Ammar, Nasreddine; Bagnoli, Philip; Duncan, Krista; Scholz, Tim

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Climate Plans and Targets

A Distributional Analysis of Federal Carbon Pricing under A Healthy Environment and A Healthy Economy

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Nasreddine Ammar; Philip Bagnoli; Krista Duncan; Tim Scholz

Published on March 24, 2022 PDF

This report provides a distributional analysis of federal carbon pricing under the Government’s A Healthy Environment and A Healthy Economy plan.

April 17, 2024: Estimates of the economic impacts presented in this report (Table 3-1) reflect the implementation of federal-equivalent carbon pricing at the national level. The counterfactual scenario used in the report reflects the broad removal of carbon pricing—that is, the removal of the federal-equivalent fuel charge and output-based pricing system (OBPS). Estimates of household net costs incorporating “fiscal and economic impacts” reflect the broad economic impact of federal-equivalent carbon pricing.

April 17 2024 Additional Analysis

July 4, 2024: Text in the March 24, 2022 version of this report was revised to ensure consistency with the economic impact of federal-equivalent carbon pricing (that is, the fuel charge and output-based pricing system). Estimates of economic impacts and household costs have not been revised.

Highlights

Under the Government’s A Healthy Environment and A Healthy Economy (HEHE) climate plan, the federal carbon levy is set to rise by $15 per year from $50 per tonne in 2022 until it reaches $170 per tonne in 2030.
When losses in economic efficiency are added to fiscal impacts of federal carbon pricing, the net carbon cost increases for all households in Ontario, Manitoba, Saskatchewan and Alberta.
Most households in provinces under the backstop will see a net loss resulting from federal carbon pricing under the HEHE plan. That is, household carbon costs will exceed the Climate Action Incentive payments households receive.
Relative to disposable income, our estimates of household net carbon costs continue to show a progressive impact that is, larger net costs for higher income households.
We estimate that carbon pricing under HEHE will reduce the budgetary balance (increase the budgetary deficit) by $0.9 billion in 2021-22 and ultimately by $5.2 billion in 2030-31.

Oil and Gas industry

Natural resources

Transport

Environmental Sustainability

Economic forecasts

Fiscal Sustainability

Fiscal policy

Taxes (Other)

Demographic indicators