Job shifting effects of carbon pricing policy, with a focus on the Canadian construction industry

Construction and Carbon: The Impact of Climate Policy on Building in Canada in 2025  is a report released on May 1 by the Smart Prosperity Institute, with a title that doesn’t reflect the full range of the study.  The report actually models the effect of carbon pricing on GDP and employment in six sectors, although construction is the focal point since the research was financed by the Canadian Building Trades Unions.  Author Mike Moffatt uses the general equilibrium model gTech  to project two scenarios for the medium term (2025) :  a “business as usual” case (which assumes federal and provincial carbon policies as they existed in 2018) and an “aggressive” case, which assumes carbon prices increasing over time so that Canada would achieve its  Paris Agreement commitment to reduce  greenhouse gas emissions  by 30% by 2030.

Smart Prosperity emphasizes that “the construction sector is one of the ‘winners’ of carbon pricing, as escalating carbon prices unleash a wave of business and household investment.”  Specifically, raising the stringency of carbon prices (the aggressive scenario) shows that the total number of jobs in Canada would  increase by an 39,500 – 19,000 of which would be in construction, and 55,000 of which would be in services. These gains are offset by job losses in the other sectors: utilities, resources, manufacturing, and transportation. smart prosperity map re construction reportProjections are broken down by province: showing that for construction jobs, Saskatchewan would see the greatest growth, followed by Quebec, Ontario, New Brunswick, Alberta, and British Columbia.

The report also provides forecasts for: Investment by sector; Impact of Higher Carbon Policies on Business Investment by Type (e.g. renewable energy, CCS, public transit); and  Impact of Higher Carbon Policies on Household Investment by Type (building efficiency, low-carbon vehicles).

The differentiated effect of carbon taxes by sector is a theme explored in an earlier Smart Prosperity working paper  Do Carbon Taxes Kill Jobs? Firm-Level Evidence from British Columbia , released in March 2019 as part of the Clean Economy Working Paper series.  The Smart Prosperity Institute is based at  the University of Ottawa.

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