The carbon pricing debate is somehow getting worse

The parliamentary budget officer's analysis of federal carbon pricing is reportedly the subject of a "fight" with the Liberal government that includes allegations of "secret data" being withheld from the public.

So it seems that this conversation — a profoundly important one about how the federal government should respond to an existential crisis — has veered very far off course.

The central problem isn't what was included in the PBO's analysis but what was missing from it. But the current "fight" relates to an error that the PBO quietly acknowledged in April. 

The CBC's Robson Fletcher explained the details of that mistake last week. In short, while the office of the PBO published analysis that was purportedly specific to the federal government's fuel levy — commonly referred to as the "carbon tax" — the office accidentally included the federal government's industrial carbon price in its modelling. 

The inclusion of the industrial price — a policy the Conservatives have notably declined to condemn — presumably had some impact on the PBO's analysis of the "economic impact" of carbon pricing. But the PBO says it won't release a corrected report until sometime this fall.

In the meantime, the government is aggrieved, the PBO is being defensive and no one — least of all the average voter — is winning.

As written into the Parliament of Canada Act, the office of the Parliamentary Budget Officer has a mandate to "support Parliament by providing analysis, including analysis of macro-economic and fiscal policy, for the purposes of raising the quality of parliamentary debate and promoting greater budget transparency and accountability."

Right now, the quality of this parliamentary debate is getting worse.

The problem goes back to a report the PBO released in March 2022: "A distributional analysis of federal carbon pricing under the Government's A Healthy Environment and A Healthy Economy plan." 

Previously, the PBO had studied the "fiscal impact" of the Liberal government's carbon-pricing policy — whether Canadian households received more or less from the Canada Carbon Rebate than they paid in costs associated with the carbon tax. On that score, the PBO estimated that most households did receive more from the rebate than they paid in additional costs — confirming one of the government's central arguments for the policy.

In its March 2022 report, and again in an updated report published in March 2023, the PBO also measured the "losses in economic efficiency" associated with the imposition of a new levy. The PBO said that when those costs were accounted for, most households were actually worse off — a finding that the Conservatives have seized on to further their criticism of the Liberal policy.

But other experts quickly came forward to criticize the PBO's economic analysis — particularly over what it left out.

For one thing, the PBO didn't attempt to analyze any benefits that might result from lower greenhouse gas emissions (some economists and government departments use a measure known as the "social cost of carbon"). For another, the analysis made no attempt to compare the Liberal government's carbon-pricing policy with any alternative policies to reduce emissions.

"The PBO compares costs relative to a world in which Canada simply ignores its emissions — and faces no consequences," experts with the Canadian Climate Institute wrote last year.