Greenhouse Gas (GHG) Emissions by Province

(To be updated soon with 2018 data)
In new Prime Minister Justin Trudeau’s election platform, he committed his government to:

·         “working with the provinces and territories to set (greenhouse gas) targets”

·         “attend the December 2015 United Nations Climate Change Conference in Paris, and will invite all Premiers to join him”

With the new government’s new accent on working with the provinces in this area, let’s look at the record so far with a special focus on GHG emissions by province.

The Chrétien/Martin government ratified the 1997 Kyoto Protocol and committed Canada to reduce GHG emissions. Canada’s average emissions over 2008-2012 were to be 6% below the 1990 level. In 2005, the last year that the previous Liberal government was in office, Canada’s GHG emissions were 21% above the 1990 benchmark.

To be fair to former Prime Minister Harper, even if he had wanted to, he could not possibly have met the Kyoto commitment that he inherited when he took office at the start of 2006. However, he did not want to comply with Canada’s Kyoto commitment. He sneered at “so-called GHG emissions” and dismissed Kyoto as “fun for a few scientific and environmental elites in Ottawa, but (for) ordinary Canadians ... the benefits are negligible”. 

The Harper government formally withdrew from the Kyoto Protocol.

The provinces were not bound by the Kyoto Protocol. However, the provinces control many policy levers needed to reduce GHG emissions – e.g., ownership and/or regulation of electric power, share the gasoline tax with the federal government.

Environment Canada collects and publishes comparable estimates of GHG emissions by province. No province met Canada’s national target of a 6% GHG reduction between 1990 and 2008-12. However, Quebec came close with a -5% reduction. Ontario at -3% was the only other province to reduce GHGs over that period. But, these reductions in Canada’s 2 most populous provinces were dwarfed by GHG increases in the three westernmost provinces – Saskatchewan (nearly +60%), Alberta (just over +40%) and British Columbia (BC +15%). Thanks to the GHG-intensive boom in western oil and gas production, GHGs rose by over 16% for Canada as a whole vs. up 7% in the USA, which never ratified Kyoto.

In the 2009 Copenhagen Agreement, Harper adopted Chrétien’s strategy of copying the American target – 2020 GHG emissions 17% below the 2005 level.

So far, Canada is doing a bit better with our Copenhagen commitment. The latest data for 2018 show Canada’s GHG emissions -2% below the 2005 benchmark vs. -12% reduction in the USA. However, neither Canada nor the USA will likely hit the Copenhagen target of a 17% GHG reduction by 2020. Canada is far away from reaching this target and the American federal administration of Donald Trump has abandoned GHG reduction policies. 

At the provincial level, Nova Scotia (NS) is leading the way with 2017 GHGs almost 33% below the 2005 level. New Brunswick (NB) is 2nd at -24% and Ontario 3^rd at -22%. PEI and Quebec are tied for 4^th at -10%. Alberta (+18%) and Saskatchewan (+14%) remain the laggards. However, thanks to low oil and gas prices slowing resource production, GHGs in those provinces have not grown as fast from 2005 to 2017 as was the case from 1990 to 2005.

Looking at the full 1990-2017 period spanning both Kyoto and Copenhagen, NS (-20%) is the leader followed by Ontario 2nd at -12% and Quebec 3rd at -11%. However, GHGs have grown fast enough in Saskatchewan (+76%), Alberta (+58%) and BC (just under +20% ) to leave Canada’s total for 2017 19% above the Kyoto Protocol’s 1990 benchmark (vs. 1% rise over the same period in the US).

In the new Paris Agreement, the Justin Trudeau government set yet another target for Canada -- a 30% GHG reduction from 2005 by 2030. Canada has finally set a different target than the USA. President Obama committed Americans to reduce total GHGs by 26% below their 2005 level by 2025. However, neither Canada nor the USA has ever had a plan to reach their GHG reduction targets. And, the Trump Administration has cancelled the USA's Paris commitment announced by then President Obama.

Ontario Silver Medal for Job Growth over 2013-18

(Updated January 2019) Employment data for the 2018 calendar year show PEI in front with 3% annual job growth vs. 2017. (Data not seasonally adjusted.) 
Alberta took the silver position at 1.9%. (For most of 2018, oil prices were higher than at any time since the recent 2014 post-recession peak. If prices remain at current low levels, Alberta job growth may fall back again.) 
Ontario took bronze at 1.6%. (Let's call 2018 the last year when the Wynne Liberal policies were in effect. There's no evidence yet that the new Ford government's "open for business" positive thinking has boosted Ontario's trend job growth. Annual job growth was actually a bit weaker in the second half of 2018 at 1.4% when we compare the last 6 months of 2018 with Premier Ford in power against the last 6 months of 2017.)  
Quebec finished 6th at 0.9% for 2018/2017 full calendar year job growth. 
(Data from here on needs updating) As for annual data complete through December 2018, let's treat 2013 as the base year for comparison -- the last full year of the Parti Quebecois government in Quebec and the last year that we could say that previous Premier Dalton McGuinty's policies were in effect in Ontario with current Premier Kathleen Wynne taking over in February 2013. Ontario ranks 2nd in job growth with 2013 as the base year averaging 1.x% over the 5 years to 2018 and Quebec ranks 3rd with 0.9x% annual job growth when employment averaged for all 12 months of 2018 is compared with 2013.
British Columbia (BC) reigns supreme over this period averaging 2.x% annual job growth. There's more to political success than employment growth. The BC Liberal government was defeated in May 2017 in the midst of this provincial job boom.
Over a longer period, employment growing faster in Quebec than in Ontario is one of the little-noticed economic stories of this millenium. Quebec's annualized average job growth of 1.3% has exceeded Ontario at 1.2% (2018 vs. 2001). Quebec ranked 4th among the provinces over this period behind Alberta (2.15%), BC (1.6%) and Saskatchewan (1.3%). The 3 westernmost provinces benefited from the oil and gas boom until 2014.
Quebec's reputation as one of Canada's economic tortoises dates back to the last century. Quebec jobs rose at a 1.2% annualized rate over 25 years to 2001 from 1976 -- the year that the PQ was first elected. The PQ was in power for 16 years of this quarter-century period from 1976 to 2001. Quebec ranked 7th in Canada annualized average job growth. Alberta (2.6%), BC (2.4%) and Ontario (1.9%) were Canada's economic hares from 1976 to 2001.

Quebec's job growth history fits the tortoise vs. hare metaphor quite nicely. Quebec's job growth since 2001 has continued at about the same pace as the 1976-2001 period. But, Ontario, once one of Canada's economic hares, fell back behind Quebec's job growth pace.

The last 5 years marked a restoration of Ontario's superior job growth performance vs. Quebec. With populists now in charge in both provinces and focusing on non-economic issues, who can say what the future will bring? 
Over short periods, structural good luck and bad luck may play a larger role than public policy. For example, job growth was relatively strong in Ontario over the 5 years of the Wynne government even though Premier Wynne and most of her Cabinet treated conventional economics with disdain. Over time, the left-wing populism of the previous Ontario government and right-wing populism of the current government (both of which reflect the populist instincts of voters who favour lower taxes and more government intervention at the same time) may reduce Ontario's long-term economic growth.

Ontario Housing Prices Still Booming in 2017

The Quebec economy and job market were growing slowly even before the Couillard Liberal government won power in April 2014. With the new government following a familiar script of doling out tough fiscal measures in the post-election budget, Montreal and Quebec City house prices peaked in the summer of 2014. 

As of May 2017, Montreal housing prices have finally inched back 0.2% above the previous peak level reached in 2014, but Quebec City prices were still -6% below 2014. If Quebec's fiscal plan works over the medium to long term, let's see whether Montreal housing price growth catches up with and even pulls ahead of Toronto in later years. 

No sign of that so far. 2013 is our starting or base year before the Quebec Liberals were elected and the Ontario Liberals were re-elected. Greater Toronto's housing price growth of 9.4%/year was streets ahead of Greater Montreal at 0.2%/year when we compare the annual average Teranet housing price index for 2016 to the 2013 annual average.

Vancouver's annual price growth was even higher over this period at 11.6%. 

Vancouver sale prices for the first 5 months of 2017 were up 12% from the same months in 2016.

No surprise to see Alberta house prices turning down in 2016 with Calgary down -2.6% and Edmonton down -1% compared to 2015 on a full year average basis. However, Calgary housing prices did rise month-over-month in late 2016 with the oil price. For 2017 so far, Calgary prices were up 1% over 2016 with Edmonton prices down -1%.  

The beat goes on in southern Ontario with Toronto prices up 25% and Hamilton prices up 21% so far in 2017. It's hard to believe that the Greater Toronto housing price boom is going to end with a soft landing. Montreal and Quebec City annual price growth in 2017 remains way behind at 3% and -2% respectively.

CIBC economist Benjamin Tal's review of rent control is worth reading now that the Ontario government is extending this policy to buildings built after 1991.

https://economics.cibccm.com/economicsweb/cds?ID=2595&TYPE=EC_PDF

Will Ontario and Quebec Government Revenues Rise with the Falling Oil Price?

Lots of media talk recently about the changing of the guard in the Canadian economy. The oil-rich provinces of Alberta, Saskatchewan and Newfoundland will lose their economic mojo thanks to the recent halving of the world oil price. Ontario, Quebec and the other non-oil provinces will do relatively well after more than a decade of watching money and people flowing to the Alberta oil boom.
I believe macroeconomists' predictions that income will grow faster in Ontario and Quebec than in the oil provinces during 2015 and subsequent years if the price of oil stays low in the present US$50 range. 
In past years before Ontario qualified for federal equalization payments, we would expect faster economic growth in Ontario to generate faster growth in Ontario government revenue.
But, now that Ontario is an equalization recipient, I am not sure whether this expectation will come true. 
The Ontario government's own revenues from income, sales and other taxes will rise as the Ontario economy strengthens pulled along by rising demand for Ontario exports to the United States. But, as Ontario's economy strengthens relative to the Canadian average, Ontario's entitlement to federal equalization revenue will fall. 
Even worse, the sharp fall in Alberta, Saskatchewan and Newfoundland government oil revenue -- estimated in some reports to be more than $10 billion/year drop for the 3 provinces combined plus BC which has some oil -- will reduce equalization payments to all provinces because total provincial government revenue to be equalized will be that much less.
At one time, total revenues for an equalization-receiving provincial government were tied tightly to the fortunes of all provinces. An increase in Prince Edward Island's revenue capacity per person relative to the national average would be offset more or less dollar-for-dollar by a decline in equalization revenue per person. But, the equalization formula has been amended significantly over the past decade. 
Equalization adjustments to changing economic and fiscal circumstances are now much more gradual. It may be the case that the Ontario and Quebec governments will reap a short-term total revenue gain from the economic growth generated by the oil price fall. However, over time, it is possible that equalization losses will offset Ontario and Quebec government revenue gains. 
I am not certain that the oil price fall and Ontario's sunnier economic outlook improve the chances that the Ontario government can meet its target of balancing the provincial budget by 2017-18. Quebec is more ambitious with a goal of balancing the 2015-16 budget. The difference between Quebec and Ontario is that Quebec is taking concrete steps to reach the balanced budget target. If Quebec's total revenue growth remains weak, Quebec might still get to balance.
I would be very interested in hearing comments from anyone out there who has kept up to date with the complex operation of the federal equalization formula. Am I right to suspect that Ontario's total revenue may not be boosted, and may even be cut slightly, by the effects of the oil price fall on the equalization formula? 
(Update 1 January 2016: I was interested to see in recent media reports that Ontario may be on its way out of equalization.)