The federal government’s Healthy Environment and Healthy Economy (HEHE) plan includes a $170-per-tonne carbon tax to be phased in over 9 years. Unlike previous cases when the government proposed major policy changes, it has not released any quantitative economic analyses of the impacts of the plan, except to claim that the policy will have no effect on GDP. This claim is at odds with numerous previous analyses of the costs of greenhouse-gas emission controls that were made inside and outside the federal government during discussions of the Kyoto Protocol.
In this study, we present an analysis using a large empirical model of the Canadian economy that indicates that the tax will have substantial negative impacts, including a 1.8% decline in Gross Domestic Product and the net loss of about 184,000 jobs, even after taking account of jobs created by new government spending and household rebates of the carbon charges. The drop in GDP works out to about $1,540 in current dollars per employed person.
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