Paris emissions targets carry extra costs for Canada’s economy

The gap between expectations and existing policy is wide. Closing that gap will cost thousands of jobs and devastate whole economic sectors

By Mark Milke
and Lennie Kaplan
Canadian Energy Centre

Aspirations are important in life but it’s always helpful to be clear on the means to the desired end, especially if others are involved. A case in point: General commitments by governments in Canada to significantly reduce carbon emissions by 2030, i.e., the Paris commitment.

In December 2015, 195 participating member states met in Paris and agreed to significantly reduce carbon emissions by 2030.

Mark Milke
Mark Milke

Canada’s government has implemented or proposed a number of policies, from carbon taxes to regulations, to hit its target: a cut in greenhouse gas emissions by 30 per cent by 2030 (from 2005 levels). That requires a reduction to 511 megatonnes annually 10 years from now.

However, comprehensive analyses of the costs of the country’s commitment on specific sectors, such as the oil and gas sector – including whether existing policy intentions can achieve the promised reductions and the economic costs of such efforts – have been lacking.

So we asked Navius Research, a firm known for its data-driven, empirical work, to assess current plans and policy to meet the Paris target. Navius was given complete independence to design one of most efficient ways of arriving at the Paris target in 2030.

Navius concluded (and others may disagree) that the best way was via a carbon tax that covers virtually all economy-wide emissions, including emissions-intensive and trade-exposed sectors.

Lennie Kaplan
Lennie Kaplan

With that efficient approach in hand, we then asked Navius to assess if a gap exists between the Paris target and current, promised policies. The answer: yes.

Navius data shows that promised policies are insufficient to achieve Canada’s emissions target in 2030. There is still a gap of 112 megatonnes of greenhouse gas emissions relative to the 2030 Paris targets.

We call this the Paris gap. That’s the gap between what existing and planned policies will deliver (if underlying assumptions are correct) and more policy and actions needed to hammer down greenhouse gas emissions by an extra 112 megatonnes. Those extra actions could include more government regulation and higher carbon taxes, among other policy pathways to 2030.

Additional questions arise when you try to calculate where the 112 megatonnes in emission reductions will occur. In large measure, roughly half the Paris gap will fall on Alberta, and with a significant impact on Canada’s oil and gas sector.

Under promised policy, the forecast is for Alberta’s greenhouse gas emissions to fall to 263 megatonnes by 2030. But add in the gap and it becomes clear Alberta will be expected to reduce emissions further, to 209 megatonnes. That’s a Paris gap of 54 megatonnes in carbon reductions for Alberta with no path on how to get there.

For the oil and gas sector across Canada – predominantly in Alberta but also in northern British Columbia, Newfoundland and Labrador, and Saskatchewan – the Paris gap means emissions need to fall not just to 163 megatonnes as existing policy envisions. In fact, the oil and gas sector needs to reduce its emissions by another 31 megatonnes (to 132 megatonnes) annually by 2030.

These multiple gaps between policy promises and the Paris target entail extra costs and impacts. From the economic modelling, it’s clear what some of these will be: A doubled carbon tax between 2025 and 2030; $19.5 billion less in investment nationwide; and an economy $54 billion smaller than assumed by existing and promised policy.

Then there are the jobs: 300,000 jobs sacrificed to hammer down carbon emissions Canada-wide.

In 2019, 300,000 jobs equals all the jobs in forestry, construction, transportation and warehousing in British Columbia, 299,368 in total. It’s more than the total number of people employed in Newfoundland and Labrador (216,485) and P.E.I. (69,315) in 2019.

Keeping the Paris commitment will not be cost-free and existing policies lack sufficient means to the promised end.

So it’s important when developing climate change policy that governments fully apprise Canadians of the economic and fiscal impacts of those policies on key sectors of the economy, such as the oil and gas industry, and on each province.

Mark Milke is executive director of research and Lennie Kaplan is chief research analyst at the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of Mind the (Paris) Gap: The Economic Impact of the Paris Commitment on Canada.

Mark and Lennie are Troy Media Thought Leaders. Why aren’t you?

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