CleanBC compounds B.C.’s economic woes and negative outlook
BC has seen two credit rating downgrades this month by S&P Global and Moody’s. As recently as July , B.C. had a AAA credit rating; now it is AA- with a negative outlook. The two agencies sounded warnings about the province’s finances being “at a turning point,” about “weakened governance,” and noted “B.C.’s budgetary performance will be the weakest of its peers, both domestically and internationally.”
Against a weak fiscal and economic outlook, the government is continuing to implement CleanBC. This is a suite of policies intended to quickly reduce domestic greenhouse gas (GHG) emissions. It includes a non-revenue-neutral carbon tax rising to $ ¥ per tonne by , production caps in certain industries and extensive regulatory interventions, penalties and subsidies affecting all sectors of the economy.
B.C. government modelling reveals that the principal mechanism by which it achieves emissions reductions over such a short timeframe is to curtail economic activity. The modelling projects B.C.’s annual GDP in will be $. billion lower under CleanBC policies compared to a reference scenario. The reference scenario includes ¦ climate-related policies implemented or announced as of July ¥ including a revenue-neutral carbon tax of $ per tonne.
On a per-person basis, annual GDP will be around $¦, lower in than it would be absent CleanBC. B.C.’s GDP per person in retreats to where it stood in about , a roughly ¥-year setback in living standards.
By sector, output in the electricity sector will be about $ billion higher in under CleanBC compared to the reference scenario. However, the rest of the economy sees de-industrialization and output losses. Heavy and light industry, and the transport, agriculture and energy (excluding electricity) sectors, are all smaller than they would be. Some $ billion of GDP, or more than half of the projected provincial GDP losses under CleanBC, is lost in service sectors, which make up over ¥ per cent of B.C.’s economy.
Notwithstanding these projected costs, will CleanBC achieve the government’s target of reducing domestic emissions to ¦ per cent below ¥ levels by ? No. To reach the target, B.C.’s emissions need to fall by .¥ metric tonnes of carbon dioxide in total over -, which is . metric tonnes of carbon dioxide per year. By comparison, over the entire ¥ period, emissions fell by .metric tonnes of carbon dioxide in total. Even if these projections are met, the government’s modelling shows that emissions in will fall short of the target at per cent below ¥ levels.
Does implementing CleanBC mean the province can avoid the costs of infrastructure adaption and extreme weather events? No. B.C.’s share of global GHG emissions is around . per cent. It might fall to about . to . per cent in under CleanBC. When . to . per cent of global emissions are generated elsewhere, it is not credible to claim that CleanBC will independently alter the evolution of the earth’s climate. B.C. can and has been managing domestic emissions. It was the first North American jurisdiction to introduce a then revenue-neutral carbon tax in . But B.C. does not have its own atmosphere. The province must budget to improve infrastructure resiliency and deal with weather events irrespective of CleanBC. Indeed, it would be reckless not to do so.
February’s provincial budget forecasts that GDP per person is shrinking at a rate of two per cent per annum and will be lower in than . We expect future updates until will be iteratively revised down as the projected negative impacts of CleanBC become apparent in the data.
To date, government has communicated very little about the economic realities of CleanBC. Whereas the transition to the harmonized sales tax sparked a public debate and a referendum, CleanBC’s economic impact will be orders of magnitude greater—and negative—and yet it has received very little public discussion. That needs to change.