There is a consensus in Ottawa that Canada must transition to net-zero greenhouse gas emissions by 2050. The Liberal government says that hitting this target is necessary to “avoid the catastrophic effects of a warming climate,” and Erin O’Toole, the Conservative leader, recently made the net-zero target part of his policy agenda as well.
Here’s the problem, though: Emissions targets are economic nonsense.
That is, whatever the targets, whatever the timeline, and whatever the plan to achieve them, emissions targets are not grounded in any economic logic. Whenever a politician, activist, or anyone else prescribes them, you can be sure that sensible policy has gone out the window.
As a general rule of economics, and a practical rule by which everybody operates in their daily lives, an activity is worthwhile if its expected benefits are higher than its expected costs. This applies in deciding whether or not to switch jobs, acquire more education, trade in an old car for a new one, or buy an ice cream cone. Deciding what to do about greenhouse gas emissions is no different.
Just as the appropriate number of ice cream cones to be consumed in 2050 depends on the costs of producing ice cream cones and the benefits to consumers of eating them, the appropriate quantity of greenhouse gas emissions in 2050 depends on the costs and the benefits associated with those emissions. It’s this cost-benefit calculation that matters when deciding whether emissions should go up or down.
What the costs and benefits of greenhouse gas emissions are today, or will be in 2050, depend on countless pieces of information beyond the reach of government central planners. It makes no more sense, therefore, for the federal government to set a quantity target for greenhouse gas emissions in 2050, than it does for it to set a target for the number of ice cream cones that should be consumed in 2050.
Importantly, while emissions targets, like ice cream cone targets, do not make sense as a matter of economic principle, some targets are more harmful than others. In the case of net-zero emissions by 2050, according to the federal government’s own numbers, hitting the target involves cutting carbon emissions even when the costs of doing so exceed the benefits.
To reach the net-zero target, the federal government is ratcheting the carbon tax up to $170 per tonne by 2030, and imposing other policies – for example, hundreds of millions of dollars in electric vehicle subsidies – that are even more costly. A 2017 study from the Montreal Economic Institute (MEI) estimated, very conservatively, that electric vehicle subsidies in Quebec cost taxpayers $288 or more per tonne of emissions reduced. Another estimate, from the Ecofiscal Commission, came in even higher.
By contrast, even according to Environment and Climate Change Canada’s own estimates (which are likely far too high), the environmental cost of greenhouse gas emissions is around $50 per tonne today. The figure rises over time, but even in 2030 will be nowhere near the $170 level the federal government has announced.
In other words, not only has the federal government thrown good policy out the window by setting an emissions target in the first place; it has also chosen a target that, according to its own policies and estimates of the environmental costs of emissions, is not worth achieving. The federal government’s climate plan, clearly, is economic nonsense.
Matthew Lau est chercheur associé à l’IEDM. Il signe ce texte à titre personnel.