A new report from the Fraser Institute suggests Canada will face serious economic consequences should the carbon tax rise to the planned $170 per tonne by 2030.
Researchers estimated that both GDP and employment will be significantly lower by 2030 because of the carbon tax, with the total economic loss amounting to $44.1 billion.
“Real GDP could decline by about 2.1% compared to the case without the tax, and the economy will lose approximately 200,000 jobs. Also real household consumption will decline in every province even after taking account of the rebates, which highlights the challenge the federal government will face in achieving their goal that most Canadians will be made better off by the plan,” the report says.
“It is noteworthy that increases in energy costs fall disproportionately more heavily on lower-income households.”
The report conflicts with the Trudeau government’s position that carbon tax policies will make Canada better off.
In December, Trudeau announced the carbon tax will increase by $15 a year until it reaches $170 paper tonne in 2030. The government claims that the hike along with other expensive programs are required to meet the greenhouse gas reduction target in the Paris climate agreement.
Researchers note the Trudeau government’s plan to issue rebates to Canadians will likely increase the federal deficit. The carbon tax, by punishing consumption and economic activity, will shrink the tax base and offset any carbon tax revenues.
“If the federal government aims to refund most of the proceeds of carbon charges to households while keeping other spending and tax rates unchanged, the net effect will be an increase in the government deficit,” the report says.
The Fraser Institute and other experts have determined the carbon tax is not sufficient to meet the Paris agreement. Even if Canada met its Paris targets, the total effect on global greenhouse gas levels would be minuscule.