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Federal government’s emission-reduction plan will cost Canadian workers $6,700 annually by 2030—while failing to meet government’s emission-reduction target

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From the Fraser Institute

By Ross McKitrick

The federal government’s plan to reduce greenhouse gas emissions will impose significant costs on Canadians—while also failing to meet the government’s own emission-reduction target, finds a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“The government’s plan will significantly hurt Canada’s economy and cost workers money and jobs,” said Ross McKitrick, professor of economics at the University of Guelph, senior fellow at the Fraser Institute and author of The Economic Impact and GHG Effects of the Federal Government’s Emissions Reduction Plan through 2030.

The government wants to reduce greenhouse gas (GHG) emissions to 40 per cent below 2005 levels by 2030. To meet this target, the government has enacted a series of policies including the federal carbon tax, clean fuel standards and various other GHG-related regulations such as energy efficiency requirements for buildings,
fertilizer restrictions on farms, and electric vehicle mandates.

The study finds that these combined policies will only reduce GHG emissions by an estimated 57 per cent of the government’s 2030 emission-reduction target.

And crucially, by 2030 these policies will:

• reduce Canada’s GDP by 6.2 per cent
• cost $6,700 per worker annually
• reduce employment in Canada by 164,000 jobs

“This poorly-designed plan, which will worsen the current downward trends in productivity and income, will reduce emissions but at a cost many times higher than the government’s estimated benefits,” McKitrick said.

  • The federal government has set a GHG emissions reduction target of at least 40% below 2005 levels by 2030, equivalent to 38.5% below 2022 levels.
  • This report examines proposed policies aimed at achieving these goals and evaluates their potential impact, aiming to address the gap left by the federal government’s lack of efforts in this matter.
  • The paper uses a peer-reviewed macroeconomic model to assess the federal government’s Emissions Reduction Plan (ERP), including carbon pricing, Clean Fuel Regulations, and other regulatory measures such as EV mandates.
  • It is estimated that the ERP will reduce Canada’s GHG emissions by about 26.5% between 2019 and 2030, reaching approximately 57% of the government’s 2030 target, leaving a substantial gap.
  • The implementation of the ERP is expected to significantly dampen economic growth, with a projected 6.2% reduction in Canada’s economy (i.e., real GDP) compared to the base case by 2030.
  • Income per worker, adjusted for inflation, is forecasted to stagnate during the 2020s and decrease by 1.5% by 2030 compared to 2022 levels.
  • The ERP costs $6,700 per worker annually by 2030, which is more than five times the cost per worker compared to the carbon tax alone.
  • Overall, while the federal ERP will contribute to reducing GHG emissions, it falls short of meeting the 2026 or 2030 targets and imposes significant economic burdens on Canadian households. Additionally, due to the high marginal cost of many regulatory measures, the ERP plan is costlier than it needs to be for what it will accomplish.

Adobe PDF Read the Full Report

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Five key issues—besides Trump’s tariffs—the Carney government should tackle

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From the Fraser Institute

By Jake Fuss and Grady Munro

On Tuesday in Ottawa, Prime Minister Mark Carney unveiled his new cabinet, consisting of 28 ministers and 10 secretaries of state. They have their work cut out for them. In addition to President Trump’s trade war, the Carney government must tackle several other critical issues that have persisted since long before Trump was re-elected.

First and foremost, the Carney government should address stagnant living standards for Canadians. From the beginning of 2016 to the end of 2024, per-person GDP—a broad measure of living standards—grew by only 2.5 per cent in Canada compared to 18.7 per cent in the United States (all figures adjusted for inflation). While U.S. tariffs threaten to further reduce living standards in Canada, the marked decline began almost a decade ago.

There’s a similar gloomy story in worker incomes as Canadians continue to fall further behind their American counterparts. According to the latest data, median employment earnings (in Canadian dollars) in all 10 provinces ranked lower than in every U.S. state in 2022—meaning Americans in low-earning states such as Mississippi ($42,430), Louisiana ($43,318) and Alabama ($43,982) typically earned higher incomes than Canadians in the highest-earning province of Alberta ($38,969).

Why is this happening?

Part of the problem is the state of federal finances. Even Prime Minister Carney has criticized the Trudeau government’s approach to spending increases and debt accumulation, which diverts taxpayer dollars away from programs and towards debt interest payments, and burdens younger generations with higher taxes in the future. But unfortunately, according to Carney’s election platform, his government plans to borrow $93.4 billion more over the next four years compared to the Trudeau government’s last spending plan. The prime minister and his new cabinet should rethink this approach before tabling their first budget.

The Carney government should also cut taxes. Canadians in every province face higher combined (federal and provincial) personal income tax (PIT) rates than Americans in virtually every U.S. state across a variety of income levels. Canada’s PIT rates are similarly uncompetitive compared to other advanced countries. High taxes impose a burden on families, but they also make it harder for Canada to attract and retain high-skilled workers (e.g. doctors, engineers), entrepreneurs and investment, which drives economic growth and prosperity.

Finally, the Carney government should meaningfully address Canada’s housing affordability crisis. Housing costs have risen dramatically due to a significant gap between the demand for houses and the supply of housing units. In 2024, construction began on 245,367 new housing units nationwide while the population grew by 951,717 people due in part to one of the highest levels of immigration in Canadian history. This problem has been growing for decades—housing starts per year have remained stuck at essentially the same level they were in the 1970s while annual population growth has more than tripled. If policymakers want to help lower housing costs, they must reduce the imbalance between population growth and housing starts.

For the federal government, that means aligning immigration targets more closely to housing supply and rethinking policies that increase housing demand such as homebuyer tax credits and First Home Savings Accounts. Meanwhile, provincial and local governments should reduce red tape and construction costs to increase supply.

The Carney government has its work cut out for it. Besides U.S. tariffs, Canadians face several critical issues, which have persisted long before Trump was re-elected, and will continue unless something changes.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute
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Business

Washington Got the Better of Elon Musk

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The tech tycoon’s Department of Government Efficiency was prevented from achieving its full reform agenda.

It seems that the postmodern world is a conspiracy against great men. Bureaucracy now favors the firm over the founder, and the culture views those who accumulate too much power with suspicion. The twentieth century taught us to fear such men rather than admire them.

Elon Musk—who has revolutionized payments, automobiles, robotics, rockets, communications, and artificial intelligence—may be the closest thing we have to a “great man” today. He is the nearest analogue to the robber barons of the last century or the space barons of science fiction. Yet even our most accomplished entrepreneur appears no match for the managerial bureaucracy of the American state.

Musk will step down from his position leading the Department of Government Efficiency at the end of May. At the outset, the tech tycoon was ebullient, promising that DOGE would reduce the budget deficit by $2 trillion, modernize Washington, and curb waste, fraud, and abuse. His marketing plan consisted of memes and social media posts. Indeed, the DOGE brand itself was an ironic blend of memes, Bitcoin, and Internet humor.

Three months later, however, Musk is chastened. Though DOGE succeeded in dismantling USAID, modernizing the federal retirement system, and improving the Treasury Department’s payment security, the initiative as a whole has fallen short. Savings, even by DOGE’s fallible math, will be closer to $100 billion than $2 trillion. Washington is marginally more efficient today than it was before DOGE began, but the department failed to overcome the general tendency of governmental inertia.

Musk’s marketing strategy ran into difficulties, too. His Internet-inflected language was too strange for the average citizen. And the Left, as it always does, countered proposed cuts with sob stories and personal narratives, paired with a coordinated character-assassination attempt portraying Musk as a greedy billionaire eager to eliminate essential services and children’s cancer research.

However meretricious these attacks were, they worked. Musk’s popularity has declined rapidly, and the terror campaign against Tesla drew blood: the company’s stock has slumped in 2025—down around 20 percent—and the board has demanded that Musk return to the helm.

But the deeper problem is that DOGE has always been a confused effort. It promised to cut the federal budget by roughly a third; deliver technocratic improvements to make government efficient; and eliminate waste, fraud, and abuse. As I warned last year, no viable path existed for DOGE to implement these reforms. Further, these promises distracted from what should have been the department’s primary purpose: an ideological purge.

Ironically, this was the one area where DOGE made major progress. In just a few months, the department managed to dismantle one of the most progressive federal agencies, USAID; defund left-wing NGOs, including cutting over $1 billion in grants from the Department of Education; and advance a theory of executive power that enabled the president to slash Washington’s DEI bureaucracy.

Musk also correctly identified the two keys to the kingdom: human resources and payments. DOGE terminated the employment of President Trump’s ideological opponents within the federal workforce and halted payments to the most corrupted institutions, setting the precedent for Trump to withhold funds from the Ivy League universities. At its best, DOGE functioned as a method of targeted de-wokification that forced some activist elements of the Left into recession—a much-needed program, though not exactly what was originally promised.

Ultimately, DOGE succeeded where it could and failed where it could not. Musk’s project expanded presidential power but did not fundamentally change the budget, which still requires congressional approval. Washington’s fiscal crisis is not, at its core, an efficiency problem; it’s a political one. When DOGE was first announced, many Republican congressmen cheered Musk on, declaring, “It’s time for DOGE!” But this was little more than an abdication of responsibility, shifting the burden—and ultimately the blame—onto Musk for Congress’s ongoing failure to take on the politically unpopular task of controlling spending.

With Musk heading back to his companies, it remains to be seen who, if anyone, will take up the mantle of budget reform in Congress. Unfortunately, the most likely outcome is that Republicans will revert to old habits: promising to balance the budget during campaign season and blowing it up as soon as the legislature convenes.

The end of Musk’s tenure at DOGE reminds us that Washington can get the best even of great men. The fight for fiscal restraint is not over, but the illusion that it can be won through efficiency and memes has been dispelled. Our fate lies in the hands of Congress—and that should make Americans pessimistic.

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