The Trudeau government’s climate change plan will cost Canadian workers $6,700 annually by 2030, cut national employment by 164,000 jobs and fail to achieve promised emission reduction targets, according to a new study by University of Guelph economist Ross McKitrick.
“The government’s plan will significantly hurt Canada’s economy and cost workers money and jobs,” said McKitrick in his report, “The Economic Impact and GHG Effects of the Federal Government’s Emissions Reduction Plan Through 2030,” released by the fiscally conservative Fraser Institute.
“This poorly-designed plan, which will worsen the current downward trends in productivity and income, will reduce emissions but at a cost many times higher than the government’s estimated benefits,” McKitrick said, predicting it will reduce Canada’s Gross Domestic Product by 6.2% by 2030.
While most economists argue federal carbon pricing (a.k.a. the carbon tax) is the most efficient way of reducing industrial greenhouse gas emissions linked to climate change, McKitrick notes the tax is actually just one of 140 programs the Trudeau government has launched related to climate change.
(Environment Minister Steven Guilbeault said last year the government has committed more than $200 billion of taxpayers’ money to over 100 government programs aimed at addressing climate change.)
“The large number of different policies testifies more to an overall lack of focus than to a commitment to optimal policy making,” McKitrick’s report says.
“Carbon pricing is part of the federal policy mix, but the profusion of accompanying regulations, subsidies, and mandates undermines any economic efficiency attained by the emission charge and ensures the package as a whole will be relatively inefficient for what it accomplishes.”
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McKitrick estimates the federal climate change plan will cut Canada’s emissions by only 26.5% compared to 2005 levels in 2030, far short of the Trudeau government’s pledge to cut emissions to at least 40% below 2005 levels in 2030 and to net-zero in 2050.
According to the latest federal data from 2022, Canada’s emissions, at 708 million tonnes, were just 7% below the 2005 level of 761 million tonnes.
The Trudeau government says 80% of households paying the federal carbon tax (B.C. and Quebec are exempt because they have their own, federally approved, carbon pricing regimes) receive more money back than they pay in carbon taxes because of its rebate system.
However, parliamentary budget officer Yves Giroux said this only applies if one limits the calculations to the fiscal impact of the carbon tax.
Adding in the negative economic impact, Giroux has said, 60% of households end up paying more in carbon taxes than they receive in rebates, rising to 80% in some provinces by 2030.
The federal government has acknowledged that its own calculations predict Canada’s GDP will be lower by almost 1%, or $25 billion, in 2030 because of federal carbon pricing. Giroux predicted in a 2022 report that the negative impact in 2030 would be 1.3%.
The feds argue that Giroux’s calculation doesn’t include the economic cost of doing nothing to combat climate change because of economic damage caused by the more severe weather that results.
But both McKitrick and Giroux argued that Canada’s emissions, at 1.5% of the global total, are too small to materially impact climate change and that, for carbon pricing to work, global emissions have to decrease.
The Statistical Review of World Energy reported last month that global industrial greenhouse gas emissions rose by 2% in 2023 compared to 2022, exceeding 40 billion tonnes of carbon dioxide equivalent for the first time.