The carbon pricing debate is somehow getting worse

5 June 2024
The carbon pricing debate is somehow getting worse

The parliamentary budget officer’s analysis of federal carbon pricing is reportedly the subject of a “fight” with the Liberal government that includes allegations of “secret data” being withheld from the public.

So it seems that this conversation — a profoundly important one about how the federal government should respond to an existential crisis — has veered very far off course.

The central problem isn’t what was included in the PBO’s analysis but what was missing from it. But the current “fight” relates to an error that the PBO quietly acknowledged in April.

The CBC’s Robson Fletcher explained the details of that mistake last week. In short, while the office of the PBO published analysis that was purportedly specific to the federal government’s fuel levy — commonly referred to as the “carbon tax” — the office accidentally included the federal government’s industrial carbon price in its modelling.

The inclusion of the industrial price — a policy the Conservatives have notably declined to condemn — presumably had some impact on the PBO’s analysis of the “economic impact” of carbon pricing. But the PBO says it won’t release a corrected report until sometime this fall.

In the meantime, the government is aggrieved, the PBO is being defensive and no one — least of all the average voter — is winning.

As written into the Parliament of Canada Act, the office of the Parliamentary Budget Officer has a mandate to “support Parliament by providing analysis, including analysis of macro-economic and fiscal policy, for the purposes of raising the quality of parliamentary debate and promoting greater budget transparency and accountability.”

Right now, the quality of this parliamentary debate is getting worse.

The real trouble with the PBO’s math

The problem goes back to a report the PBO released in March 2022: “A distributional analysis of federal carbon pricing under the Government’s A Healthy Environment and A Healthy Economy plan.”

Previously, the PBO had studied the “fiscal impact” of the Liberal government’s carbon-pricing policy — whether Canadian households received more or less from the Canada Carbon Rebate than they paid in costs associated with the carbon tax. On that score, the PBO estimated that most households did receive more from the rebate than they paid in additional costs — confirming one of the government’s central arguments for the policy.

In its March 2022 report, and again in an updated report published in March 2023, the PBO also measured the “losses in economic efficiency” associated with the imposition of a new levy. The PBO said that when those costs were accounted for, most households were actually worse off — a finding that the Conservatives have seized on to further their criticism of the Liberal policy.

Minister of Environment and Climate Change Steven Guilbeault tells Power & Politics that the recent error by the parliamentary budget officer is ‘below the standard’ he expects from the PBO. The Parliamentary Budget Office issued an update to its analysis of federal carbon pricing, saying it had mistakenly included the industrial price on carbon.

But other experts quickly came forward to criticize the PBO’s economic analysis — particularly over what it left out.

For one thing, the PBO didn’t attempt to analyze any benefits that might result from lower greenhouse gas emissions (some economists and government departments use a measure known as the “social cost of carbon”). For another, the analysis made no attempt to compare the Liberal government’s carbon-pricing policy with any alternative policies to reduce emissions.

“The PBO compares costs relative to a world in which Canada simply ignores its emissions — and faces no consequences,” experts with the Canadian Climate Institute wrote last year.

(Separately, the Climate Institute also estimated how much the federal fuel levy and the industrial pricing system are likely to reduce Canada’s emissions between now and 2030.)

Did the PBO mean to suggest Canada would be better off with no policy to reduce emissions? Apparently not.

“It’s by no means intended to be an interpretation or suggestion that doing nothing is the right thing to do,” PBO Yves Giroux told the CBC’s Power & Politics last week.

At Issue this week: The Parliamentary Budget Office admits it made an ‘inadvertent error’ when calculating the economic impact of the carbon tax, and the Liberals want the record corrected. Greg Fergus survives the latest attempt by the Conservatives to oust him as Speaker.

The PBO also doesn’t seem to have meant to suggest that carbon-pricing is a uniquely expensive policy.

“Anything we do with respect to addressing or trying to curb climate change will have costs,” Giroux told the Canadian Press last year. “It’s either a cost to the carbon tax or regulations to reduce the use of fossil fuel.

“Regulations also have a cost. Doing nothing would also have costs.”

That all seems obvious. But then, it’s not clear what conclusions Canadians are supposed to draw from a report that only measures the cost of one of those things. Without any point of comparison, a measure of the economic impact of one policy is of very limited value.

A miscalculation that sets everyone back

The Liberals and Giroux are now engaged in a bit of a back-and-forth over what his updated analysis eventually will show. Voters would be forgiven for finding that exchange rather tedious.

In the middle of some haggling over his report on Monday at the House of Commons finance committee, Giroux said the government has its own analysis of the impact of carbon pricing but he doesn’t have permission to release the report himself. That led the Conservatives to allege that the government is hiding a “secret carbon tax report” and that the PBO is under some kind of “gag” order.

In question period on Tuesday, the Conservatives accused the government of propagating a “carbon tax cover-up.” Jasraj Singh Hallan, the Conservative finance critic, said the analysis, once released, would “lambaste and completely put to shame the claims on the carbon tax scam.”

Conservative finance critic Jasraj Singh Hallan is accusing the government of covering up negative research on its carbon pricing policy. (Adrian Wyld/The Canadian Press)

Perhaps the government should release economic studies of all of its proposed measures as a matter of course. Perhaps that’s something the Conservatives can commit to doing whenever they next form government.

But again, an economic analysis of federal carbon pricing policy isn’t very useful if it does nothing to explain how the policy compares to the alternatives.

Whenever the next election arrives, voters will face a choice between different approaches to climate change and reducing Canada’s greenhouse gas emissions. A proper airing of that choice would include information on the projected emissions reductions and economic impacts of each party’s approach.

Right now, Canadians only have information on one party’s approach.

Sooner or later, someone might get around to raising a real debate.

Source: cbc

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