Article content continued

“Global warming causes major damage to the global economy and the natural world and engenders risks of catastrophic and irreversible outcomes such as rising sea levels, extreme weather events (already more frequent) leading to loss of life, and the possibility of much higher warming scenarios,” the IMF said. “Policy action is thus urgently needed to curtail emissions. “

As coal use has declined precipitously in Canada, a US$75 a tonne carbon tax would increase electricity prices by less than 30 per cent in Canada compared with as much as 90 per cent in Australia and several large emerging market economies, the IMF said. Gasoline prices would rise by 5-15 per cent in most countries.

A US$75 a tonne carbon tax would increase electricity prices by less than 30 per cent in Canada compared with as much as 90 per cent in Australia IMF

“For retail electricity and gasoline, price changes of this size are well within the bounds of price fluctuations experienced during the past few decades,” the IMF said.

Under a US$75 a tonne carbon tax, electricity retail prices would increase 11 per cent in Canada compared with a global average increase of 32 per cent, and Canadian gasoline prices would jump 17 per cent, the report showed. Also, natural gas prices would balloon 128 per cent in the country, the IMF said.

In the IMF’s analysis of the impact of a US$50 a ton carbon tax in Canada, the U.S., China and India, the report found that Canada suffered the least burden on households and industry.

The report also suggested using 30-40 per cent of carbon tax revenue to compensate lower income households for higher energy prices while using the rest for public investment in India or China, and to cut labour taxes in Canada and the U.S.

This “is also highly progressive and can still generate large gains in economic efficiency,” the IMF said.

According to Ottawa’s assessment of the impact of the $20 a tonne carbon tax and government relief, the average family in Ontario would benefit $56 after paying $244 in higher prices and receiving $300 in the government’s climate action incentive. Similar net benefits would be $195 in Saskatchewan, $104 in Manitoba and $46 in New Brunswick, the government says.

Correction: The $50 carbon tax comes into force by 2022, not next year.

Financial Post

• Email: cmcclelland@postmedia.com