PBO estimates additional carbon pricing of up to $239 per tonne needed to hit Paris target in 2030

The Parliamentary Budget Officer (PBO) today released an updated analysis of the additional carbon pricing needed to achieve Canada’s greenhouse gas emissions (GHG) target in 2030 under the Paris Agreement.

Under the Paris Agreement, Canada has committed to reduce its GHG emissions by 30 per cent below 2005 levels by 2030. To help meet the target, the Government introduced the federal carbon pricing system, under which the fuel charge rises to $50 per tonne in 2022, and an Output-Based Pricing System (OBPS), aimed at energy-intensive trade-exposed emitters.

Based on the Government’s own projections, announced policies and measures are not sufficient to achieve Canada’s commitment—there is a gap of 77 megatonnes in projected emissions in 2030 relative to the Paris target.

In his report, Carbon pricing for the Paris target: Closing the gap with output-based pricing, the PBO estimates that additional carbon pricing necessary to achieve the Paris target ranges from $67 per tonne (under a broad-based levy) to between $81 and $239 per tonne, depending on the extent that an OBPS favours energy-intensive trade-exposed emitters.

Combined with the $50 per tonne federal fuel charge, households and firms not covered under the OBPS could face a total carbon price ranging from $117 to $289 per tonne in 2030,” said Yves Giroux, PBO.

The price range highlights that future OBPS rules will have a large impact on the additional carbon pricing by affecting where the burden to reach the Paris target falls most.

The report also analyzes the impacts of the additional carbon price on the Canadian economy.

The economic impact of the additional carbon pricing is estimated to reduce the level of GDP in 2030 by between 0.47 and 0.62 per cent compared to projections under current policy,” adds Mr. Giroux.