Reaching Paris target entails extra costs to jobs and Canada’s economy

Mark Milke and Lennie Kaplan, Canadian Energy Centre, July 17, 2020

Aspirational goals are important in life but it’s always helpful to be clear on the means to the desired end, especially if others are involved. A case in point: General commitments by governments in Canada to significantly reduce carbon emissions by 2030, i.e., the “Paris” commitment.  That’s where, in December 2015, 195 participating member states agreed to significantly reduce carbon emissions by 2030.

In Canada, the federal government has implemented or proposed a number of policies from carbon taxes to regulations in its effort to hit its Paris-promised reduction target—a cut in greenhouse gas emissions by 30 percent by 2030 (from 2005 levels). And that requires a reduction to 511 megatonnes (Mt) annually ten years from now.

However, comprehensive analyses of the costs of the country’s commitment on specific sectors, such as the oil and gas sector—including whether existing policy intentions can achieve the promised reductions and the economic costs of such efforts—have been lacking. 

To address that gap, we asked Navius Research, a firm known for its data-driven, empirical work to assess current plans and policy to meet the Paris target. Navius was given complete independence to design one of most efficient ways of arriving at the Paris target in 2030. They concluded (and others may disagree) that was via a carbon tax that covers virtually all economy-wide emissions, including emissions intensive and trade-exposed sectors.   

With that efficient approach in hand, we then asked Navius to assess if a gap exists between the Paris target and current, promised policies. In short, the answer is “yes.”

Navius data shows that promised policies are insufficient to achieve Canada’s emissions target in 2030: There is still a gap of 112 megatonnes of greenhouse gas emissions relative to the 2030 Paris targets. We label this the “Paris gap.” That’s the gap between what existing and planned policies will deliver (assuming underlying policy assumptions are correct) and more policy and actions needed to hammer down greenhouse gas emissions by an extra 112 megatonnes. Those extra actions could include more government regulation and higher carbon taxes among other policy pathways to 2030.

Additional questions arise when you try and calculate where the 112 megatonnes in emission reductions will occur. In large measure, roughly half the Paris gap will fall on Alberta, and with a significant impact on Canada’s oil and gas sector.

Under promised policy, the forecast is for Alberta’s greenhouse gas emissions to fall to 263 Mt by 2030, but add in the gap, and it becomes clear Alberta will be expected to reduce emissions further, to 209 megatonnes.  That’s a Paris gap of 54 Mt in carbon reductions for Alberta with no path on how to get there.

For the oil and gas sector across Canada, predominant in Alberta but also in northern British Columbia, Newfoundland & Labrador, and Saskatchewan, the Paris gap means emissions need to fall not just to 163 megatonnes as existing policy envisions. In fact, the oil and gas sector need to actually reduce its emissions by another 31 megatonnes (to 132 Mt) annually by 2030.   

These multiple Paris gaps between policy promises and the Paris target entail extra costs and impacts. From the economic modeling, it is clear what some of these will be: A doubled carbon tax between 2025 and 2030; $19.5 billion less in investment nation-wide; and an economy $54 billion smaller than assumed by existing and promised policy.

Then there are the jobs foregone: 300,000 jobs sacrificed than would exist if existing Paris policy promises could actually deliver promised greenhouse reductions absent new measures to hammer down carbon emissions Canada-wide.

To put that 300,000 job figure in perspective, in 2019, it equals all the jobs in forestry, construction, transportation and warehousing in British Columbia, or 299,368 jobs in total. Or another comparison: It is akin to more than the total number of people employed in Newfoundland & Labrador (216,485) and PEI (69,315) in 2019, or 285,800 jobs in total.

Keeping the Paris commitment will not be cost-free and existing policies lack sufficient means to the promised Paris end. It is thus important when developing climate change policy that governments fully apprise Canadians of the economic and fiscal impacts of those policies on key sectors of the economy, such as the oil and gas industry, and on each province.

Mark Milke is executive director of research and Lennie Kaplan is chief research analyst at the Canadian Energy Centre. They are authors of Mind the (Paris) Gap: The Economic Impact of the Paris Commitment on Canada. Image credit: Skeeze, Pixabay.