Ottawa needs to boost carbon tax by $50 a tonne to meet emissions reduction targets: budget officer

The federal government would have to levy an additional carbon tax worth as much as $50 a tonne on greenhouse gas emissions (GHG) to achieve Canada’s emissions reduction targets, the parliamentary budget officer (PBO) said in a report released Thursday.

Canada, a signatory to the Paris climate agreement, which committed virtually every country to lowering emissions to try to halt the effects of climate change, has committed to lowering emissions by some 30 per cent from 2005 levels by 2030.

In real terms, it would be mean lowering GHG emissions from 732 megatonnes to 513 megatonnes by 2030, a target initially pitched by the former Conservative government, but one that was also agreed to by Environment Minister Catherine McKenna at the Paris climate talks.

The PBO said the problem is the government’s current policies and measures just aren’t enough to get the country to that promised level. Under the PBO projects, based on the government’s current carbon tax and other promised policy fixes, Canada will only get to 592 megatonnes meaning there’s a 79 megatons shortfall.

The government has already mandated every province and territory have some sort of carbon pricing scheme — and it has stepped in to levy one in hold-out provinces with conservative governments like Ontario, Manitoba, New Brunswick, Saskatchewan and two territories. But the PBO said Ottawa would have to go further still with the addition of a separate, more broad-based carbon tax, starting at $6 per tonne in 2023 before rising to $52 per tonne in 2030.

That would be on top of the current carbon price, which is worth $20 per tonne of emissions this year and rises incrementally to $50 by 2022.

It would also mean people in those four provinces, but also those in a province with its own pricing mechanism, would have to pay as much as $102 per tonne by 2030 to ensure Canada hits the Paris targets — designed to keep the planet from warming more than 2 C from pre-industrial levels.

Big hike in gas prices expected by 2030

A total carbon price of $102 per tonne — which includes the government’s carbon tax plus this new, suggested PBO levy — would result in an an additional hike to gas prices by as much as $0.23 per litre by 2030.

The PBO-pitched carbon levy would be different from the current carbon tax in that the proposed hike would apply more broadly, covering all sectors except agriculture. The current carbon tax is focused largely on fossil fuels like oil, natural gas and propane.

The PBO said while there are other measures proposed by the government to help reduce emissions, including building retrofits and installing electric vehicle charging stations, the budget officer said Environment and Climate Change Canada could not say with any sort of accuracy just how much those measures would actually reduce emissions.

The Liberal government has not yet said if it will commit to rising that price if re-elected in the fall.

The PBO said carbon pricing alone might not be the only solution and additional regulatory changes could be enacted by this or future governments to target particular sectors of the economy.

The PBO said the projections do not preclude a massive technological breakthrough of some sort that could make this aggressive pricing unnecessary.