OTTAWA – “The carbon tax will siphon over $2.5 billion from Saskatchewan’s economy when fully implemented and make our province a less competitive place to do business.” — Saskatchewan Premier Brad Wall, responding to Prime Minister Justin Trudeau’s announcement Monday of a “floor price” on carbon.
It seemed to come as a surprise to everyone: Prime Minister Justin Trudeau telling the House of Commons that Ottawa will set a minimum price for carbon pollution, forcing the hand of any province or territory that’s not doing it themselves.
Trudeau’s plan — a “floor price” of $10 per tonne starting in 2018, increasing to $50 per tonne by 2022 — didn’t sit well with Saskatchewan’s Brad Wall, a longtime opponent of pricing carbon.
Such a “carbon tax” would have disastrous effects on resource-dependent Saskatchewan, Wall complained. His assertion that the measure would “siphon” more than $2.5 billion out of the province is now being repeated by Conservative MPs.
But is it true? Will Saskatchewan lose billions of dollars and suffer economically if the federal government sets a carbon price of $50 a tonne?
Spoiler alert: The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of “no baloney” to “full of baloney” (complete methodology below).
This one earns a rating of “a lot of baloney” — the statement is mostly inaccurate, but contains elements of truth. Here’s why.
A carbon tax generally takes the form of an extra charge on fossil fuels such as gasoline, natural gas and coal. It is one way governments try to encourage companies and consumers to be more energy efficient, reduce greenhouse gas emissions and spark more investment in renewable energy sources.
In 2008, British Columbia became the first Canadian jurisdiction to widely implement a carbon tax — currently $30 per tonne. An Environment Canada backgrounder on Trudeau’s new policy states that, “at a minimum, carbon pricing should apply to substantively the same sources as British Columbia’s carbon tax.”
In real terms, British Columbians pay an extra 6.67 cents per litre of gasoline as a result of the carbon tax. Other fuels such as diesel, natural gas, propane and coal are taxed at different rates because of their different emissions.
The B.C. government says about 70 per cent of its annual greenhouse gas emissions come from fuels that are taxed, which last year generated about $1.2 billion in revenue. The rest is either from non-energy sources such as farm animals and deforestation, or “fugitive” emissions that can’t be measured.
Wall’s office declined to provide numbers to back up his statement.
However, Saskatchewan’s environment ministry says the province generated 74.8 million tonnes of greenhouse gases in 2013. Assuming 70 per cent would be taxed at $50 per tonne, that equates to $2.6 billion per year — well within Wall’s $2.5 billion ballpark.
But central to Trudeau’s announcement was the promise that any and all revenue generated by a federally imposed price would flow back to the province or territory from which it came — a direct contradiction of Wall’s Saskatchewan “siphon.”
In terms of competitiveness, a B.C. government study in 2012 found a $30 per tonne carbon tax had a small negative impact on economic growth. Some industries, such as agriculture, were hit harder and thus required more tax relief, the study found. Clearly, a price higher than $30 per tonne would have a deeper impact.
Kathy Young, a spokesperson for Wall, said in an email that Saskatchewan’s analysis of the impact includes fuel, fertilizer, and other “key aspects” of Saskatchewan’s economy.
“According to federal government data, these sectors represent 66 per cent of Saskatchewan’s emissions profile,” Young wrote. “British Columbia’s greenhouse-gas emissions (70 per cent) primarily come from transportation.”
Young also noted that even in the case of a revenue-neutral plan, the administration of a carbon tax is likely to have an impact.
“Removing money from the hands of consumers and business, and redirecting it through government mechanisms, undermines the efficient allocation of resources within the economy.”
A tax in Saskatchewan would also put the province at a “significant competitive disadvantage” to other jurisdictions with which it competes economically, she added.
For the record, the Alberta government has promised to release its own economic analysis in advance of implementing a carbon tax in January, although no such analysis has yet to materialize.
WHAT THE EXPERTS SAY
Wall’s estimate that a carbon tax would generate about $2.5 billion in Saskatchewan appears correct, experts say. It would also impact competitiveness, although the magnitude would depend on the sector.
But given the Liberal government’s promise to return all carbon revenue to the original province or territory, they note that any notion that billions would be “siphoned” out of Saskatchewan is clearly untrue.
“Concretely, it would be a transfer from the federal to the provincial government of that amount, which the provincial government could then do what it wishes with it,” said Trevor Tombe, an assistant professor of economics at the University of Calgary.
“In that sense, it is incorrect to say the funds are siphoned out of Saskatchewan.”
Nicholas Rivers, an associate professor at the University of Ottawa’s Institute of the Environment, said the real cost to people and businesses in Saskatchewan will depend on what the provincial government does with the money.
“The Saskatchewan government, if it chooses, can give the entire amount of revenue raised by the tax back to Saskatchewan residents, in whatever form it chooses,” Rivers said in an email.
That could include tax rebates, tax cuts or support for industries such as heavy manufacturing or agriculture that face a disproportionate impact from a carbon tax.
Mark Cameron is a former policy director in the office of then-prime minister Stephen Harper who now heads up the environmental research group Canadians for Clean Prosperity. He said a carbon tax could actually end up costing less than Wall’s preferred emissions-reducing options.
Wall has championed carbon capture sequestration — trapping underground the carbon dioxide generated by power plants and other sources — as well as a plan to have half of Saskatchewan’s energy come from renewable sources such as solar and wind by 2030.
“I think Premier Wall has indicated he doesn’t want a carbon price, but he hasn’t really given a persuasive, rational explanation as to why a carbon price is worse than the other actions he’s committed to take,” Cameron said.
“Those are very costly policies. A carbon price would achieve the same objectives at lower cost.”
A carbon tax of $50 per tonne would indeed generate more than $2.5 billion in Saskatchewan. It would also have an impact on the province’s economy and competitiveness, though how much is a matter for debate.
But Wall’s central warning — taxpayers and businesses would see billions leave Saskatchewan because of Justin Trudeau’s carbon tax — is false, given the federal promise to keep provinces and territories whole.
For those reasons, Wall’s statement contains “a lot of baloney.”
The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:
No baloney — the statement is completely accurate
A little baloney — the statement is mostly accurate but more information is required
Some baloney — the statement is partly accurate but important details are missing
A lot of baloney — the statement is mostly inaccurate but contains elements of truth
Full of baloney — the statement is completely inaccurate