The Canadian economy is one of the most energy-intensive, underlines the OECD in a report
Canada's carbon intensity is nearly one-third higher than that of the United States.
Canada has “ambitious” targets to decarbonize the economy, but it will take “significant reductions” in greenhouse gas emissions to meet them, as its economy is one of the most energy-intensive in the country developed, 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 unveiled at Ottawa Monday.
For every unit of gross domestic product (GDP) generated, Canada emits on average more than double the emissions of the UK, for a creation of equivalent wealth. Canada's carbon intensity is nearly one-third higher than that of 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.
Canadian oil sands are the third largest proven oil deposits in the world, reads the government website.
Despite the scale of the challenge, the OECD believes that Canada has a good framework and many instruments to make the energy transition. Some mechanisms could be improved, however, according to the international organization's chief economist, Philip Hemmings.
We must move forward with the increases in carbon prices that are planned, argues the economist. We also believe that it would be good if the carbon pricing system could be strengthened in certain sectors and find ways to be more efficient.
The report also shows that productivity has been increasing more slowly in Canada than in the United States since 2020.
In the medium to long term, I think attention to ways to increase productivity should be a central issue surrounding public policy debates, says Pereira. This is important because, if you want to have an improving standard of living and robust economic growth, you need to 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.
The OECD proposes, among other things, to reduce 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, the report says.
Comparison with others member countries of the OECD 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, pose a risk to 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 payment.
