Ottawa needs to boost carbon tax by $50 a tonne to meet emissions reduction targets: budget officer

The federal government would have to levy an additional carbon tax worth as much as $50 a tonne on greenhouse gas emissions (GHG) to achieve Canada's emissions reduction targets, the parliamentary budget officer (PBO) said in a report released Thursday.

Canada is a signatory to the Paris climate agreement, which committed virtually every country to lowering emissions to try to halt the effects of climate change. Under that agreement, Canada has committed to lowering emissions by some 30 per cent from 2005 levels by 2030.

In real terms, that would mean lowering GHG emissions from 732 megatonnes to 513 megatonnes by 2030, a target initially pitched by the former Conservative government and agreed to by Environment Minister Catherine McKenna at the Paris climate talks.

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. 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 government's policy states that every province and territory should have some sort of carbon pricing scheme — and it has stepped in to impose a carbon pricing levy in hold-out provinces with conservative governments like Ontario, Manitoba, New Brunswick, Saskatchewan and two territories.

But the PBO said Ottawa would have to go further still with the addition of a separate, more broadly based carbon tax, starting at $6 per tonne in 2023 before rising to $52 per tonne in 2030.

That would be on top of the current carbon price, which is worth $20 per tonne of emissions this year and rises incrementally to $50 by 2022.

It also would mean those living in those four provinces, and those living in provinces with their own pricing mechanisms, would have to pay as much as $102 per tonne by 2030 to ensure Canada hits the Paris targets — which are meant to keep the planet from warming more than 2 C from pre-industrial levels.

Carbon levy could lead to higher gas prices

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.

Supporters of a carbon tax say the threat of climate change demands action and a revenue-neutral plan of this sort (the current federal carbon tax will be largely rebated to most households) is the best way to shift patterns of consumption away from GHG-emitting fossil fuels. Opponents fear a levy of this sort will be economically damaging and too punitive for consumers and small businesses.

The PBO-pitched carbon levy would be different from the current carbon tax in that the proposed hike would apply more broadly, covering all sectors except agriculture. The current carbon tax is focused largely on fossil fuels like oil, natural gas and propane.

"For illustrative purposes, we've focused on carbon pricing to give an idea to Canadians and parliamentarians as to how much it would cost, or how much effort it would require, to meet the targets under the Paris accord," Yves Giroux, the parliamentary budget officer, told reporters.

"The government has clearly stated its intent with respect to reducing greenhouse gas emissions and it has a plan that goes to 2022, but there's a gap."

McKenna tried to distance herself from the PBO's findings Thursday, saying the government does not intend to rise the carbon price after 2022 even if it's re-elected in the fall.

"The parliamentary budget officer's report has nothing to do with our climate plan. Our climate plan includes a price on pollution. We give the money back to families and 80 per cent of families are better off, especially low- and middle-income families, and we have a whole range of other measures," McKenna said.

"The report 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."

In a statement, McKenna said that the government has "no plan to increase the price post 2022. For Conservatives to suggest otherwise is simply false and misleading.

"We will meet our 2030 target through what we are already doing and new measures, including tackling plastic pollution, doubling the amount of nature that we are protecting, investments in clean tech and innovation."

The PBO agreed carbon pricing alone might not be the only solution and additional regulatory changes could be enacted by the current government or future governments to target particular sectors of the economy.

"There's a multiplicity of regulations that could be implemented, like vehicle efficiency, emissions of electricity generators, subsidies for certain sectors. There's so many policy instruments that are possible ... but regulations also have a cost," he said.

While other measures have been proposed by the government to help reduce emissions, including building retrofits and installation of electric vehicle charging stations, the budget officer said Environment and Climate Change Canada could not say with any sort of accuracy just how much those measures would actually reduce emissions.

The PBO said the projections do not preclude a massive technological breakthrough of some sort that could make this aggressive pricing unnecessary.

Conservative Leader Andrew Scheer said the PBO report demonstrates that the current Liberal environmental policy is inadequate, arguing that the carbon tax will cost Canadians more but will stop well short of helping Canada meet its Paris targets.

"Justin Trudeau's carbon tax would need to be $102 per tonne ... that's five times more expensive than it is today, meaning Canadians will pay more for groceries, home heating and gasoline prices will jump 23 cents a litre," Scheer said in a statement.

"Trudeau pretends he has a plan for climate change but it's clear that his carbon tax will not even come close to achieving Canada's emissions reductions targets.The PBO confirmed today that his plan is not as advertised."

Scheer has vowed to scrap the federal carbon tax. He said he'd release a Conservative plan for the environment and climate change on June 19.

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