Canada's economy took $20-billion hit from climate change last year, PBO says

OTTAWA — The effects of climate change bit a $20-billion sized hole out of Canada's economy last year, parliamentary budget officer Yves Giroux said Tuesday.

His office issued a new analysis looking at the economic impacts of climate change over the next 80 years, which comes as the annual United Nations climate conference, also known as COP27, is kicking into high gear in Egypt.

Environment Minister Steven Guilbeault, who is in Sharm El-Sheikh for the two-week gathering, said this meeting is supposed to be the "implementation COP," where promises made around the world to cut greenhouse-gas emissions become more than just talking points.

"We are in the make-or-break decade in our effort to stay below 1.5 degrees Celsius, to keep the planet livable," Guilbeault said in an interview with reporters by phone from Egypt on Tuesday.

The 2015 Paris climate accord saw every country agree to reduce emissions enough to limit global warming to as close to 1.5 C as possible. Above 1.5 C, the effects of climate change begin to mount exponentially. Above 2 C, many are considered irreversible.

Currently, the average global temperature is 1.2 C above pre-industrial times. A UN report last month said the climate policies in place now would see that grow to 2.8 C by 2100.

If the policies promised but not yet implemented are added, that will come down to 2.4 C to 2.6 C, the UN report said. In Canada those policies would include a promised cap on emissions from oil and gas production, which is in development now.

Giroux's report concludes that even if all those promises are fully implemented, Canada's GDP is going to grow more slowly than if climate change didn't exist.

And in fact it already did, Giroux said. In 2021, the PBO estimates that the weather extremes already linked to global warming lowered Canada's GDP by 0.8 per cent than what it would have been without climate change.

Tim Scholz, a PBO analyst who co-authored the report, said that works out to roughly between $20 billion and $25 billion less on Canada's reported GDP of $2.5 trillion in 2021.

The economic hits from climate change can include reduced farm outputs from drought or extreme precipitation, lowered productivity for outdoor workers and higher energy bills due to hotter summers.

It can also mean lost work hours when hurricanes, tornadoes and other major storms damage power grids or destroy buildings, and impacts on tourism, such as shorter ski seasons.

In a scenario where all promised climate policies are fully enacted, Canada's GDP is expected to be 0.08 percentage points lower every year than in a world without climate change.

By 2050, that amounts to a GDP reduced by 2.4 per cent compared to no climate change, and by 2100, by 5.8 per cent.

In a scenario where only policies already implemented are in place, the hit could grow to 2.5 per cent by 2050, and 6.6 per cent by 2100.

Without clear estimates of what Canada's GDP will be in those years, Giroux said quantifying the amount is difficult. But 5.8 per cent of Canada's current economy is about $145 billion and 6.6 per cent is $165 billion.

This report by The Canadian Press was first published Nov. 8, 2022.