Oil and gas emissions cap may lead to between $48 and $103 billion in federal deficits from 2030 to 2040
The proposed oil and gas emissions cap could result in $48 billion to $103 billion in cumulative federal government national accounts-based deficits over 11 years (2030 to 2040), according to numbers derived from the Conference Board of Canada’s recent report to Alberta Treasury Board and Finance.
In my analysis, I examined the impact of the proposed federal oil and gas emissions cap based on a reference or business as usual (BAU) case (no oil and gas emissions cap) and three oil and gas emissions cap scenarios: a 45 per cent methane reduction scenario, a 60 per cent methane reduction scenario, and a 75 per cent methane reduction scenario, all developed by the Conference Board of Canada.
Under the reference or BAU case, without the application of the proposed oil and gas emissions cap, the federal government’s cumulative national account surplus between 2030 and 2040 is $25.7 billion.
Under the 75 per cent methane reduction proposed oil and gas emissions cap scenario, the federal government experiences cumulative national account deficits totalling $47.7 billion between 2030 and 2040, a negative $73.4 billion change in the government’s fiscal position from the reference or BAU case.
Under the 60 per cent methane reduction proposed oil and gas emissions cap scenario, the federal government experiences cumulative national account deficits totalling $76.7 billion between 2030 and 2040, a negative $102.4 billion change in the government’s fiscal position from the reference or BAU case.
And under the 45 per cent methane reduction proposed oil and gas emissions cap scenario, the federal government experiences cumulative national account deficits totalling $102.6 billion between 2030 and 2040, a negative $128.3 billion change in the government’s fiscal position, from the reference or BAU case.
While there is widespread recognition that the proposed federal oil and gas emissions cap hurts the Alberta economy, the harm done to the rest of the Canadian economy and the federal government’s own fiscal position is less well known. Cumulative national account-based federal deficits resulting from the application of the oil and gas emissions cap could add up to $48 billion to $103 billion to Canada’s debt (estimated at nearly $1.4 trillion for 2028/29) between 2030 and 2040, increasing debt servicing costs (estimated at over $60 billion for 2028-29.
In light of these disturbing deficit and debt numbers, the federal government has a responsibility to immediately release its economic and fiscal impact analyses of the proposed oil and gas emissions on the Canadian and provincial economies and their finances.
Lennie Kaplan spent over two decades in the public service of Alberta, including as a senior manager in the fiscal and economic policy division of the Ministry of Treasury Board and Finance, where he worked on cross-ministry initiatives evaluating the fiscal and economic impacts of federal climate change policies. He retired from the province’s Canadian Energy Centre at the end of October 2023.
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