Stephane Rolland, The Canadian Press
Canada has “ambitious” targets to decarbonize the economy, but it will take “significant reductions” in greenhouse gas emissions to meet them while its economy is one of the most energy-intensive among developed nations, according to a report by the Organization for Economic Co-operation and Development (OECD).
Among OECD members, only Australia is less efficient when considering the amount of greenhouse gases that are emitted to produce a comparable level of wealth, according to the report released in Ottawa on Monday.
For every unit of gross domestic product (GDP) generated, Canada emits on average more than double the emissions for equivalent wealth creation in the UK. Canada’s carbon intensity is nearly one-third higher than the United States.
“Canada produces a lot of oil and gas, explains the acting chief economist of the OECD, Alvaro Pereira, in a press conference. The harsh winters in Canada mean that more energy is needed in Canada to keep our buildings warm.”
Despite the magnitude of the challenge, the OECD believes that Canada “has a good framework” with a “range of instruments” to make the energy transition. However, some mechanisms could be improved, believes the chief economist of the international organization, Philip Hemmings.
“We must move forward with the increases in carbon prices that are planned, comments the economist. We also believe that it would be good if the carbon pricing system were strengthened in certain sectors and found ways to be more efficient.”
Need for greater productivity
The report also shows that productivity has been increasing more slowly in Canada than in the United States since 2020.
“In the medium and long term, I think that attention to ways to increase productivity should be a central issue surrounding debates on public policies, pleads Mr. Pereira. (…) It is important because if you want to have an improving standard of living and robust economic growth, you must have good productivity.”
Mr. Hemmings said there is no “magic bullet” to boost productivity and that governments need to continually think about ways to encourage productivity.
Among other things, the OECD proposes reducing trade barriers between provinces, which hinder the circulation of goods and services. “The non-recognition of certain qualifications between provinces reduces the efficiency of Canadian labor markets and limits mobility”, can we read in the report.
Skyrocketing property prices
A comparison with other OECD member countries shows that real estate prices have grown much faster in Canada since 2010 than in the euro zone and the United States.
Rising interest rates, which are adding to the mortgage debt of many households, represent a risk for the economy, but Mr. Pereira believes that this risk is “manageable”. “For some households, it could be an issue,” admits the economist.
Mr. Hemmings clarified that rising interest rates are not so much a risk for the banking sector, but rather for consumption as households have to spend more money on their mortgage payments.
