Senator Rosa Galvez

Print this page

Given the nature of the transformation required for Canada to meet its Paris Agreement obligations, Canadians and decision-makers must reflect on the economic costs and opportunities associated with the transition and of course the costs of inaction. This page highlights the economic benefits of strong climate action aligned with reaching net-zero emissions at the latest in 2050 and the economic costs associated with climate inaction.

Climate Action can Generate Economic Growth

The Canadian Net-Zero Emissions Accountability Act sends strong signals¹ about the long-term future of Canada’s economy, increasing the predictability of the necessary transition. Further, the bill enshrines in legislation a framework for target-setting and planning that will set the course for which types of projects are and aren’t compatible with our obligations.

In their February 2021 report Canada’s Net-Zero Future, The Canadian Institute for Climate Choices examined more than 60 possible pathways to reach net zero by 2050, and in all of them Canada’s GDP is substantially larger than it is today:

“Our analysis clearly shows that Canada’s future net zero economy will be stronger than the economy of today. Canadians will be better off. And when the other benefits of the transition are taken into account—from falling energy costs to cleaner air and better health to avoided impacts from a changing climate—they will likely be much better off.” (From an article about the report)

By 2030, Canada’s clean energy sector’s GDP is forecasted to grow by 58%, generating over 200,000 jobs while the fossil fuel sector will only grow by 9% and shed over 125,000 jobs. Despite steady growth in fossil fuel production over the last 20 years, the cost-benefit for Canadians has fallen sharply; non-renewable resource revenue on a per barrel of oil basis has fallen 72% in Alberta since 2000.

At the global level, the International Energy Agency highlighted in its May 2021 report, Net Zero by 2050: A Roadmap for the Global Energy Sector:

 “To reach net zero emissions by 2050, annual clean energy investment worldwide… will create millions of new jobs, significantly lift global economic growth, and achieve universal access to electricity and clean cooking worldwide by the end of the decade.”

“All the technologies needed to achieve the necessary deep cuts in global emissions by 2030 already exist, and the policies that can drive their deployment are already proven.”

Managing Director of the International Monetary Fund, Kristalina Georgieva, stated in June 2021:

“A transition to the new climate economy is critical to avoid widespread economic and financial disruption… Climate action is also an opportunity. And IMF research shows that green infrastructure investment with carbon pricing could boost global GDP by 7 percent annually over the next 15 years—and create millions of jobs.”

Economic Justification for Climate Action

The Economic Costs of Climate Impacts

Climate impacts include:

• Destabilization of ice sheets and glaciers and consequent sea level rise
• Stronger tropical cyclones
• Extreme heat impacts
• More frequent and intense floods and droughts
• Disruptions to oceanic and atmospheric circulation
• Destruction of biodiversity and collapse of ecosystems

These impacts will undermine economic growth and development, exacerbate poverty and destabilize political institutions. Current economic assessments of climate costs fail to take into account the potential for large concurrent impacts across the world that would cause mass migration, displacement and conflict (Stern & Stiglitz, 2021).

Economic assessments that are expressed solely in terms of effects on output, i.e. GDP, that only extrapolate from past experience, or that use inappropriate discounting, do not provide a clear indication of the potential risks to lives and livelihoods.

Further, GDP leaves out important aspects of well-being, such as human health, ecosystems, and Indigenous cultural traditions—all of which would suffer from climate change impacts.

Estimates of the Costs of Climate Impacts

Global Cost Estimates

• According to the World Bank, “Natural disasters cost about $18 billion a year in low- and middle-income countries through damage to power generation and transport infrastructure alone. They also trigger wider disruptions for households and firms costing at least $390 billion a year.”
• The Network on Greening Financial Systems (NGFS), a group of 91 central banks and supervisors estimates a global GDP impact of up to 13% and provides a landscape of GDP impact estimates in academic literature:

Cost Estimates for Canada

• A study by insurance company Swiss Re estimates that Canada, along with the UK and US, would lose around 6-7% of its GDP by 2050 with 2-2.6 degrees of warming and up to 9% under 3.2 degrees of warming.
• The World Resources Institute’s Aqueduct Floods Project projects that by 2050 flooding alone in Canada will impact 431,000 people and cost $17 B annually.
• A 2011 report from the National Round Table on the Environment and the Economy finds that climate change costs for Canada could be between $21 billion and $43 billion per year by the 2050s. They also project the costs of flooding from climate change could be between $1 billion and $8 billion per year by the 2050s. Changes to timber quantities due to climate change in the 2050s could reduce national GDP by up to 0.3% — or about $17 billion — compared to a case with no climate change.
• According to the Canadian Institute for Climate Choices, insured losses for catastrophic weather events totaled over $18 billion between 2010 and 2019, and the number of catastrophic events was over three times higher than in the 1980s.
• The Insurance Bureau of Canada estimated that insured losses to the private sector and individuals from catastrophic weather events have more than quadrupled over the past decade, causing $2.4 billion in insured damage in 2020. Uninsured losses are roughly three to four times that amount.
• The Fort McMurray wildfire, which caused the evacuation of 88,000 residents, was by far the costliest wildfire in Canada’s history, and the most costly disaster experienced by the country. The overall estimated financial impact was $8.9 billion
• The Agri-food sector will see declines in yield arising from increases in frequency, severity, and unpredictability of severe weather events including periods of prolonged drought and precipitation. Extreme weather events that can reduce crop yields by as much as 50% and warmer summers mean reduced milk production and reduced weight gain among beef cattle.
  

¹ Economic Considerations in the CNZEAA

• Economic projections must be included in the emissions reductions plan; Canada’s emission reduction plans will create a competitive advantage in the clean economy that attracts investment, stimulates economic growth, and leads to more jobs and less pollution.
• The advisory body must contain expertise in “economic and distributional effects of climate change” and “economic analysis and forecasting”.
• The advisory body must specifically take into account economic factors in providing advice and reporting
• The preamble recognizes that “climate change poses significant risks to (…) economic growth and the “plan to achieve net-zero emissions by 2050 should contribute to making Canada’s economy more resilient, inclusive and competitive”.

Return to text