Evidence of meeting #163 for Environment and Sustainable Development in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was households.
A video is available from Parliament.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
There will be other things in tomorrow's report.
Conservative
Conservative
Joël Godin Conservative Portneuf—Jacques-Cartier, QC
Okay.
We are talking about redistributing 90% of the revenues from pricing related to greenhouse gas emission to taxpayers. Where will the remaining 10% go?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The 10% will be returned to the sectors most affected by carbon pricing. I don't have the details on hand, but it's something—
Conservative
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I'm not sure whether all the measures have been planned, but, in part, I think—
Conservative
Joël Godin Conservative Portneuf—Jacques-Cartier, QC
The assistance will probably take the form of grants, right?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, there will probably be grants to the sectors affected.
Conservative
Joël Godin Conservative Portneuf—Jacques-Cartier, QC
I would like to talk about Table 1 of the summary of the French document.
Between 2019-20 and 2021-22, carbon pricing will be $20, $30 and $40 per tonne, and in 2022-23 and 2023-24, it will be $50. Rates are the same for both years, but it is estimated that revenues will decline in 2023-24. How do you explain that?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The pricing is indeed the same, but the carbon intensity or total emissions will probably decrease as a result of the price on carbon. Unlike in the years before, when emissions will fall slightly, the increase in the price on carbon will more than offset the decrease in emissions.
Conservative
Joël Godin Conservative Portneuf—Jacques-Cartier, QC
You used the word “probably”. These are models based on the hope that energy consumption and population will not increase too much and that companies will not increase their production. So it's hypothetical.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
They are forecasts and there is always an element of uncertainty. I can give you a very simple example to illustrate the uncertainty.
If the price of a barrel of oil drops to $10 and the economy continues to do well, the price of gasoline will fall and the price on carbon will not have much impact. People will drive more and have less fuel-efficient vehicles because they can afford it more. Factors of that type can have a significant impact on forecasts.
Conservative
Joël Godin Conservative Portneuf—Jacques-Cartier, QC
Have you made any comparisons with other countries that have implemented this sort of system to determine the effect it has had after five, six or 10 years?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, we made comparisons with European countries that have a carbon exchange system and other countries that have implemented carbon pricing. We compared what happened in terms of consumer elasticity and reaction to those price changes and to a cap being imposed on emissions.
Liberal
The Chair Liberal John Aldag
Great. Thank you.
We'll go over to Mr. Bossio for his last six minutes of questions.
Liberal
Mike Bossio Liberal Hastings—Lennox and Addington, ON
This has been very interesting. Thank you so much.
Based on the testimony today, what we've heard is that it's going to cost less. Eight out of 10 Canadians are going to receive more in the rebate than they are going to pay out, and that's across all the provinces and all those areas.
We've talked about the actual impact on GHG reductions, in that a price on pollution is effective in reducing GHG emissions. We've talked about not just the reduction in those emissions but also about the intensity of those emissions. As the economy grows, the population grows, yet GHGs aren't just dropping in general but are also dropping in relation to the actual growth in those other areas, and the intensity is dropping even further as we go along.
You're saying it depends on the location. It could be 4% in Ontario, 19% in Saskatchewan, but that's because Saskatchewan has a much higher carbon intensity as a province. Overall, you have modelled that by 2023-24, it's going to lead to a 6% to 7% reduction in overall GHG emissions. That's not even projecting out to 2030 in the other areas that you model.
Would you agree, then, with most economists out there that a price on pollution is a cost-efficient and effective way to reduce carbon emissions?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
As an economist, I'm certain that the more expensive something becomes, the less demand there will be for it.
Is it an effective way? It is certainly an effective way. I'd say it's not the only way. As all people in the field know, there's also regulation. That's one way, and subsidies are another way, but generally speaking, the consensus among economists is that a broad-based price on carbon is the least disruptive way to reduce greenhouse gas emissions.
Liberal
Mike Bossio Liberal Hastings—Lennox and Addington, ON
Even though people are going to receive more back than they're paying out, it's still efficient. Even though they're not feeling the expense necessarily, it's still an efficient way to do it. It's still the most price-effective. It's the best market mechanism that can be used to reduce GHG emissions.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's certainly one way. It's a way that is less disruptive to the economy and it's more transparent than other ways.
Liberal
Mike Bossio Liberal Hastings—Lennox and Addington, ON
That's based on your models, and those models are based on generally accepted economic principles and what you have seen in other markets around the world.
Liberal
Mike Bossio Liberal Hastings—Lennox and Addington, ON
Then you have good evidence to back that up.
We were speaking earlier about the other 50-plus measures that are going to go into trying to deal with a price on pollution. As I said, 79 megatonnes were implemented in the modelling that was done by the government, but there are also unmodelled measures, such as investments in clean tech, the strategic innovation fund, the electric vehicle rebates and public transit. You said you were taking those 50-plus measures into account. Does the report that you're releasing tomorrow include those measures as well?
When the environment commissioner came out with her audit, we heard that it's going to take three, four or five years to really understand the true impact of a lot of these measures.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I cannot speak for each and every one of these measures, but we have taken into consideration the policies that had been announced as of September 2018. I cannot determine whether we have taken into consideration all of the potential measures under the strategic innovation fund, because some of these measures are specific measures and specific investments still have to be made.
It's the same with public transit. Some of the investments for public transit will reduce greenhouse gases, but it's difficult to determine the extent to which they will do that before the specific projects are known and before the ridership is projected or can be assumed.
We have taken the broad measures into consideration, but with regard to the specifics such as the ones you mentioned, probably not. It would be very difficult and risky.