It’s unfortunate, because Alberta had a made-in-Alberta plan to put a price on pollution.”Last Monday, Manitoba Sustainable Development Minister Rochelle Squires announced her province would cut its emission reduction target between 2018 and 2022 from 2.5 to 1.0 million tonnes, mainly on the assumption that the federal carbon tax will no longer be in place. “We’ve removed the carbon pricing element from our plan and are moving forward with getting real emissions reductions,” she told The Canadian Press. “(There are) several more initiatives to come that will help us transition to a low-carbon future without imposing a tax on Manitobans.”