Canada's budget watchdog re-ran the numbers on the carbon tax — here's what it found
Parliamentary Budget Office re-did its analysis after what it called an 'inadvertent error'
After making what it called an "inadvertent error," Canada's independent budget watchdog ran its analysis of the federal carbon tax and rebates a second time — and came to a similar conclusion when it comes to how many Canadians receive more in rebates than they pay through the carbon tax.
But when considering the impact on the economy, and how that will affect household income by 2030-31, the budget watchdog says the costs to households will be lower than it predicted in its last report — which erroneously included the industrial price on carbon in its calculations.
Thursday's updated report from Parliamentary Budget Officer (PBO) Yves Giroux found that — considering the average household cost of paying the consumer fuel levy, the GST that's charged and the indirect costs from the carbon tax — on average, households will see a net gain in 2030-31.
The report also said that, "broadly speaking," its analysis showed larger net gains and lower net household costs than its previous study did.
On average, however, the PBO said households will be worse off by 2030-31 when the economic impact on GDP and investment income is factored in — just not as badly off as his original report suggested last March.
"Given that the fuel charge lowers employment and investment income, which makes up a larger share of total income for higher-income households, their net cost is higher," the PBO said on its website.
All Canadians outside Quebec and British Columbia pay the federal carbon tax on consumer fuels. Most also receive federal rebates.
The next rebate arrives in bank accounts on Tuesday.
Large emitters in the oil and gas, steel and other industries also pay the carbon price through a separate industrial, or output-based, pricing system.
Earlier this year, the PBO acknowledged that its original economic analysis of the federal carbon tax and rebates inadvertently included the industrial pricing system that applies to heavy emitters.
Consistent with previous reports, the PBO's updated analysis does not account for the benefits of reducing emissions or the economic costs of climate change. It also does not estimate the impacts of alternative policies.
The Parliamentary Budget Office is a non-partisan government office serving MPs and senators. It produces economic and financial analyses for parliamentarians.
PBO finds lower net costs for households
Although Thursday's report came to a conclusion similar to the PBO's previous one, its estimate of net costs from the carbon tax were much lower than in the previous report.
Previously, the PBO said the average net cost for a household in Alberta was $2,773 in 2030-31. In its new report, that cost is now $697.
The tone of the report has also changed. It now addresses issues that have been hotly debated in the political and climate policy arenas.
It states Thursday's report is not an endorsement of calls to scrap carbon pricing.
"(The report) should not be seen as an alternative policy option of 'doing nothing' such that if the economic impact of carbon pricing is negative then it should be jettisoned," the report states.
The federal carbon tax is a key political target for the Conservatives. Party leader Pierre Poilievre has been holding "axe the tax" rallies across the country and is calling for what he calls a "carbon tax" election.
Liberals have spent a lot of political capital defending the system. Environment and Climate Change Minister Steven Guilbeault said in a media statement Thursday the system gives more money back to Canadians through rebates than they lose to the carbon tax.
"This report is an important correction," Guilbeault said. "It clears the air on Pierre Poilievre's big lie and shows that carbon pricing is the most cost-effective way to fight climate change."
Poilievre argues the consumer carbon price is making Canadians poorer.
"Today, the Parliamentary Budget Office (PBO) once again confirmed that the NDP-Liberal carbon tax is impoverishing Canadians," says a news release from the Conservative Party of Canada.
"This proves what Common Sense Conservatives have been saying all along – the carbon tax is nothing more than an expensive scam."
The advocacy group Climate Action Network Canada said the political debate over carbon pricing misses the point.
"By continuing to focus on carbon pricing, we are collectively ignoring the elephant in the room: the costs of runaway climate change," said Alex Cool-Fergus, the national policy manager for the network.
"With every heat wave and flood, Canadians are paying the real price of climate change. Devastating unnatural disasters are making life unaffordable for people."
Poilievre has claimed the federal carbon tax and rebates will cause "mass hunger" if the carbon tax continues to increase as scheduled. A higher price on carbon, Poilievre said, would "shut down our entire economy" and result in an economic "nuclear winter."
Power and Politics host David Cochrane asked Giroux whether his analysis shows those dire predictions might come true.
"The numbers that were provided to us don't suggest that it would be that catastrophic," Giroux said.
Some of the data in Giroux's report came from Environment and Climate Change Canada.
Clarifications
- This story has been updated to clarify that while the PBO's revised analysis largely confirmed its earlier findings on the fiscal impact of the carbon price and rebate, the average negative economic impacts of the federal tax by 2030-31 were lower when the industrial carbon price was not included.Oct 10, 2024 6:41 PM ET
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