Global commitment Transitional costs Economic impact

Why a price on carbon needs to be part of our journey to net-zero

What are the implications of a carbon tax in Canada? Click the icon below to read the report:



The challenges of addressing climate change are understood. How will Canada achieve its emissions-reduction goals and temper the economic implications of the transition? Carbon pricing is part of the solution.

Carbon pricing reduces transition costs, in line with economic theory, because it acts as a financial incentive for consumers and businesses to modify their energy usage. It also changes the relative pricing of goods and services, and lower-carbon producers benefit.

Modelling conducted by Deloitte indicates that a gradual rise in carbon pricing to $170 per tonne in 2030 will drive major emissions reductions, bringing Canada three-quarters of the way to its Paris Agreement target. Carbon taxes imposed by governments generate revenues that are then recycled back into the economy. 

Modelling indicates that Canadian emissions will decrease 26% by 2030, bringing the country three-quarters of the way to its Paris Agreement target




Implementing carbon pricing involves transition costs, with trend rates of annual Canadian economic growth edging down from 1.7% to 1.6%. Household purchasing power and consumption will dip slightly in our carbon-pricing scenario.

Some industries will face more substantial challenges

Higher prices will affect each segment of the economy differently, depending on the intensity of production and consumption emissions. A few sectors will likely experience above-average declines in output.

Overall, the federal government’s carbon pricing policy will shift the composition of the Canadian economy. For example, industries such as mining and transportation will contribute less while the utilities sector will contribute more.

The challenge, then, is to close the gap. While imposing higher carbon prices can help, finding ways to facilitate large-scale funding for technology may have the greatest potential impact over the long run, partly because these technologies can lower emissions while creating considerable economic upside opportunities.

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