An update on the federal carbon price’s economic impact that corrected an error in earlier reports largely supports previous conclusions, the parliamentary budget officer said Thursday.
Yves Giroux said his office still finds the vast majority of households get back more in rebates than they pay for carbon pricing, but for most, those gains are erased after broader economic factors are taken into account.
The office acknowledged in April that it mistakenly included the economic impact of industrial carbon pricing in its 2022 and 2023 analyses, which were meant to focus only on the consumer levy.
But the overall narrative is consistent, Giroux said.
“When we use the government’s own numbers and isolate the fuel charge itself, we still find that the average household is worse off, including the economic impact.”
The PBO’s reports have become a major feature of Canada’s political debate over the consumer carbon price, which is applied to fossil fuels purchased by households and smaller businesses and organizations.
Environment Minister Steven Guilbeault, whose government insists the policy is a way to incentivize less pollution, said Thursday the report was “very clear” that Canadians would get more in rebates than what they pay.
But the federal Conservatives promise to eliminate it. They suggested in their own statement that the report confirmed the carbon price was “impoverishing Canadians.”
The PBO’s new analysis, which looks at the eight provinces that use the federal carbon price, says most households will be better off in the 2030-31 fiscal year than earlier estimates suggested. It also estimates a smaller overall effect on the budgetary deficit.
The numbers vary drastically province to province. In Ontario, for example, the PBO now estimates the average household will get $331 more in rebates than they pay, up from the previous $202. In Saskatchewan, it’s up to $1,205 from $699.
When the broad economic effects are considered — from an expected decrease in profits for energy-intensive sectors to lower employment and investment income — the new analysis predicts less of a pinch.
In Ontario, the negative impact for the average household has been downwardly revised from $1,820 to $903.
Thursday’s report also finds more people with lower incomes would get an overall boost. Looking at five equally divided income groups, the new numbers suggest the two groups making the least money would avoid a negative impact, while the earlier analyses suggested only those in the lowest group would be spared.
The PBO has been criticized for the fact that its analyses do not consider the possible economic impacts of climate change caused by higher emissions, or the benefits of green investments.
“Looking at the cost of climate change and putting that into the mix would be something significantly more complex,” Giroux said during a media briefing Thursday.
“That would put us as the arbiter of what’s beneficial versus what has more cost, and that’s much more complex, and that’s generally not within our mandate.”
For the first time, Thursday’s report included government estimates for the hit to Canada’s economy versus the actual emissions reduced by both the consumer and industrial carbon price.
Big emitters pay the levy on a portion of what they actually emit rather than paying a surcharge on the fuel they buy to operate, and the per-megatonne emissions reductions that result are “significantly less costly,” Giroux said.
The numbers suggest that in 2030 the consumer carbon price would reduce real gross domestic product by 0.7 per cent, while reducing emissions by 13 megatonnes. The industrial price would reduce GDP by 0.2 per cent, but cut an additional 49 megatonnes.
Guilbeault defended the importance of both policies.
“No single measure will enable us to achieve our 2030 targets. We need everything,” he said, referring to the government’s plan to bring carbon emissions to at least 40 per cent below 2005 levels.
The PBO first noted the error in its 2022 and 2023 analyses in an unpublicized note on its website. The office faced criticism when the information became public.
The Liberals said the office was guilty of a lack of transparency. Giroux accused the government of barring the release of numbers that would prove his analysis remained largely correct. And the Conservatives seized upon his comments to suggest the Liberals were muzzling an independent officer of Parliament.
Giroux later clarified his comments, saying he was asked not to share the actual data set, but wasn’t instructed not to speak publicly. The government ultimately published the raw data, just as Conservatives were tabling a motion in the House of Commons demanding its release.
The result of that controversy — Thursday’s report — is that Canadians now have a clearer and more accurate reflection of what carbon pricing will do, said Dave Sawyer, principal economist at the Canadian Climate Institute.
“This update confirms that carbon pricing can drive substantial emissions reductions in Canada’s largest industrial sectors without compromising competitiveness and without imposing significant costs on households,” he said.
This report by The Canadian Press was first published Oct. 10, 2024.
