BC has seen two credit rating downgrades this month by S&P Global and Moody’s. As recently as July 2021, ÎÚÑ»´«Ã½ had a AAA credit rating; now it is AA- with a negative outlook. The two agencies sounded warnings about the province’s finances being “at a turning point,” about “weakened governance,” and noted “ÎÚÑ»´«Ã½’s budgetary performance will be the weakest of its peers, both domestically and internationally.”
Against a weak fiscal and economic outlook, the government is continuing to implement CleanBC. This is a suite of policies intended to quickly reduce domestic greenhouse gas (GHG) emissions. It includes a non-revenue-neutral carbon tax rising to $170 per tonne by 2030, production caps in certain industries and extensive regulatory interventions, penalties and subsidies affecting all sectors of the economy.
ÎÚÑ»´«Ã½ government modelling reveals that the principal mechanism by which it achieves emissions reductions over such a short timeframe is to curtail economic activity. The modelling projects ÎÚÑ»´«Ã½’s annual GDP in 2030 will be $28.1 billion lower under CleanBC policies compared to a reference scenario. The reference scenario includes 14 climate-related policies implemented or announced as of July 2017 including a revenue-neutral carbon tax of $30 per tonne.
On a per-person basis, annual GDP will be around $4,500 lower in 2030 than it would be absent CleanBC. ÎÚÑ»´«Ã½’s GDP per person in 2030 retreats to where it stood in about 2013, a roughly 17-year setback in living standards.
By sector, output in the electricity sector will be about $1 billion higher in 2030 under CleanBC compared to the reference scenario. However, the rest of the economy sees de-industrialization and output losses. Heavy and light industry, and the transport, agriculture and energy (excluding electricity) sectors, are all smaller than they would be. Some $15 billion of GDP, or more than half of the projected provincial GDP losses under CleanBC, is lost in service sectors, which make up over 70 per cent of ÎÚÑ»´«Ã½’s economy.
Notwithstanding these projected costs, will CleanBC achieve the government’s target of reducing domestic emissions to 40 per cent below 2007 levels by 2030? No. To reach the target, ÎÚÑ»´«Ã½’s emissions need to fall by 23.7 metric tonnes of carbon dioxide in total over 2022-2030, which is 2.6 metric tonnes of carbon dioxide per year. By comparison, over the entire 2007-2021 period, emissions fell by 1.8 metric tonnes of carbon dioxide in total. Even if these projections are met, the government’s modelling shows that emissions in 2030 will fall short of the target at 32 per cent below 2007 levels.
Does implementing CleanBC mean the province can avoid the costs of infrastructure adaption and extreme weather events? No. ÎÚÑ»´«Ã½’s share of global GHG emissions is around 0.19 per cent. It might fall to about 0.10 to 0.18 per cent in 2030 under CleanBC. When 99.8 to 99.9 per cent of global emissions are generated elsewhere, it is not credible to claim that CleanBC will independently alter the evolution of the earth’s climate. ÎÚÑ»´«Ã½ can and has been managing domestic emissions. It was the first North American jurisdiction to introduce a then revenue-neutral carbon tax in 2008. But ÎÚÑ»´«Ã½ does not have its own atmosphere. The province must budget to improve infrastructure resiliency and deal with weather events irrespective of CleanBC. Indeed, it would be reckless not to do so.
February’s provincial budget forecasts that GDP per person is shrinking at a rate of two per cent per annum and will be lower in 2028 than 2022. We expect future updates until 2030 will be iteratively revised down as the projected negative impacts of CleanBC become apparent in the data.
To date, government has communicated very little about the economic realities of CleanBC. Whereas the transition to the harmonized sales tax sparked a public debate and a referendum, CleanBC’s economic impact will be orders of magnitude greater—and negative—and yet it has received very little public discussion. That needs to change.
David Williams, DPhil, is vice-president of policy at the Business Council of British Columbia.
