LASER TALK: Canada’s Ecofiscal Commission’s Final Report

LASER TALK: Canada’s Ecofiscal Commission’s Final Report

Canada’s Ecofiscal Commission was a group of independent, policy-minded Canadian economists working together to align Canada’s economic and environmental aspirations. Their final report published in November 2019 presented new evidence and economic modelling to inform the debate on how Canada can close “the gap” between its current GHG emissions trajectory and its 2030 Paris Agreement target.

The report mapped out 3 pathways to close the gap: using (1) mainly carbon pricing with dividends, (2) regulations and subsidies other than carbon pricing, and (3) regulations and subsidies that do not directly increase household costs. Among the findings was that GDP per capita would increase the most through the carbon pricing with dividends policy package.

In the carbon pricing with dividends policy package, the price of carbon covers 89% of emissions, rises to $210 per tonne by 2030, and includes an output-based pricing system for large emitters. Their modelling estimates this form of carbon pricing, along with complementary policies, gets Canada to its 2030 Paris Agreement target.

Based on the evidence, the report listed 3 recommendations:

1. Governments should evaluate whether their policies are stringent enough to meet targets, and close any gaps.
2. If governments wish to meet their climate goals at least cost, they should rely on increasingly stringent carbon pricing.
3. If policymakers choose not to close the gap to Canada’s emissions target using carbon pricing, they should rely on increasingly stringent flexible regulations instead.

As part of a final word on cost-effectiveness, the report stated that “policymakers who believe that achieving Canada’s GHG targets requires compromise on climate policy cost-effectiveness should proceed with caution… All the approaches we assess in this report impose costs on the economy, so minimizing their costs to households and businesses is a worthwhile goal.” It also points out that less cost-effective climate policies carry with them increased political risk—due to their costs.