Study: Carbon tax will cost Canada 200,000 jobs

Canada‘s Liberal federal government is introducing a carbon emissions tax (carbon tax) in 2019.

The Canadian federal Liberal government’s plan for a carbon tax has raised concerns among academics, with one study finding that the plan would have significant economic and employment costs, with a net loss of 200,000 jobs.

A study released by the Fraser Institute on March 16 said the federal government plans to raise the carbon price to $170 per ton in stages by 2030. This Time the government did not do the quantitative economic analysis of the policy as it did in the past, but claimed that “the policy will not have an impact on gross domestic product. But this assertion is inconsistent with previous analyses.

A study by the Institute’s senior researcher Ross McKitrick, in collaboration with Elmira Aliakbari, director of natural resources research, found that the federal carbon tax plan would reduce gross domestic product by 2.1 percent; it would result in a net loss of more than 200,000 jobs (taking into account new government spending and rebates to households that would create new jobs).

A 2.1 percent drop in GDP equates to an economic loss of $44.1 billion in 2019 dollars. After taking into account the government’s carbon tax rebate, this equates to an average loss of about $1,800 per year for an employed person.

Of the 202,554 net job losses, Ontario will be hit the hardest, with an estimated 98,766 jobs lost; followed by Quebec (42,318), Alberta (30,544), British Columbia (22,919), New Brunswick (2,248), Manitoba (1,679), Nova Scotia (1,459) Saskatchewan (1,280), Newfoundland and Labrador (1,040), and Prince Edward Island (452).

The report says it uses an analytical approach called the Computable General Equilibrium (CGE) model, which is one of the standard methods for evaluating such policies. In previous policy debates, the federal government has used several independent analyses based on different CGE models done. “We compared the results of our analyses, and when estimated by reducing the same amount of CO2 emissions, our macroeconomic cost estimates were nearly identical to the average of the six previous studies.”

Professor McKittrick said, “The federal government says that a higher carbon tax would have a ‘virtually zero’ impact on the economy, but in reality, a carbon tax of this magnitude would have a significant impact on the economy and on Canadian workers across the country.”

The study shows that the economic contraction caused by a high carbon tax would also have a negative impact on government finances. Specific estimates are that the full implementation of the new carbon tax will increase the provincial and federal deficit by $24 billion per year.

“Many previous studies, including some from within the federal government, have shown that imposing a high carbon tax would have a significant negative impact on the economic well-being of Canadians.” Ariabari said, “Our new study confirms the findings of these earlier studies. It is important for the government to be transparent with Canadians regarding the actual costs of the policy.”