OTTAWA — According to a joint report by the Conference Board of Canada and the Canadian Academy of Engineering, carbon pricing will help Canada reduce greenhouse gas emissions (GHG), however, the reductions will fall short of the government’s goal of a 30 per cent reduction from 2005 levels by 2030.
The report states trillions of dollars in investment spending on clean energy infrastructure and significant changes to the way Canadians consume energy will be needed to achieve emission reductions.
"Simply pricing carbon and moving away from fossil fuels are insufficient measures to achieve deep GHG emission reductions. And while technology and innovation will play a role in the long term, it can’t get us to the 2030 target given the relatively short window available to develop and adopt these solutions," said Louis Theriault, vice-president, industry strategy and public policy with the Conference Board of Canada, in a statement.
"Given that the required investment will be in the trillions of dollars, policy-makers need to communicate to Canadians the scale of how this transformation will impact everyday lives."
The report, entitled the Cost of a Cleaner Future, examines the impacts of carbon pricing and the investments required to help Canada achieve significant emission reductions. It finds that even if carbon taxes were to reach $200 per tonne by 2025, this would only result in a 1.5 per cent reduction in GHG emissions outside of the power generation sector.
The analysis also suggests that pricing carbon will have only a modestly negative affect on the economy. Introducing a carbon tax will lead to higher prices across the economy, which will reduce Canadians’ purchasing power, adds the release.
Assuming a carbon tax of $80 per tonne in 2025, the average annual cost to a Canadian household would be approximately $2,000.The largest price increases will be in natural gas, gasoline and electricity. Final consumer prices for natural gas would increase by as much as 60 per cent if carbon was taxed at $200 per tonne.
Additionally, business investment and trade volumes would also be impacted by carbon taxes through the forecast period.
Most industries’ exports would decline as higher production prices reduce their competitiveness. A lower Canadian dollar should help trade sensitive sectors.
However, industries with a domestic focus and sensitivity to price changes, such as residential construction, will be hard hit.
"Carbon tax revenues would add significantly to government coffers but the revenue collected is expected to be put back into the economy through tax cuts and higher public spending and investment," states the release.
"The assumption that carbon revenues will be recycled into the economy is the key reason why the total impact on the economy is small."