Cost of carbon emissions nearly five times higher than previously thought: analysis

The economic cost of greenhouse gas emissions is nearly five times higher than previously thought, Environment Minister Steven Guilbeault said Wednesday.

The minister told attendees at a climate change conference in Ottawa that the government used updated scientific knowledge and economic models to revise the way it evaluates how much climate change is costing Canadians.

The new numbers have been in development for months but come after a recent report from the parliamentary budget officer on the economic costs of the carbon price. That report did not specifically equate the cost of the price on carbon to the costs of climate change itself.

"The updates to the social cost of carbon simply show that every tonne of greenhouse gas is costing the economy more," Guilbeault said at the Net Zero Leadership Summit.

The social cost of carbon estimates the financial impact that every tonne of emissions has on everything from food production and human health to disaster repair bills and even property values.

The idea is that growing emissions contribute more to global warming, and every increase in global average temperatures can increase the number and severity of extreme weather events.

More than seven years ago an analysis estimated that by 2020 the cost would be about $54 a tonne in 2020. Guilbeault said the updated model suggests that figure was actually closer to $247.

He said this year it's even higher, at $261 per tonne of emissions, and by 2030 it will rise to $294.

"Pause for a moment to understand what this signifies," Guilbeault said.

"Every tonne of carbon we reduce this year saves society as a whole $261 — and we are talking in terms of cutting megatonnes: millions of tonnes."

Between 2005 — the year Canada uses as the base for its 2030 emissions targets — and 2021, Canada eliminated 62 million tonnes of greenhouse gas emissions. Using the new social cost of carbon figure, that equates to saving almost $10 billion.

However that doesn't include an estimate of what it cost to eliminate those 62 million tonnes. The carbon price in 2021 was $40 per tonne, and it will rise to $170 per tonne in 2030.

Last year a federal analysis of regulations to reduce emissions produced from gasoline and diesel said the cost of that policy was about $151 per tonne.

Canada's Ecofiscal Commission in 2017 pegged the cost of Quebec's electric vehicle subsidy at about $355 per tonne. Most provinces and the federal government now have some kind of electric vehicle subsidy.

By 2030, Canada wants to eliminate at least another 231 million tonnes. That could save $68 billion on the emissions side, but there are no direct comparisons to illustrate how much it will cost to do that.

Canada has dozens of other policies designed to help meet that target, including phasing out coal power, expanding renewable electricity, mandating an end to the sale of gas-powered cars and capping emissions from the oil and gas industry.

The parliamentary budget officer's recent analysis of carbon pricing said the government's climate rebates are more than the direct cost of carbon pricing for most families, but when you factor in the economic costs — such as lower incomes or job losses — many families may have less money in 2030 than they would without the carbon price.

Guilbeault and others criticized that report for not being explicit that climate change itself is contributing to job losses and lower incomes.

The social cost of carbon analysis is done in concert with the United States Environmental Protection Agency, which published its interim values last year but is still reviewing them before releasing a final version. Canada published its final numbers Wednesday.

This report by The Canadian Press was first published April 19, 2023.