Analysis of an analysis of Canada's Federal Carbon Pricing System

“Fiscal and Distributional Analysis of the Federal Carbon Pricing System” is a product of the The Parliamentary Budget Officer (PBO). The PBO’s analyses are, in general, performed, “for the purposes of raising the quality of parliamentary debate.” This analysis of the PBO document is intended to raise the quality of debate everywhere.

The Canadian government’s policy on pricing greenhouse gas emissions is to enforce provincial government’s have a policy on pricing greenhouse gas emissions - and where they don’t to impose a “federal backstop” policy. The PBO’s analysis is looking at the impact of the provinces where the federal backstop will be imposed - here I’ll analyse the analysis for only one of them (Ontario) to avoid bombarding the reader with too many figures.

Ignoring the other provinces will only be a portion of what’s ignored. The PBO’s analysis notes there are “two components” of the backstop policy empowered by the Greenhouse Gas Pollution Pricing Act.

• A charge on fossil fuels, or “fuel charge”... and
• A regulatory system for large industry, known as the “output-based pricing system” (OBPS)

The OBPS is glossed over for a few reasons: it’s expected to be a small portion of total revenue (less than 4% for Ontario), it’s not finalized (despite being expected to apply back to the start of the year), and therefore it’s not known which provinces will have satisfactory pricing already in place for large emitters and which the federal backstop will be imposed on.

So... in the PBO analysis, and here, the hundreds of large emitters that emit over one-third of the country’s greenhouse gas emissions aren’t considered.

Image captured from my presentation of data from Canada’s GHG Emissions Reporting Program

We’ll all focus on the millions of residential households instead.