Canadians will pay dearly for Ottawa’s carbon tax

Critics of the carbon tax (such as myself) argue that by taxing the energy and material inputs of virtually every element of economic activity, the tax will essentially raise the cost of all goods and services (housing, transportation, food, heating and cooling, health care, etc.) in Canada.

Governments, including the Trudeau government, often handwave away such criticisms, arguing that industries will find ways to innovatively and inexpensively reduce greenhouse gas emissions, and that, in any event, government plans to rebate 90 per cent of the tax to Canadian households so Canadians are not worse off.

But new data, generated by Environment and Climate Change Canada (ECCC) and the Parliamentary Budget Officer (after being suppressed by the Trudeau government for some time) has put a price on the carbon tax. As reported in the National Post, the ECCC “estimates that the real, or inflation-adjusted, GDP in a scenario without a carbon tax in 2030 would be $2,688 billion. With a carbon tax, that number drops to $2,663, which is a difference of $25 billion. That amounts to a 0.92 per cent reduction in real GDP in 2030. It is slightly lower than the PBO’s estimation of 1.3 per cent which it predicted in its first economic analysis in 2022.”

When one considers that Canada’s lackluster economic performance in recent years has generated a GDP that compares with the low-growth rates of the 1930s, and that real GDP in 2023 grew by only 1.1 per cent, losing another one per cent to the carbon tax would represent a rather large loss. (For those keeping track, GDP in the United States grew by 3.3 per cent in 2023.)

So, the Trudeau government’s carbon tax is very costly. This should come as no surprise. According to a 2021 study published by the Fraser Institute, a $170 per tonne carbon tax (the level its’s slated to reach in 2030) would impose significant costs on Canada’s economy, causing a 1.8 per cent drop in GDP and the loss of about 185,000 jobs nationwide.

As noted in the study, the “economic costs vary by province. Alberta will experience a 2.4 per cent reduction in GDP while Quebec and British Columbia will face drops of 1.5 per cent and 1.6 per cent. The largest proportionate burdens of job losses will fall on Ontario and Alberta, with Quebec and British Columbia close behind.” The analysts note that a $170/tonne carbon tax would spur significant reductions in Canadian greenhouse gas emissions—but at levels insufficient for Canada to comply with its commitments to international agreements such as the Paris Agreement.

For years now, Canada’s politicians have downplayed and dismissed criticisms of the carbon tax levied by analysts who predicted the carbon tax would, indeed, inflict significant harm to Canada’s economy and the economies of Canadian households. Now, with the cat out of the bag by virtue of the government’s own internal estimates, it’s time for a more honest discussion about the costs and benefits of the tax. Hopefully, the Trudeau government will seize the moment and seriously consider removing the carbon tax to avoid future harm to already economically labouring Canadian families.