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Carbon pricing alone will fall short of GHG emission reduction targets

Report warns trillions of dollars in investment needed to green Canada’s economy.


Carbon pricing alone will fall short of Canada’s carbon reduction targets.
Photo: Thinkstock

OTTAWA — Reducing climate change-inducing carbons will take more than a pricing regime and a shift away from fossil fuels to reach Canada’s goal of a 30% reduction from 2005 levels by 2030.

A joint report by The Conference Board of Canada and The Canadian Academy of Engineering warns between $1.5 trillion and $3.4 trillion in investment on clean energy infrastructure and significant changes made to the way Canadians consume energy will be needed to achieve deep emission reductions.

Even carbon taxes reaching $200 per tonne by 2025 would only result in a 1.5% reduction in greenhouse gas emissions (outside of the power generation sector).

“While technology and innovation will play a role in the long term, it can’t get us to the 2030 target given the relatively short window available to develop and adopt these solutions,” said Louis Thériault, the Conference Board’s vice-president, industry strategy and public policy.

The report concludes only a small reduction in greenhouse gas emissions will come from carbon pricing alone; and the annual cost to average households based on an $80 per tonne carbon tax would be close to $2,000 by 2025. However, the negative impact on the economy would be small given the revenues would be put back into the economy through tax cuts, higher public spending and investment.

The largest price increases will be in natural gas, gasoline, and electricity. The report sees natural gas increasing by as much as 60% based on $200 per tonne carbon tax.

Investment requirements are based on the Ottawa-based Canadian Academy of Engineering’s Trottier Energy Futures Project analysis. It outlines several technical options to achieve 30% to 60% carbon reductions by 2050.

Bringing emissions 30% below 1990 levels by 2050 is far off Canada’s Paris Agreement target. Sixty per cent is closer, but at considerable cost: $3.4 trillion in new investments would be needed between now and 2050. That’s about $100 billion annually, which represents about half of current non-residential business investment in Canada. More than half of that investment would be directed to power generation for electrification of Canada’s economy.

The Conference Board, an Ottawa-based research firm, notes the Canadian economy, fast approaching its capacity, would be challenged to absorb these new investments, which are expected to crowd out spending in other areas.

Thériault said policy makers need to communicate to Canadians the scale of how this transformation will impact everyday lives.

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