After years of seeming like a faraway problem, the climate crisis is now hitting home for Canadians. Last year, my province of British Columbia experienced catastrophic flooding and mudslides after a summer of deadly heat waves and wildfires. Houses, farms and roads were ravaged. Lives were lost. All of which left the province in a state of constant recovery.
In its latest report released February 28, the UN’s Intergovernmental Panel on Climate Change issued its most dire warning yet about the consequences of inaction on billions of people around the world. IPCC chair Hoesung Lee underscored the urgent need for immediate and more ambitious action, saying “Half measures are no longer an option.”
In the coming weeks, Canada’s federal government will update its climate plan so that it aligns with its emissions targets. While our leaders’ rhetoric has been bold, their actions have been more hesitant. This is in part because the transition to a low-carbon economy is often falsely framed as a choice between a healthy environment and a prosperous economy. The focus of public discourse is often on the challenges of the transition to the low-carbon future rather than the benefits of its final destination.
Research we conducted at the Deloitte Economics Institute has found that the economy can not only cope with the cost of the transition, but will continue to grow at close to the same pace as it would without a price on carbon. Additionally, not only will the transition costs abate over time, but the economic transformation also creates significant opportunities for Canada to become a market leader, particularly if we embrace and lead in clean technology areas, such as hydrogen and carbon capture and storage.
We isolated the impacts of carbon pricing, analyzing a business-as-usual scenario with no carbon price and a policy scenario with carbon pricing. We found that the sooner we ramp up, the sooner the costs associated with the transition to a low-carbon economy peak. At our current pace, the net economic impact turns positive in 2060 and climbs beyond that point, with our economic modelling showing that in 2070, the Canadian economy is larger by $30 billion compared to a world without climate action. We can’t wait 30 years, and accelerating our pace will have only positive results.
We know we can’t decarbonize our economy with carbon pricing alone. Our analysis shows that putting a price on carbon will do most of the heavy lifting to reach the government’s Paris Agreement goals, but it cannot fully achieve them.
How to close the gap
The transformation to a low-carbon economy will require a combination of regulation, carbon pricing, technology leveraging and substantive investment to dramatically shift Canadian energy use. While part of the revenue raised through carbon taxes should be given back to consumers through rebates in order to maintain public support, a significant share should go toward accelerating the adoption of clean technology.
This transformation will not be seamless or easy. As a country, Canada faces particular challenges in achieving its necessary carbon reductions. We have to consider the underlying drivers of our emissions and the fact that transition costs will be unequal across regions. Provinces with greater reliance on high-emitting industries will face greater transition costs. Oil and gas comprises a large part of Canada’s GDP, but if the country takes the necessary steps, it will be able to build a more environmentally sustainable domestic oil and gas sector by taking advantage of sustainable technologies, streamlining and improving processes, and making better use of data to reduce the ecological impact resulting from waste, spills and accidents. If we don’t, the economic impact of inaction will only exacerbate our situation.
We can’t wait 30 years, and accelerating our pace only increases the benefits.
While the energy transition requires significant investment, it also creates significant opportunities for Canada to become a market leader in clean technology areas. In developing a green energy sector, Canada will be able to export its environmentally sustainable technology, technical services and know-how globally. We have a respected history in the energy market and can parlay that into significant economic opportunities.
The world needs to transition to a low-carbon future. In Canada, while many are concerned about the potential economic costs resulting from this transition, there are enormous opportunities before us, particularly if we are able to make rapid progress. Delay will only increase the transition costs and reduce possible gains from being a leader in this green shift. We’ll need strong leadership, public support, bold actions, substantive investment and considerable collaboration between the public and private sectors to ensure we make the most of the opportunity ahead.
The choice facing Canadians is not whether we get there but how we can reap the rewards while minimizing the costs of the change. Ultimately, if we take early and decisive action, everyone – including taxpayers and consumers – will be better off over the long-term.
Henry Stoch is the national leader of Deloitte’s sustainability and climate change practice in Canada.