Doug Ford has recently faced criticism for suggesting that a federal carbon tax would lead to a recession.
He was publicly mocked by to Trudeau government aide Gerald Butts, who compared Ford’s concerns about a recession to claiming that the moon is made out of cheese.
Despite Butt’s accusation, Premier Ford’s comment is backed up by many economists and financial experts who predict that Canada may be on the verge of a recession.
Ford, for instance, cited a study by the Conference Board of Canada which indicated that a carbon tax would shrink Canada’s gross domestic product by $3 billion.
Likewise, a study in the Canadian Tax Journal by Professor Nicholas Rivers from the Climate and Energy Policy at the University of Ottawa suggests that the cost of clothing, food, public transport, electricity, heating among other things will all rise.
With a $30-a-tonne carbon tax, the price of food alone is set to rise by 1.2%. This is because the price of everything that needs to be shipped and transported will be negatively affected by a carbon tax.
Canada’s economic growth in recent years has been based largely on household spending — with household expenditure counting for nearly half of our GDP. Reduced spending and a higher cost of living, which are the intended goals of the carbon tax, could thus could drive an economic downturn.
University of Calgary Professor Jennifer Winter calculated that the federal carbon tax would cost Ontario households on average $707 per year, meaning that Ontarians will have less money to spend on household goods.
A University of Regina Study by Regina’s Institute has also discovered that a federal carbon tax could potentially reduce Saskatchewan’s GDP by nearly $16 billion with very little effect on Canada’s emissions.
The study estimates Saskatchewan’s GDP will lose 2.43% or $1.8 billion annually.
Contrary to claims from carbon tax enthusiasts, evidence suggests that economic growth slows considerably after a carbon tax is adopted.
Supporters of the federal carbon measures often point to British Columbia as an example of the tax working successfully.
While British Columbia has been able to keep apace with other provinces after the tax was introduced, the province’s Ministry of Finance stated that the carbon tax has had a “negative impact on GDP.”
Unlike the federal carbon tax — which is set to increase on a sliding scale every year — B.C.’s carbon tax was frozen for five years at $30 per metric tonne of carbon emissions.
Trudeau introduced the federal carbon tax at $10 per metric tonne in 2018, and will add an additional $10 per metric tonne of carbon each year.
Despite claims from Liberal operatives like Gerald Butts, many economists remain skeptical of the economic benefit of carbon taxes and seem to draw a similar conclusions to Premier Doug Ford about the potential that a carbon tax may spur a recession in Canada.
Other financial experts are also warning about Canada plunging into a recession.
“I think we’re just on the precipice of embarking on a serious recession,” said Jim Mylonas, global macro strategist at BCA Research.
“It’s not a matter of if, but when.”