The federal carbon tax will have to significantly increase in order to meet the targets set out by the Paris climate agreement, according to the Parliamentary Budget Office (PBO).
In the PBO report Carbon Pricing For The Paris Target released Thursday, analysts wrote that the carbon tax may have to increase to as much as $289 per tonne by 2030. The current carbon tax is $20 per tonne and is capped at $50 by 2022.
“We assume that additional carbon pricing needed to achieve the Paris target will begin in 2023 and rise through 2030,” wrote analysts.
”The additional carbon pricing in our scenarios differs significantly from the existing federal fuel charge under the federal carbon pricing system. We assume that additional pricing would apply more broadly, covering all sectors and would be applied to all provinces and territories.”
The PBO estimates that additional increases to the carbon tax would decrease Canada’s GDP by between 0.47% and 0.62% by 2030.
While the report notes that current policies are already projected to significantly reduce Canada’s greenhouse gas emissions by 2030, the PBO says that much more drastic action would have to be taken to meet the Paris climate agreement.
The Paris climate agreement is a United Nations-backed treaty to combat climate change and limit the rise in global temperatures..
The Paris agreement has been cited by the federal government as motivation behind several costly initiatives designed to cut emissions, including the proposed Clean Fuel Standard which has been described as a second carbon tax.
The Clean Fuel Standard, which will require energy producers to offset their carbon footprint, may cost the energy sector between $150 and $180 per tonne of emissions produced.
Despite pulling out of the agreement, in recent years the United States has been a world leader in reducing carbon emissions.