Carbon tax could mean bad news for Sask. GDP: study

By Adriana Christianson/CJME News Staff
June 27, 2018 - 4:52pm

The Saskatchewan government says it now has the numbers and research to prove a federal carbon tax would be bad for the economy.

Environment Minister Dustin Duncan unveiled the results of a study by researchers from University of Regina Institute for Energy, Environment and Sustainable Communities, funded by the provincial government.

The models generated by researchers show a carbon tax could hit Saskatchewan’s gross domestic product (GDP) by almost $16 billion by 2030 while having a very limited effect on emissions.

Duncan said the province wanted to see more specific economic analysis from the federal government on what a carbon tax could to do a resource-based economy like Saskatchewan. He said the only federal numbers provided were vague and didn’t account for an export-based economy linked closely to agriculture, mining and the oil and gas industry.

“Our industries in the province are price-takers, we’re not price-makers, so we are at the whims of the global economy and so an economy like ours, this model shows that it will have a negative effect on our GDP, and most importantly I think in all of this discussion – it will have minimal impact on actually reducing emissions,” Duncan said.

The researchers looked at several detailed scenarios of a federal carbon tax. The most conservative scenario shows a carbon tax of $50 per tonne would reduce provincial GDP by 2.43 per cent — $1.8 billion annually. When asked if the research accounts for the federal promise to return carbon tax revenue back to the province, Duncan said that’s included.

“The model takes into account reinvesting those dollars, so the concept of a revenue-neutral tax, that is incorporated into this and it still does show a significant decrease in the GDP over the course – from now to 2030,” Duncan told reporters.

The study also looked at the potential environmental impact of a federal carbon tax and found it would only reduce GHG emissions by less than one mega-tonne. This is approximately 1.25 per cent of Saskatchewan’s total emissions and would result in a cost to GDP of $1,890 per tonne.

“If the whole point of the carbon tax is to reduce emissions, then this model says that for Saskatchewan doesn’t actually reduce emissions, it only hurts the economy,” Duncan said.

The minister went on to say this research model backs the logic of why the province has been opposed to the carbon tax from the beginning and further supports the justification of a legal challenge against it.

On top of that, research conducted at the University of Calgary estimated a federal carbon tax will cost an average Saskatchewan household more than $1,000 per year.

The government introduced its climate change strategy last year called a Prairie Resilience. It included SaskPower’s commitment to achieve up to 50 per cent electricity capacity from renewable resources and reduce overall GHG emissions by 40 per cent by 2030. This will result in GHG reductions of approximately six million tonnes.

The provincial plan accounts for upstream oil and gas producers reducing GHG emissions by 40 to 45 per cent through a methane reduction strategy, which will result in reductions of four to 4.5 million tonnes.

The government said its plan also recognizes the prominent role of agriculture in addressing climate change and reducing emissions. Producers already sequester nearly 12 million tonnes of carbon through innovations such as zero-till technology.

NDP to review the study

NDP Leader Ryan Meili also spoke to reporters about his initial reaction to the provincially-funded study on the cost of a carbon tax.

He described this particular economic model as an “outlier” which requires further analysis by experts.

“It’s somewhat inconsistent with what we know from the evidence elsewhere,” Meili noted. “If you look at studies done by folks like the Eco-Fiscal Commission and others, what they show is that a pure regulation framework – which is what Prairie Resilience largely is – tends to have a larger negative impact on GDP versus carbon pricing.”

Meili said the NDP plans to dig deeper into the 300-page report to see if it truly takes into consideration other policy options as well as the potential impact of doing nothing to reduce carbon emissions at all.

The opposition will continue to call on the Sask. Party government to come up with an alternative plan instead of risking having a carbon tax imposed on the province with no return of funds.

— With files from Sarah Mills

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