Letter to the Parliamentary Budget Officer Regarding Pollution Pricing

April 5, 2023

 

Office of the Parliamentary Budget Officer

900-99 Bank Street

Ottawa, ON K1A 0A9

 

Dear Yves Giroux,

I am writing to you regarding two recent reports published by your office that are of great public interest. 

In light of the overwhelming body of evidence, including your own analysis, that climate change is bringing huge costs to bear on Canadians, I would ask that you launch a new study that integrates both sides of the climate ledger into your assessment of the federal fuel charge and its overall impact on Canadian household finances.

Most recently, your office published “A Distributional Analysis of the Federal Fuel Charge under the 2030 Emissions Reduction Plan,” on March 30, 2023. Your novel headline conclusion regarding whether or not most Canadians will come out ahead or behind due to pollution pricing continues to garner media headlines and generate heated debate in the House of Commons.

Prior to this distribution analysis report of March 30, your office had published “Global greenhouse gas emissions and Canadian GDP,” on Nov. 8, 2022. That report, which came to the conclusion that rising temperatures due to greenhouse gas emissions had already cost the Canadian economy $20 billion by 2021, received far less media attention and public debate. Perhaps this was because your findings on the high cost to every Canadian of climate change mirrored a number of other reports that arrived at similar conclusions. These reports include, but are by no means limited to:

  • The Intergovernmental Panel on Climate Change (IPCC) report of February 2022, “Climate Change 2022: Impacts, Adaptation and Vulnerability;”
  • A five-part series by the Canadian Climate Institute, “TIP OF THE ICEBERG: Navigating the Known and Unknown Costs of Climate Change for Canada,” from December 2020;
  • The Institute for Sustainable Finance report of April 2022, “The Physical Costs of Climate Change: A Canadian Perspective;”
  • The Insurance Bureau of Canada and the Canadian Federation of Municipalities report of February 2020, “The Cost of Climate Adaptation;”
  • The Financial Accountability Office of Ontario reports from November 2020 and August 2021, “Costing Climate Change Impacts to Public Infrastructure Project;”
  • And the Bank of Canada’s report of March 2017, “Thermometer Rising—Climate Change and Canada’s Economic Future.”

As the Bank of Canada wrote more than six years ago: “In economic terms, climate change is a negative externality. Any individual or company that engages in activities that generate greenhouse gases imposes a cost on everyone else by contributing to climate change. Establishing a price for carbon emissions forces polluters to bear those wider societal costs—thus internalizing the externality.”

The weight of these combined reports and your own analysis paints a powerful picture of the massive cost to every Canadian -- past, current and future – of climate change and the massive price of inaction. 

I was therefore more than deeply perplexed, I was shocked, when I read in your distributional assessment of the federal fuel charge that the PBO analysis “does not attempt to account for the economic and environmental costs of climate change.”

Such a study should also include recognition of the economic benefits that pollution pricing induces through energy-saving measures such as installing electric heat pumps to replace oil furnaces in homes, or the lifetime cost savings of owning a Zero Emission Vehicle compared to an internal combustion engine, or a myriad of other fuel-saving measures across the economy. To ignore the impact of these developments does a disservice to the public debate about how best to tackle climate change.

As your office’s website states, “the PBO is responsible for providing economic and financial analysis to Parliament for the purposes of raising the quality of parliamentary debate and promoting greater budget transparency and accountability.”

I believe there is no more pressing public policy issue than a fair and fully informed assessment of the costs, benefits and liabilities of climate change action and inaction, which is why I am requesting a new study to consider all sides.

 

Respectfully,

 

Lloyd Longfield

Member of Parliament for Guelph