A Distributional Analysis of Federal Carbon Pricing under A Healthy Environment and A Healthy Economy

Highlights

• Under the Government’s A Healthy Environment and A Healthy Economy (HEHE) climate plan, the federal carbon levy is set to rise by $15 per year from $50 per tonne in 2022 until it reaches $170 per tonne in 2030.

• When losses in economic efficiency are added to fiscal impacts of federal carbon pricing, the net carbon cost increases for all households in Ontario, Manitoba, Saskatchewan and Alberta.

• Most households in provinces under the backstop will see a net loss resulting from federal carbon pricing under the HEHE plan. That is, household carbon costs will exceed the Climate Action Incentive payments households receive.

• Relative to disposable income, our estimates of household net carbon costs continue to show a progressive impact that is, larger net costs for higher income households.

• We estimate that carbon pricing under HEHE will reduce the budgetary balance (increase the budgetary deficit) by $0.9 billion in 2021-22 and ultimately by $5.2 billion in 2030-31.

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Communications

Quotes

• Incorporating economic impacts into our distributional analysis helps to provide a more complete picture of the overall impact of the federal carbon pricing system on households under the federal backstop.

• Under the Government’s HEHE plan, most households in Alberta, Saskatchewan, Manitoba and Ontario will see a net loss resulting from federal carbon pricing. That is, the costs they face—including the federal carbon levy, higher GST and lower incomes—will exceed the Climate Action Incentive rebate they receive.

Infographic

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News Release

{"id":31,"created_at":"2022-03-18T11:22:01-04:00","updated_at":"2022-03-24T08:59:09-04:00","slug":"pbo-releases-its-distributional-analysis-of-a-healthy-environment-and-a-healthy-economy-le-directeur-parlementaire-du-budget-publie-son-analyse-distributive-du-plan-un-environnement-sain-et-une-economie-saine","title_en":"PBO releases its distributional analysis of A Healthy Environment and A Healthy Economy","title_fr":"Le directeur parlementaire du budget publie son analyse distributive du plan Un environnement sain et une \u00e9conomie saine","body_en":"The Parliamentary Budget Officer (PBO) today released his distributional analysis of federal carbon pricing under the Government\u2019s A Healthy Environment and A Healthy Economy (HEHE) climate plan.\n\nUnder the HEHE plan, the federal carbon levy is set to rise by $15 per year from $50 per tonne in 2022 until it reaches $170 per tonne in 2030. The report provides an update to previous PBO distributional analysis and incorporates the loss in economic efficiency from federal carbon pricing on household incomes.\n\n\u201cIncorporating economic impacts into our distributional analysis helps to provide a more complete picture of the overall impact of the federal carbon pricing system on households under the federal backstop,\u201d says PBO Yves Giroux.\n\nThe report finds that when the economic impact is combined with the fiscal impact, that is the carbon levy and related GST paid less the rebate received, the net carbon cost increases for all households, reflecting the overall negative economic impact of the federal carbon levy under the Government\u2019s HEHE plan.\n\n\u201cUnder the Government\u2019s HEHE plan, most households in Alberta, Saskatchewan, Manitoba and Ontario will see a net loss resulting from federal carbon pricing. That is, the costs they face\u2014including the federal carbon levy, higher GST and lower incomes\u2014will exceed the Climate Action Incentive rebate they receive,\u201d adds Mr. Giroux.\n\nEstimates of household net carbon costs continue to show a progressive impact, that is, larger net costs for higher income households. The report finds that the largest net cost is for households in the top income quintile in Alberta (2.8% of disposable income) and the largest net gain is for households in the lowest income quintile in Saskatchewan (2.3% of disposable income) in 2030-31. \n\nThe report also provides estimates of the impact of carbon pricing on federal budgetary revenues and program spending. \u201cUnder its HEHE climate plan, we estimate that carbon pricing will increase the budgetary deficit, other things being equal, by $0.9 billion in 2021-22 and ultimately by $5.2 billion in 2030-31,\u201d says Mr. Giroux.\n\nThe scope of the PBO\u2019s analysis is limited to estimating the distributional impact of federal carbon pricing and does not attempt to account for the economic and environmental costs of climate change.","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui son analyse distributive de l\u2019approche de tarification du carbone pr\u00e9vue dans le plan de lutte contre les changements climatiques du gouvernement intitul\u00e9 Un environnement sain et une \u00e9conomie saine.\n\nDans le cadre de ce plan, la taxe f\u00e9d\u00e9rale sur le carbone, qui est \u00e9tablie \u00e0 50 $ la tonne pour 2022, augmentera de 15 $ par ann\u00e9e jusqu\u2019\u00e0 atteindre 170 $ la tonne en 2030. L\u2019analyse distributive du DPB constitue une version actualis\u00e9e de l\u2019analyse pr\u00e9c\u00e9dente sur le sujet et fait notamment \u00e9tat des pertes d\u2019efficience \u00e9conomique que la tarification du carbone par les autorit\u00e9s f\u00e9d\u00e9rales fera subir aux m\u00e9nages.\n\n\u00ab En int\u00e9grant les r\u00e9percussions \u00e9conomiques \u00e0 notre analyse distributive, nous pouvons dresser un portrait plus complet de l\u2019incidence globale du syst\u00e8me f\u00e9d\u00e9ral de tarification du carbone sur les m\u00e9nages dans le contexte du filet de s\u00e9curit\u00e9 f\u00e9d\u00e9ral \u00bb, a d\u00e9clar\u00e9 le DPB, Yves Giroux.\n\nLe DPB a constat\u00e9 que, lorsque l\u2019on conjugue les r\u00e9percussions \u00e9conomiques aux r\u00e9percussions budg\u00e9taires (c\u2019est-\u00e0-dire en soustrayant le remboursement offert de la taxe sur le carbone et de la TPS connexe), les co\u00fbts nets augmentent pour l\u2019ensemble des m\u00e9nages et accentuent les contrecoups \u00e9conomiques globaux de la taxe f\u00e9d\u00e9rale sur le carbone pr\u00e9vue dans le plan Un environnement sain et une \u00e9conomie saine.\n\n\u00ab Suivant le plan Un environnement sain et une \u00e9conomie saine du gouvernement, la tarification du carbone par les autorit\u00e9s f\u00e9d\u00e9rales entra\u00eenera une perte nette pour la plupart des m\u00e9nages de l\u2019Alberta, de la Saskatchewan, du Manitoba et de l\u2019Ontario. Autrement dit, les co\u00fbts qu\u2019ils devront ainsi assumer \u2013 que ce soit en raison de la taxe f\u00e9d\u00e9rale sur le carbone, de la TPS sur cette taxe ou de l\u2019impact sur les revenus \u2013 seront sup\u00e9rieurs au paiement de l\u2019Incitatif \u00e0 agir pour le climat qu\u2019ils recevront \u00bb, a ajout\u00e9 M. Giroux.\n\nLes co\u00fbts nets que devront assumer les m\u00e9nages en raison de la tarification du carbone devraient continuer d\u2019augmenter progressivement selon le revenu, ce qui veut dire que les co\u00fbts nets seront plus importants pour les m\u00e9nages dont le revenu est \u00e9lev\u00e9. Dans son analyse, le directeur parlementaire du budget a constat\u00e9 en outre qu\u2019en 2030 2031, les m\u00e9nages qui subiront la plus grosse perte nette sont ceux du quintile de revenu sup\u00e9rieur de l\u2019Alberta (2,8 % du revenu disponible), tandis que le gain le plus important ira aux m\u00e9nages du plus faible quintile de revenu de la Saskatchewan (2,3 % du revenu disponible). \n\nLe DPB a \u00e9galement estim\u00e9 l\u2019incidence de la tarification du carbone sur les recettes budg\u00e9taires et les d\u00e9penses li\u00e9es aux programmes du gouvernement f\u00e9d\u00e9ral. \u00ab Nous estimons que le plan Un environnement sain et une \u00e9conomie saine fera augmenter le d\u00e9ficit budg\u00e9taire de 0,9 milliard de dollars en 2021 2022 et de 5,2 milliards de dollars d\u2019ici 2030 2031 \u00bb, explique M. Giroux.\n\nL\u2019analyse du DPB portait exclusivement sur les r\u00e9percussions distributives de la tarification f\u00e9d\u00e9rale du carbone et ne visait pas \u00e0 calculer les co\u00fbts \u00e9conomiques et environnementaux des changements climatiques.","release_date":"2022-03-24T09:00:00-04:00","is_published":"2022-03-24T08:59:09-04:00","internal_id":"COM-2122-031","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/pbo-releases-its-distributional-analysis-of-a-healthy-environment-and-a-healthy-economy-le-directeur-parlementaire-du-budget-publie-son-analyse-distributive-du-plan-un-environnement-sain-et-une-economie-saine"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/pbo-releases-its-distributional-analysis-of-a-healthy-environment-and-a-healthy-economy-le-directeur-parlementaire-du-budget-publie-son-analyse-distributive-du-plan-un-environnement-sain-et-une-economie-saine"}},"pivot":{"publication_id":654,"news_release_id":31}}