This is a guest commentary by Dave Wilkin.
The battle over the April 1 Carbon Tax hike has heated up –It’s Trudeau’s “Taxing Pollution” vs. Poilievre’s “Axe the Tax”. It appears the government has lost this round, as most Canadians and provincial leaders (including Liberals) now oppose it. Fighting climate change has taken a back seat to the cost of living, housing affordability and healthcare concerns. Other climate change regulations, including rising federal fuel taxes, emission caps, EV purchase mandates, and zero emission grids by 2035, are drawing concerns, similar to the Parliamentary Budget Officer’s carbon tax study’s long-term economic impact findings.
Let’s turn now to the bigger global energy picture for some insights, drawing largely from the Energy Institute’s 2023 Statistical Review of World Energy.
First, to reach net-zero emissions by 2050 is a massive undertaking, with huge uncertainties. McKinsey & Company, a global consulting leader, estimates the global cost at about $275 trillion US for energy/land-use system physical assets (2021-2050). That’s $9.2 trillion annually, about 7.5 percent of global GDP (70 percent for new/reallocated spending from high to low-emission assets). The cost distribution is disproportionate: About 6 percent for OECD (wealthy) countries, but 2-3 times that for most Non-OECD (mostly developing) countries. It’s front-loaded and progress lags, likely pushing it closer to 10 percent by 2030. For Canada, that’s roughly $130 billion Cdn. annually, similar to other estimates, including my own. Current spending is a fraction of these amounts.
Next, on primary energy, we find consumption grew 31 percent globally from 2005-2022. But again, imbalances: Non-OECD countries were up almost 70 percent with energy per capita half of that, while OECD countries were mostly flat (per capita it fell 12 percent). For comparison, Canada’s energy consumption grew 4 percent while per capita, it fell 13 percent. On the energy mix, fossil fuels share is about 82 percent both globally and in the US, the EU is 71 percent, and Canada, 64 percent.
Examining global proven fuel reserves, we see both oil and gas will last around 50 years at current production levels (RP ratio), but for OECD country reserves, it’s 25 and 14 years respectively. Canada holds over 70 percent of OECD oil reserves (RP: 89 years), the US about 20 percent (RP: 11 years) and the EU has almost none. Non-OECD countries’ RP ratios for all fossil fuels are over 67 years. Note that proven oil & gas reserves continue to rise globally.
Global CO2 energy-related emissions continue to rise, driven by non-OECD countries, whose emissions have grown by 50 percent since 2005 to a 68 percent global share in 2022. China and India drove half of that growth. Over the same period, EU emissions fell by a quarter, the US down 18 percent, and Canada down 3 percent. Our global emissions share fell to 1.5 percent.
Lastly, 49 countries have national carbon pricing, covering roughly 10 percent of global emissions. The majority are in the EU, where average pricing is around $90 US/ton and energy costs are about 2 to 4+ times higher than in Canada. Another 40 countries have subnational pricing, covering another 13 percent of global emissions. Notably, of the major Asian exporting countries, only South Korea ($11/ton) and Japan ($2/ton) have national carbon pricing. The US doesn’t.
Given the above, here are key implications and takeaways:
- High carbon taxes and heavy fossil fuel regulations disproportionally impact poorer countries and the less well-off among wealthy ones. They weaken economies and make exports less competitive. Affordable energy is a necessity, not a luxury.
- The impact of the very high net-zero transition costs constrains other government spending priorities, pushes up debt, and fuels inflation. It does bring significant opportunities in clean energy sectors and transportation, but insufficient to offset the high transition costs.
- Without significant increases in transfers from wealthy countries, developing countries will fail to lower emissions. They will continue to tap significant non-OECD fossil fuel reserves to fuel much of their growth.
- Energy-insecure wealthy countries remain highly motivated to transition from fossil fuels, thus their push for high carbon pricing, heavy regulations, and renewables. However, increasing uncertainty/disruptions in global energy markets, and lagging transition progress means Canada’s significant mineral resources and oil & gas reserves will become increasingly relevant to them.
- Population growth, a large natural resource sector, and a big cold country drive Canadian energy consumption higher.
- Climate impacts and their costs are rising. Climate resiliency investments are crucial but sadly lacking.
In closing, here’s some advice for the next federal government:
- Set realistic, achievable targets and hit them.
- Plan thoroughly, in collaboration with provinces/territories/businesses, considering all impacts/trade-offs, with full costing.
- Leverage Canadian advantages: abundant resources (including oil and gas), and nuclear technology.
- Communicate clearly, consistently, and honestly.
- Make adjustments when things change.
Here’s hoping they will listen to the people.
Dave Wilkin is a Professional Engineer, with a master’s degree in Electrical Engineering from the University of Toronto. His career spans over 40 years in Information Technology, banking, energy, and consulting. A former resident of Huntsville, Ontario, he now lives in Burlington but still spends time at his Huntsville area cottage.
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Drama Queens Poilievre and Dani Smith are screaming about a measly 3.2 cents a litre when gas varies more than that every week.
PP called it unaffordable and tried to force a non-confidence vote and Dani even called it “Inhumane.” LOL.
While both ignored the fact the carbon tax rebate went up a matching amount so it makes no difference at all.
In fact gas is down FAR more than the total carbon tax of 17 cents per litre from the $2 peak last year.
It seems many people still don’t understand the point of the tax and the rebate.
The most effective and least expensive way to lower emissions.
To read the report from 200+ economists go to:
ecofiscal /2024/03/26/open-letter-ca.
Funny how “Scott Moe says Saskatchewan considered carbon tax alternatives, but found them too costly”
Search and watch the video “Saskatchewan softens tone in carbon tax battle with Ottawa.”
So Moe found out from the feds that his plan is “illegal and likely to cost residents more money by cutting off the federal carbon tax rebate.”
Doing nothing about climate change is extremely expensive and responsible for a big part of inflation.
“From chocolate to home insurance, climate change is making life more expensive.”
To see the PBO say most Canadians are better off with the rebate and how the tax and rebate works watch the video:
“Carbon tax crash course: How it works and what it will cost you”
Some people still get hung up on whether or not you get more back with the rebate than you pay in the tax without making any changes.
That’s not the point.
The point of the tax and rebate is to encourage you to switch to low carbon energy without penalizing those who don’t/can’t.
ALL incomes get FAR more back with the rebate if they go EV and heat pump.
That’s the point.
Avoid the tax and still get the big rebate.
Up to $2160/year for a family of 4 in rural AB.
The rebate pays the entire yearly cost of “fuel” for an EV (FREE “fuel” courtesy of the gas burners), road tax if any and helps to pay off the EV and heat pump.
On top of $12K total EV purchase rebates in PQ for example. On top of $11K total heat pump rebates in BC for example.
Heat pumps are FREE in Ontario if you switch from electric heating and have low income.
After rebates EVs and heat pumps can cost less than comparable GHG spewing versions.