Canadian Carbon Tax Could Cost 200,000 Jobs

The Canadian government’s plan to increase its carbon tax to C$170 (US$136)/mt by 2030 will cost 202,000 Canadians their jobs and increase combined federal and provincial deficits by more than C$24bn, the Fraser Institute said in a March 16 report.

Under prime minister Justin Trudeau’s build back better environmental plan titled Healthy Environment and Healthy Economy (HEHE), the carbon tax will increase to C$170 from its current level of C$30. Households will be reimbursed through lump-sum rebate cheques funded by the proceeds of the tax, the government said in unveiling HEHE in December 2020, leaving them “better able to invest in affordable solutions that reduce pollution.” 

“The federal government has said the higher carbon tax will have ‘almost zero’ impact on the economy, but in fact, a tax of that magnitude will have significant effects on the economy and on Canadian workers across the country,” said Ross McKitrick, a senior fell at the institute and co-author of the report.

The institute studies the impacts of government policy on the public. It’s ranked in the top 15 on the University of Pennsylvania’s Global Go To Think Tank Index, and is funded entirely by voluntary donations.

The study also found that a C$170 carbon tax would slash Canada’s gross domestic product (GDP) by 2.1% – a loss to the economy of C$44.1bn, based on the 2019 GDP. And even though the government promises a carbon tax rebate, the average Canadian worker will still have C$1,800 less income every year because of the tax.

Ontario leads in the workforce reduction column, with an estimated 98,766 lost jobs, followed by Quebec, with 42,318 lost jobs. The two provinces – which combined make up the bulk of the Trudeau-led Liberal Party’s support base – will see GDP contractions of 2.2% and 1.7%, respectively.

Out west, where support for the Trudeau government is virtually non-existent, the carbon tax will cost 30,544 jobs in Alberta and cut the province’s GDP by 2.5%. Alberta, along with several other provinces, challenged the tax before the Supreme Court of Canada at hearings in September; the high court has yet to render its decision.

“Many previous studies, including some from the federal government itself, have shown that a large carbon tax will have major negative impacts on the economic well-being of Canadians,” said Elmira Aliakbari, director of natural resource studies at the institute and McKitrick’s co-author. “Our new study confirms these earlier findings. The government needs to be transparent with Canadians about what the real costs of this policy are likely to be.”