Why Trudeau and Poilievre are referring to the PBO on the carbon tax

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OTTAWA — As one MP put it this week, parliamentary budget officer Yves Giroux has been in the news “almost as much” as Taylor Swift these days, as the parties debate his studies of the federal carbon tax’s impact on Canadians’ wallets.

Both Liberals and Conservatives have been extensively citing the PBO’s reports in attempting to justify their respective stances on the carbon tax, which goes up April 1, and the governments tax rebates.

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Prime Minister Justin Trudeau claims the reports say eight out of 10 families get more from the rebate than they pay in carbon taxes. Conservative Leader Pierre Poilievre cites the PBO in his claim that “a majority of households will see a negative impact.”

The truth is, Liberals and Conservatives are both telling a different version of the truth — with some important caveats.

Giroux’s appearance at the House of Commons government operations committee Wednesday may have been overshadowed by the Saskatchewan premier’s testimony, but MPs had pointed questions for the budget watchdog.

Conservative MP Phil Lawrence asked Giroux whether there is ultimately “more money coming into Canadians’ pockets or leaving their pockets” for those where the backstop applies.

“If one looks at the fiscal impact, that is the amount of the carbon tax paid directly, indirectly and the GST that applies on these embedded direct carbon taxes paid minus the carbon rebate, most families are better off — we estimate around 80 per cent,” said Giroux.

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Last year’s analysis from the PBO indeed stated that “most households will see a net gain” in Alberta, Saskatchewan, Manitoba, Ontario, Prince Edward Island, and Newfoundland and Labrador by the fiscal year 2030-31 — once the tax reaches $170 per tonne of carbon.

The only exception was in Nova Scotia, where households in the third, fourth and fifth highest income quintiles would pay more than they receive in carbon rebates.

The PBO noted that the tax minus the rebates is “broadly progressive,” meaning that lower-income households would benefit more than higher income households.

However, the numbers changed once the PBO included the economic impacts of the introduction of the carbon tax. The assumption is that the tax will have had an impact on some sectors of the economy, and therefore family incomes.

“Then, we find that most Canadian families, in provinces where the federal backstop regime is in place, will see a small negative impact of the carbon tax,” Giroux told MPs.

The same analysis mentioned above indeed mentioned that “most households will see a net loss” by the fiscal year 2030–2031 since they will be paying more in the federal fuel charge and GST, and it is assumed that they will be receiving lower incomes.

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On average, households in Alberta would be paying $2,773 in net losses and those in Ontario would be paying $1,820 by 2030-31, according to the PBO’s estimates. Lower-income households would continue to benefit from a net gain, while higher-income households would pay more.

But the PBO’s conclusions on the economic impacts of the carbon tax have been challenged by Liberals and by climate think tanks, who claim that he failed to account for the costs of climate change.

The Canadian Climate Institute, for example, accused the PBO of being “misleading” for failing to consider “economic benefits of carbon pricing and the costs of climate inaction, both in terms of stabilizing the climate and competing in a global economy racing to net zero.”

And this week, hundreds of economists signed an open letter saying that a national carbon price is the cheapest way to cut the most emissions, while disputing arguments put forward by Poilievre that the carbon price is driving up inflation and the cost of living.

Poilievre dismissed them as “so-called experts” and pledged to listen to the “common people.”

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However, the PBO did attempt to account for the cost of climate change in a report back in 2022. The analysis noted that extreme weather had already reduced Canada’s GDP by 0.8 per cent between 1981 and 2021 and that the GDP could be further reduced by five per cent by 2100. But the report noted that “accounting for the cost of climate change is not straightforward.”

Liberal MP Irek Kusmierczyk challenged Giroux this week and said it “boggles the mind” that the PBO did not account for the costs of climate change in its carbon tax analysis.

Giroux said that his mandate is to estimate the cost of government proposals, and encouraged other entities like think tanks or the government itself to disclose their numbers if they want to venture in a cost-benefit analysis of the carbon tax.

“To my knowledge, there hasn’t been that much work undertaken on the cost-benefit analysis, because it’s a complicated field that requires lots of data spanning several years,” he said.

“So that’s why even though it would be ideal to have the cost-benefit analysis, the benefits are not always very tangible, and not easily measurable.”

National Post
calevesque@postmedia.com

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