Thursday, October 22, 2015

Greenhouse Gas (GHG) Emissions by Province

(Updated 2017 with 2015 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 Chr├ętien/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 to a 5% reduction. Ontario at -2% 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 (+56%), Alberta (+40%) and British Columbia (BC +19%). Thanks to the GHG-intensive boom in western oil and gas production, GHGs rose by 16.5% for Canada as a whole vs. up 7% in the USA, which never ratified Kyoto.

In the 2009 Copenhagen Agreement, Harper adopted Chr├ętien’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 2015 (the last full calendar year of the Harper regime) show Canada’s GHG emissions 2% below the 2005 benchmark vs. -10% reduction in the USA. However, neither Canada nor the USA will likely hit their Copenhagen target of a 17% GHG reduction by 2020. 

At the provincial level, New Brunswick (NB) and Nova Scotia (NS) are leading the way with 2015 GHGs 30% below their 2005 levels. Ontario is 3rd at -19%, Prince Edward Island 4th (PEI = -15%), Quebec 5th at -10% and BC 6th at -5%. Alberta (+18%) and Saskatchewan (+8%) remain the laggards, but thanks to low oil prices slowing production GHGs in those provinces have not grown as fast from 2005 to 2015 as was the case from 1990 to 2005.

Looking at the full 1990-2015 period spanning both Kyoto and Copenhagen, NS (-18%) and NB (-13.5%) are the leaders followed by Quebec 3rd at -10%, Ontario 5th at -8% and PEI  5th at -5%, . However, GHGs have grown fast enough in Saskatchewan (+66%), Alberta (+56%) and BC (+17%) to leave Canada’s total for 2015 18% above the Kyoto Protocol’s 1990 benchmark (vs. 3.5% rise over the same period in the US).

In the new Paris Agreement, the new 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. Neither Canada nor the USA has a plan to reach the new Paris targets and the Trump Administration has announced that the USA is withdrawing from the Paris process.

Monday, May 11, 2015

Ontario Silver Medal for Job Growth in 2016 (and over 2013-16)

With all 12 months of Statistics Canada job data now in, 2016 looks relatively good for Ontario with 1.1% year-over-year job growth -- 2nd out of 10 provinces behind only to British Columbia (BC =3.2%). Quebec ranks 3rd with 0.8% job growth. All other provinces have fewer jobs in 2016 compared to 2015.

Let's treat 2013 as the base year for comparison -- the last full year of the Parti Quebecois government in Quebec and 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 0.9% over the 3 years to 2016 and Quebec ranks 3rd with 0.6% annual job growth when employment averaged for all 12 months of 2016 is compared with 2013. BC reigns supreme over this period averaging 1.6% annual job growth.

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 1.2% has exceeded Ontario at 1.1% (2016 vs. 2001).

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.

However, the last 3 years mark a restoration of Ontario's superior job growth performance vs. Quebec.

(Update June 2017) Employment data for the first 5 months of 2017 show BC still out in front with 3.8% annual job growth vs. 2016 (not seasonally adjusted). Interesting that strong job growth did not save the BC Liberal government from a narrow defeat in the May 2017 election. PEI is in silver position at 3.1% (after a -2.2% loss in 2016), Quebec bronze at 2.2% and Ontario 4th at 1.35%. Alberta's job market is at least showing signs of stabilizing with total jobs up 0.5% (8th). Newfoundland is last with jobs down another -3.3% so far in 2017 as that province's economy suffers the double whammy of lower oil prices (since the recent highs of 2014) and a fiscal adjustment enforced by the bond market. 

Tuesday, March 24, 2015

Ontario Housing Prices Still Booming

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




Friday, January 9, 2015

Ontario Jobs Hare Beat Quebec Tortoise in 2014

(Updated 18 February 2016)
Statistics Canada data show that Ontario is back on top as the non-oil province with the strongest job growth in 2014 (12-month average compared to 2013). 

Yes, Alberta and Saskatchewan led the way again in 2014. The oil price was high for most of 2014. Ontario and the other non-oil provinces could not compete with Alberta and Saskatchewan in the 2014 job growth contest. Alberta, Saskatchewan and BC have been dominating job growth in Canada since 2000. But, 2014 may well mark the last hurrah for the western jobs boom until resource prices bounce back. 

Quebec lagged behind in 6th place among the 10 provinces. On an annual average basis, total jobs actually fell by 0.03% in Quebec between 2013 and 2014 vs. +0.8% growth in Ontario. Job growth was already lagging in Quebec when the Parti Quebecois government of Pauline Marois was defeated in April 2014. The incoming Couillard government may have then contributed to job stagnation with budget constraints imposed to meet the 2015-16 budget balance target.

The Quebec government will be in a much stronger position than Ontario to withstand the next recession. My hypothesis is that the Quebec jobs tortoise will catch up with and surpass the Ontario hare during the next economic cycle of recession and recovery. However, I can't predict whether Couillard's risk-averse approach to fiscal management will have paid off politically by the autumn of 2018 when both the Quebec and Ontario governments return to the polls.

GDP Growth 2014

Ontario's relatively strong employment performance in 2014 was consistent with relatively strong economic and income growth as measured by Gross Domestic Product (GDP). Ontario's real GDP (adjusted for changes in the prices of each province's products) growth of 2.7% in 2014 ranked 3rd among the provinces behind Alberta (4.8%) and BC (3.2%). Quebec ranked 6th with 1.5% real growth.

Alberta's years of strong GDP growth ended in 2014 and will not resume until the world oil price rebounds and/or Alberta goes through the painful transition to a post-oil future. 

Thursday, January 8, 2015

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.)