Up to 3% hit to economy seen from climate action
CO2 emissions cuts to date not deep enough, parliamentary office warns
Curbing carbon emissions would cost Canada between one and three per cent in economic growth by 2030, but the price of leaving greenhouse gas emissions unchecked “could be substantial,” the Parliamentary Budget Office said Thursday.
The federal government and a number of provinces have introduced a slew of measures to curb emissions, but they will not be enough, the PBO said in a report.
“Those measures, while substantial, are unlikely to achieve the target on their own. Deeper reductions will be needed,” the independent parliamentary body noted.
The report comes as Prime Minister Justin Trudeau is set to sign the Paris climate-change agreement in New York on Friday, along with leaders of 130 other nations.
The Liberal government is pursuing a number of initiatives to combat climate change, and is in discussion with the provinces to develop a carbon pricing mechanism.
The PBO warned that a patchwork of programs across different sectors may lead to “unnecessarily high costs,” while regional disparity could also hamper a pan-Canadian effort.
GDP per capita, which is forecast to climb to $61,200 by 2030, up from $55,500 in 2014, would be between $600 and $1,900 per capita higher in the absence of emission reduction policies, the PBO said.
“The needed changes will, however, necessarily impact on the economy since non-GHG sources of energy are currently more costly than cheap coal, natural gas or even oil products,” the PBO said.
“The estimate used in the PBO report indicates that incomes could be reduced by between one and three per cent, relative to where PBO projects they would otherwise be.”
The PBO estimates Canada will have to slash emissions by 208 million tonnes to reach the previous government’s pledge to reduce the nation’s greenhouse gas emissions (GHGs) by 30 per cent below 2005
Those measures, while substantial, are unlikely to achieve the target on their own. Deeper reductions will be needed.
levels by 2030.
GHG emissions stood at 724 million tonnes in 2005. Reaching that target would be the equivalent of removing all emissions from cars and trucks, PBO said.
The most substantial emission reductions will have to be pursued in transportation, oil production and electricity with a combination of carbon-tax and greener alternatives.
Oil and gas production will lead carbon emission increases, soaring to 145 million tonnes by 2030, compared to 91 million tonnes in 2013, the PBO estimated.
Led by oilsands emissions, fossil fuel production will account for nearly 20 per cent of the country’s CO2 emissions, compared to its current contribution of 12.5 per cent.
Cutting oilsands emissions by about 40 million tonnes will require a carbon price of between $43 to $100 per tonne in oil and gas extraction, refining and distribution.
As an example, $100 per tonne would raise the price of a litre of gasoline by 24 cents, the PBO estimates.
Late last year, Alberta announced a carbon tax of $20 per tonne by January 2017, rising to $30 per tonne in January 2018 and growing with inflation. Any higher rates would likely be politically difficult in an era of low profitability in the province’s dominant oil sector.
“You need to get to that $100 target by 2030, so you don’t need to do it all today,” Philip Bagnoli, author of the PBO report, said in an interview, noting that technological innovations could help bring emissions down. “If you do it gradually and give people time to respond, my bet is that you will not have to get to $100 per tonne.”
Energy emissions will see a decline to a still substantial 189 metric tonnes by 2030, compared to 224 million tonnes emissions in 2013. Road transport emissions will edge higher to 147 million tonnes by 2030, versus 134 million tonnes in 2013.
Despite the need to act against climate change, the PBO also warns that Canada could fall victim to “carbon leakage.” The country’s unilateral pursuit of carbon pricing could see economic production move away to countries that have less stringent policies.
Despite accounting for just two per cent of global emissions, Canada’s emissions per capita are among the highest in the world.
And it’s trailing its peers, according to the Conference Board of Canada in a report published Thursday.
The board gave Canada a “D” grade in its latest report on environmental performance, rating it 14th among 16 peers, ahead of only the U.S. and Australia.
Canada got a solitary “A” for lowemitting electricity production, but chalked up a string of Ds in energy intensity, GHG emissions and two other categories.
Among provinces, only Ontario secured a B grade, while Quebec, British Columbia and Prince Edward Island could only muster Cs.
“Saskatchewan, Alberta, Newfoundland and Labrador, Nova Scotia, and New Brunswick are at the bottom of the pack,” with “D minus” grades for doing worse than the lowest-ranked peer country,” the board said.