University of Waterloo researchers have analysed the effects of Canada’s carbon price regime on the economy. Their findings indicated that, as carbon costs rise, high-emitting carbon industries could be placed at risk of default, facing a financial risk of $256bn (£203bn).
The study called on financial lenders to consider carbon emissions a part of their credit assessment of Canadian companies.
Over the past few years, Canada has established a national minimum tax on carbon pollution above a certain sector-specific threshold, with the goal of transitioning to a net-zero economy. The price of carbon started at $20 per tonne in 2019, increasing to $50 in 2022.
However, the University of Waterloo study has exposed the uncertainty the Canadian economy faces as a result of these measures.
“Canadian banks are deeply involved in lending to carbon-intensive clients and have increased lending to those companies by billions of dollars despite their public commitments...