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Carbon pricing for the Paris target: Closing the gap with output-based pricing

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Published on October 8, 2020 PDF

This report updates and extends PBO’s analysis of the additional carbon pricing needed to achieve Canada’s greenhouse gas (GHG) emissions target in 2030 under the Paris Agreement.

We provide an updated estimate based on a broad carbon levy and extend our analysis to incorporate additional carbon pricing using an Output-Based Pricing System (OBPS), taking into consideration alternative structures. Estimates of the corresponding impacts on the Canadian economy are also provided.


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{"id":6,"created_at":"2020-10-07T21:40:18-04:00","updated_at":"2021-02-25T15:07:04-05:00","slug":"COM-2021-006--pbo-estimates-additional-carbon-pricing-of-up-to-239-per-tonne-needed-to-hit-paris-target-in-2030--le-dpb-estime-que-pour-atteindre-la-cible-de-laccord-de-paris-en-2030-il-faudra-augmenter-le-prix-du-carbone-jusqua-239-la-tonne","title_en":"PBO estimates additional carbon pricing of up to $239 per tonne needed to hit Paris target in 2030","title_fr":"Le DPB estime que pour atteindre la cible de l\u2019Accord de Paris en 2030, il faudra augmenter le prix du carbone jusqu\u2019\u00e0 239 $ la tonne","body_en":"The Parliamentary Budget Officer (PBO) today released an updated analysis of the additional carbon pricing needed to achieve Canada\u2019s greenhouse gas emissions (GHG) target in 2030 under the Paris Agreement. \n\nUnder 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.\n\nBased on the Government\u2019s own projections, announced policies and measures are not sufficient to achieve Canada\u2019s commitment\u2014there is a gap of 77 megatonnes in projected emissions in 2030 relative to the Paris target.\n\nIn 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.\n\n\u201cCombined 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,\u201d said Yves Giroux, PBO.\n\nThe 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.\n\nThe report also analyzes the impacts of the additional carbon price on the Canadian economy.\n\n\u201cThe 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,\u201d adds Mr. Giroux.\n-30-","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui une analyse mise \u00e0 jour de la tarification du carbone qu\u2019il faudrait appliquer pour que le Canada atteigne d\u2019ici 2030 la cible de r\u00e9duction des \u00e9missions de gaz \u00e0 effet de serre (GES) \u00e9tablie dans l\u2019Accord de Paris.\n\nConform\u00e9ment \u00e0 l\u2019Accord de Paris, le Canada s\u2019est engag\u00e9 \u00e0 r\u00e9duire ses \u00e9missions de GES de 30 % par rapport aux niveaux de 2005 d\u2019ici 2030. Pour tendre vers cet objectif, le gouvernement a instaur\u00e9 le syst\u00e8me f\u00e9d\u00e9ral de tarification du carbone, qui fera passer la taxe sur les carburants \u00e0 50 $ la tonne en 2022, ainsi qu\u2019un syst\u00e8me de tarification fond\u00e9 sur le rendement (STFR), destin\u00e9 aux \u00e9metteurs \u00e0 forte intensit\u00e9 \u00e9nerg\u00e9tique expos\u00e9s \u00e0 la concurrence.\n\nSi l\u2019on se fie aux projections du gouvernement lui m\u00eame, les politiques et les mesures annonc\u00e9es ne seront pas suffisantes pour permettre au Canada de respecter son engagement, puisqu\u2019il y a un \u00e9cart de 77 m\u00e9gatonnes entre les \u00e9missions pr\u00e9vues en 2030 et la cible de l\u2019Accord de Paris.\n\nDans son rapport intitul\u00e9 Tarification du carbone et Accord de Paris : combler l\u2019\u00e9cart avec la tarification fond\u00e9e sur le rendement, le DPB estime que pour atteindre cette cible d\u2019ici 2030, la tarification suppl\u00e9mentaire du carbone \u00e0 appliquer devrait osciller entre 67 $ la tonne (avec une taxe \u00e0 large assise) jusqu\u2019\u00e0 entre 81 $ et 239 $ la tonne (avec un STFR favorisant les \u00e9metteurs \u00e0 forte intensit\u00e9 \u00e9nerg\u00e9tique expos\u00e9s \u00e0 la concurrence).\n\n\u00ab Si l\u2019on ajoute \u00e0 cela la taxe f\u00e9d\u00e9rale sur les carburants de 50 $ la tonne, le prix total du carbone, pour les m\u00e9nages et les entreprises qui ne sont pas couverts par le STFR, pourrait aller de 117 $ \u00e0 289 $ la tonne d\u2019ici 2030 \u00bb, a d\u00e9clar\u00e9 Yves Giroux, DPB.\n\nCette fourchette de prix indique clairement que les r\u00e8gles futures du STFR auront une influence consid\u00e9rable sur la tarification suppl\u00e9mentaire du carbone pour atteindre la cible de l\u2019Accord de Paris.\n\nLe rapport fournit \u00e9galement une analyse des r\u00e9percussions sur l\u2019\u00e9conomie canadienne de la tarification suppl\u00e9mentaire du carbone.\n\n\u00ab On estime que la tarification suppl\u00e9mentaire du carbone pourrait r\u00e9duire le PIB de 0,47 \u00e0 0,62 % d\u2019ici 2030 par rapport aux projections bas\u00e9es sur la politique actuelle \u00bb, a ajout\u00e9 M. Giroux.\n-30-","release_date":"2020-10-08T09:00:00-04:00","is_published":"2021-02-25T15:07:04-05:00","internal_id":"COM-2021-006","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/COM-2021-006--pbo-estimates-additional-carbon-pricing-of-up-to-239-per-tonne-needed-to-hit-paris-target-in-2030--le-dpb-estime-que-pour-atteindre-la-cible-de-laccord-de-paris-en-2030-il-faudra-augmenter-le-prix-du-carbone-jusqua-239-la-tonne"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/COM-2021-006--pbo-estimates-additional-carbon-pricing-of-up-to-239-per-tonne-needed-to-hit-paris-target-in-2030--le-dpb-estime-que-pour-atteindre-la-cible-de-laccord-de-paris-en-2030-il-faudra-augmenter-le-prix-du-carbone-jusqua-239-la-tonne"}},"pivot":{"publication_id":35,"news_release_id":6}}