Carol McLellan, director of corporate services with the Yukon Finance Department, speaks during a technical briefing on carbon pricing April 5, 2018. (Chris Windeyer/Yukon News)

Federal study looks at carbon price impacts in Yukon

Study has little data on initial household costs, no thought of new mines, few business details

The federal government is predicting a price on carbon will reduce the territory’s greenhouse gas emissions by approximately two per cent in 2019.

That’s an estimated 13.6 kilotonnes according to a federal analysis of the impacts of carbon pricing in the Yukon released by the territorial government April 5. That number increases to an estimated 32 kilotonne reduction, about 5.4 per cent, in 2022.

“Given the fact that emissions in 2015 for aviation were 49 kilotonnes and emissions for electrical generation were 19 kilotonnes, a 32 kilotonne reduction is significant,“ said Kirsten Burrows, a senior analyst at the Yukon’s Climate Change Secretariat.

The federal government is implementing a carbon tax for any jurisdiction that hasn’t come up with one of its own, starting in 2019.

It starts with a $20/tonne tax in the first year which will grow to $50/tonne by 2022.

The report makes a handful of predictions regarding how much the tax will cost Yukon households if carbon pricing was implemented as planned in 2018. But changes to the implementation date, and the size of the tax when it starts, mean those numbers are no longer accurate.

The federal government predicted that a $10/tonne carbon tax in 2018 would cost the average Yukon household between $140 and $370 more a year.

The start date for the tax has since been pushed to Jan. 1, 2019 and the tax will now start at $20/tonne.

But Yukon officials say it’s not as simple as doubling the 2018 household predications to come up with 2019 estimates.

Since Yukon imports much of its goods from outside the territory, Yukoners are already paying for carbon pricing in other jurisdictions.

Carbon prices in B.C. and Alberta are currently higher than the prices that will be imposed in the Yukon at the outset, so those costs won’t increase, officials said. Only the direct cost of items bought and sold in the Yukon are expected to go up.

A spokesperson for Environment and Climate Change Canada could not provide exact numbers for how much more a Yukon household is expected to pay in 2019.

“We estimate the total impacts on a Yukon household to be, on average, about $760 in 2022, at $50/tonne,” spokesperson Mark Johnston said in an email.

The federal government predicts Yukon households will spend a total of $12.5 million on the carbon tax in 2022.

Yukon Party finance critic Brad Cathers said the flawed data forces Yukoners to make “some very high level assumptions.”

“We don’t have a firm number on the tax bill per household and we’ve got no idea whether Yukoners are going to be recovering any of that $500-plus per household in most of the Yukon or $850 for Old Crow,” he said.

“They haven’t provided any information on how adding that tax will actually reduce emissions.”

Rebate

The federal analysis doesn’t consider the Yukon Liberal Party’s promise to rebate all the money it gets from the carbon tax back to Yukoners and Yukon businesses.

The Yukon government is expected to generate $10.9 million from the carbon tax in 2019. That grows to $26 million by 2022. With nine months to go before the federal tax is implemented, Yukon officials say they still haven’t decided how that rebate will work.

Carol MacLellan, with the Yukon’s finance department, said the territory is still waiting for information from Ottawa about how and when it will get the money as well as more details about plans for heavily polluting industries, like mining, that Ottawa has promised.

NDP house leader Kate White said that if the territory was planning on giving larger rebates to specific industries, they will “need to justify it with math and science.”

“There is always going to be a cost to doing business and we already undersell on everything including royalties,” she said.

Impact on businesses

Unlike what Ottawa appears to have tried to do with household costs, the report includes no analysis of what the impact of a carbon tax will be on the bottom lines of individual businesses.

The report only looks at how a carbon tax will reduce the contribution of various sectors to the Yukon’s overall GDP.

In 2019 the transportation sector is expected to reduce the GDP by $4.6 million over what would have been expected for that year without a carbon tax.

“It could mean for example, compared to a business-as-usual scenario there are fewer flights, there are fewer planes leaving, there are fewer people taking those planes so the airline is buying less fuel,” MacLellan said.

“So when you look at the contribution of that airline’s activities to GDP, that’s slightly lower than it would have been without a carbon price.”

The federal government estimates Yukon’s GDP will be about 0.11 per cent, or $4.11 million, less in 2020 than it would be without a carbon tax.

With the Yukon Liberal government’s promise to rebate the money, the change to the GDP is a net zero, territorial officials say.

Peter Turner, the president of the Yukon Chamber of Commerce, said it was “encouraging” that the impact on the GDP appears to be low. Those changes could be mitigated if new businesses related to green energy open up.

Turner said the analysis has “more detail around the consumer side of things rather than the business side of things.”

Without details on the costs for individual businesses, it’s hard to plan a mitigation strategy, “but it’s also hard to measure if we were successful or not.”

Turner said the federal government based some of its analysis on data from 2013 and is expecting 2016 data later this year. That suggests there will be a lag before the federal government will know if the carbon tax is succeeding in reducing the carbon footprint, he said.

“We want this to be a success so we might be undertaking some surveys … to try and get a read on how it is impacting the business community,” he said.

The chamber will be putting together a committee to make recommendations to the territorial government about what the rebate should look like.

Turner said he’s worried about industries that can’t pass costs onto consumers, like mining.

“It’s not like they can say, ‘we’re going to charge you an extra $10 for gold’ because they’re on a commodities market.”

When it comes to the mining industry specifically, the federal government’s analysis asserts that the economic impact of a carbon tax will be “minimal.” But the study does not consider future mines.

“The methodology that was used, by there own admission basically draws a pencil line forward projecting the assumption that the way the economy worked over the last few years will continue going forward,” Cathers said.

“It doesn’t factor in major new mines that are expected to open and will immediately change those numbers.”

Cathers criticized the document for not at least doing a case analysis of what might happen when a new mine opens.

‘Unique circumstances’

Last May, federal Environment and Climate Change Minister Catherine McKenna said this study was being done to “find solutions that address the unique circumstances of the North.”

“In particular, we will discuss how a price on pollution will apply given the unique circumstances of the North; not whether a price on pollution will apply,” she said in a statement.

But there are no explicit considerations given to the North anywhere in the federal legislation, Yukon officials confirmed.

“The draft legislation was tabled last week and the intention with the federal backstop is that is applies the same way in P.E.I. as it will in N.W.T. as it will in the Yukon,” Burrows said, adding that the federal government has introduced other funding to help the North with environmental concerns.

In an emailed statement to the News, McKenna’s office said they are “working with territorial governments to find approaches to pricing pollution that work for northern Canada.”

”This modelling is analysis, not policy. It looks at the impact of a scenario where the federal backstop is applied to the Yukon, in order to provide data to the Yukon in formulating its approach to pricing pollution.

We are having very productive discussions with the government of the Yukon about pricing pollution, and we’re looking forward to continuing those discussions.”

Contact Ashley Joannou at ashleyj@yukon-news.com

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