Carbon tax not to blame for affordability crisis: UCalgary study

Carbon taxation continues to be blamed for many of the affordability issues in Canada, but a new report questions if it's really the root cause of our money problems. Henna Saeed reports.

New data from the School of Public Policy at the University of Calgary is diving into how emissions pricing would affect affordability in the country.

The study used British Columbia’s long-running carbon tax and the most recent Statistics Canada data to figure out how the province’s carbon taxation affects affordability.

UCalgary economics professor Trevor Tombe, who wrote the study alongside public policy and economics associate professor Jennifer Winter, says the facts reveal fairly minimal effects for most products from the carbon tax.

“We find that carbon taxes increase air transport costs by about 0.9 per cent,” he explained. “We find that food in B.C is only 0.3 per cent more expensive as a result of carbon taxes and clothing, only 0.2 per cent.”

The paper says if Canada eliminated the carbon tax as a whole, consumers would likely not see a lot of extra cash in their pockets.

“All in, we estimate that the changes in carbon taxes affect consumer prices today by only 0.6 per cent and so that’s how much things would get cheaper by if we were to eliminate the carbon taxes completely,” Tombe said.

He believes Canadians should be aware of the carbon tax on their food, but notes that amount is far less than that of inflation.

“Just under 0.3 per cent here in Alberta to nearly 0.9 in Manitoba but, [whichever way] you slice it, that’s far smaller an effect than the well over 20 per cent increase in food prices that we’ve seen just in the past, roughly, two years,” Tombe explained.

That seems to be the case across the board — while carbon taxes have an impact on the price of essentials like food, clothing, gas, and more, it isn’t what is pushing costs over the edge.

“Carbon taxes do affect consumer prices beyond just energy, but by a very small amount relative to the very large and rapid inflation that we’ve seen over the past two years in Canada,” Tombe said. “So, carbon taxation is not itself a big part of the affordability challenge that we’re seeing in the country.”

“Those who attribute the affordability challenge to climate policy are missing much bigger contributing factors, like challenges in the housing market in Canada, global development.”

Tombe adds that while the country’s economic situation seems to be steadying, inflation is likely to impact the lives of Canadians for the foreseeable future.

“Affordability challenges are going to be here to stay for many years,” he said. “It looks like inflation has come down pretty rapidly, it’s getting much closer to where we’d like it at that two per cent target rate. But, price levels are still far higher than where they were.”

He also expects the issue to top potentially upcoming election platforms

The paper, written by Jennifer Winter and Tombe, can be found on the Policy School’s website

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