The Congressional Budget Officer’s analysis of federal carbon pricing Reportedly It is the subject of a “battle” with the Liberal government, including allegations that “secret data” is being hidden from the public.
So this conversation, a very important conversation about how the federal government should respond to an existential crisis, seems to have gone wildly off track.
The central issue is not what was in the PBO’s analysis but what it left out. But the current “fight” concerns an error that the PBO quietly admitted to in April.
CBC’s Robson Fletcher I explained the details of that mistake last week.In essence, the PBO’s office released an analysis focused specifically on the federal fuel tax (commonly referred to as the “carbon tax”), but mistakenly included a federal industrial carbon price in its modeling.
The inclusion of industrial prices (a policy the Conservatives have specifically refused to condemn) is likely to have had some impact on the PBO’s analysis of the “economic impact” of carbon pricing, but the PBO has said it will not publish a revised report until the autumn.
Meanwhile, the government is frustrated, the PBO is on the defensive, and no one is winning, especially the average voter.
As stated in the Parliament of Canada Act, the Parliamentary Budget Office has a mandate to “assist Parliament by providing analysis, including macroeconomic and fiscal policy analysis, with a view to enhancing the quality of Parliamentary debate and promoting budget transparency and accountability.”
Currently, the quality of debate in the Diet is deteriorating.
The real problem with PBO calculations
The issue dates back to a report released by the PBO in March 2022.A distributional analysis of federal carbon pricing under the government’s “healthy environment, healthy economy” plan.”
Previously, the PBO had looked into the “fiscal impact” of the Liberal government’s carbon pricing policy, i.e. whether Canadian households received more or less from the Canada Carbon Rebate than they paid in costs related to the carbon tax. In this regard, the PBO estimated that most households received more from the rebate than the additional costs they paid, supporting one of the government’s main arguments in support of the policy.
In the March 2022 report and the updated report released in 2021, March 2023The PBO also measured the “economic efficiency losses” that would come with the introduction of new taxes. It said that once these costs were taken into account, most households were actually worse off. The Conservatives have used this finding to further their criticism of Liberal policies.
Environment and Climate Change Minister Steven Guilbeault told Power & Politics that the recent error by the Parliamentary Budget Officer was “below the standard” he expects from the Parliamentary Budget Office, which released its latest analysis of federal carbon pricing and said it had mistakenly included an industrial carbon price.
But other experts soon Criticizing the PBO’s economic analysis — especially about what is being left out.
First, the PBO did not attempt to analyze the potential benefits of reducing greenhouse gas emissions (some economists and government agencies haveThe social cost of carbonSecond, the analysis makes no attempt to compare the Liberal government’s carbon pricing policy with other policies to reduce emissions.
“The PBO is comparing costs to a world where Canada ignores emissions and takes no responsibility,” said an expert from the Canadian Climate Institute. I wrote it last year.
(Separately, the Climate Research Institute Estimation How much could a federal fuel tax and industry pricing system reduce Canadian emissions between now and 2030?
Was the PBO trying to suggest that it would be better for Canada? no Policies to reduce emissions? Apparently not.
“This is not intended to be interpreted or to suggest that doing nothing is the right thing to do,” said the PBO’s Yves Giroux. He told CBC Power and politics last week.
This week’s stories: The Parliamentary Budget Office admits it made an “inadvertent error” in calculating the economic impact of a carbon tax, and the Liberals are seeking to correct the record. Greg Fergus has survived an attempt by the Conservatives to oust him from the speaker position.
The PBO also did not seem to mean to suggest that carbon pricing is a particularly costly policy.
“Anything we do to address or try to curb climate change has a cost,” Giroux said. He told The Canadian Press last year“That’s either the cost of a carbon tax or regulations to reduce fossil fuel use.
“There are costs to regulation. There are costs to doing nothing.”
All of that seems obvious. But it’s not clear what conclusions Canadians should draw from a report that measures the costs of only one of them. Measuring the economic impact of one policy is of very limited value without a comparison.
A miscalculation that set everyone back
The Liberal Party and Mr Giroud are currently engaged in a bit of a back-and-forth over what the results of Mr Giroud’s latest analysis will ultimately show, and voters would be forgiven for finding the exchange boring.
During a debate over the report at the House of Commons Finance Committee on Monday, Giroux said the government was conducting its own analysis of the impact of a carbon tax but that he did not have permission to release it. This led the Conservatives to say the government was hiding a “secret carbon tax report” and that the PBO was doing some kind of “gag” order.
During question and answer session on Tuesday, the Conservatives accused the government of perpetrating a “carbon tax cover-up.” Conservative finance critic Jasraj Singh Haran said the analysis, if published, would “sternly criticise and completely embarrass claims of carbon tax fraud.”
Perhaps the Government should as a matter of course publish the results of an economic study on all the measures it proposes – perhaps this is something the Conservatives can promise to implement when they are next in power.
But again, an economic analysis of a federal carbon pricing policy isn’t very useful without explaining how the policy compares to other policies.
Whenever the next election comes, voters will be faced with a choice between different approaches to climate change and reducing Canada’s greenhouse gas emissions. Properly expressing that choice will need to include information about the emissions reduction potential and economic impacts of each party’s approach.
Right now, Canadians only know information about one party’s approach.
Sooner or later, someone might have a real argument.
