Federal government’s emission-reduction plan will cost Canadian workers $6,700 annually by 2030—while failing to meet government’s emission-reduction target

The federal government’s plan to reduce greenhouse gas emissions will impose significant costs on Canadians—while also failing to meet the government’s own emission-reduction target, finds a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“The government’s plan will significantly hurt Canada’s economy and cost workers money and jobs,” said Ross McKitrick, professor of economics at the University of Guelph, senior fellow at the Fraser Institute and author of The Economic Impact and GHG Effects of the Federal Government’s Emissions Reduction Plan through 2030.

The government wants to reduce greenhouse gas (GHG) emissions to 40 per cent below 2005 levels by 2030. To meet this target, the government has enacted a series of policies including the federal carbon tax, clean fuel standards and various other GHG-related regulations such as energy efficiency requirements for buildings,
fertilizer restrictions on farms, and electric vehicle mandates.

The study finds that these combined policies will only reduce GHG emissions by an estimated 57 per cent of the government’s 2030 emission-reduction target.

And crucially, by 2030 these policies will:

• reduce Canada’s GDP by 6.2 per cent
• cost $6,700 per worker annually
• reduce employment in Canada by 164,000 jobs

“This poorly-designed plan, which will worsen the current downward trends in productivity and income, will reduce emissions but at a cost many times higher than the government’s estimated benefits,” McKitrick said.

The federal government has set a GHG emissions reduction target of at least 40% below 2005 levels by 2030, equivalent to 38.5% below 2022 levels.
This report examines proposed policies aimed at achieving these goals and evaluates their potential impact, aiming to address the gap left by the federal government’s lack of efforts in this matter.
The paper uses a peer-reviewed macroeconomic model to assess the federal government’s Emissions Reduction Plan (ERP), including carbon pricing, Clean Fuel Regulations, and other regulatory measures such as EV mandates.
It is estimated that the ERP will reduce Canada’s GHG emissions by about 26.5% between 2019 and 2030, reaching approximately 57% of the government’s 2030 target, leaving a substantial gap.
The implementation of the ERP is expected to significantly dampen economic growth, with a projected 6.2% reduction in Canada’s economy (i.e., real GDP) compared to the base case by 2030.
Income per worker, adjusted for inflation, is forecasted to stagnate during the 2020s and decrease by 1.5% by 2030 compared to 2022 levels.
The ERP costs $6,700 per worker annually by 2030, which is more than five times the cost per worker compared to the carbon tax alone.
Overall, while the federal ERP will contribute to reducing GHG emissions, it falls short of meeting the 2026 or 2030 targets and imposes significant economic burdens on Canadian households. Additionally, due to the high marginal cost of many regulatory measures, the ERP plan is costlier than it needs to be for what it will accomplish.

Read the Full Report

Author:

Ross McKitrick

Professor of Economics, University of Guelph

Related Topics:#CarbonTax #FraserInstitute #RossMcKitrick FederalEmissionReductionPlan

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Published on February 22, 2025

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