Agreement on a Pan-Canadian Carbon Pricing Scheme

It looks as though Prime Minister Justin Trudeau’s Liberals are moving forward with a national carbon pricing scheme albeit adapted to regional circumstances. On Thursday March 3, 2016, Trudeau announced that the federal government along with all ten provinces have agreed to a “comprehensive and ambitious plan” to put a price on carbon.

Carbon pricing (which includes both cap and trade and a carbon tax) leverages the market to disincentivize emissions intensive activities by making them more expensive while incentivizing low carbon technologies. In effect carbon pricing integrates the true cost of carbon which is currently not reflected in the market. Carbon pricing is the best way to help governments reduce emissions while minimizing economic impacts.

There are some compelling arguments that have been made in support of carbon pricing. In April 2015, 65 researchers in Canada published a report that indicated putting a price on carbon is key to reducing emissions in the country. With oil prices so low this may be the best time to put a price on carbon. Although carbon pricing was rejected by the previous Conservative government under Stephen Harper, it was part of the Liberal’s raft of campaign promises.

Canada’s new Prime Minister has said that he will respect the unique circumstances of each province and this appears to be the caveat that secured the support of detractors like Saskatchewan’s Brad Wall. “There will be different approaches but pricing carbon is part of the solution that this country and all of its premiers will put forward,” Trudeau told a news conference.

There are predictable detractors like David McLaughlin former
President and CEO of the National Round Table on the Environment and the
Economy and a Conservative Chief of Staff. In a Globe and Mail
article McLauglin indicated that carbon pricing, particularly as it is
being proposed in Canada, “is the least effective way to reduce
emissions.”

Canadians support climate action and carbon pricing. A poll published in January 2015, when Harper’s Conservatives where still in power, found that the majority of Canadians said that Canada “should do more” to combat climate change. A total of 69 percent of those surveyed said that they favored a carbon reduction incentive and 59 percent said that they supported “increasing taxes on those activities and products that generate more emissions.” While 78 percent supported, “lowering taxes on those activities and products that produce lower emissions,” only 44 percent supported “introducing a national carbon tax that would be phased in over time.”

As reported by the CBC an Angus Reid Institute poll at the end of 2015, a solid majority of Canadians see climate change as a serious threat and want to see emissions reductions even if it increases their annual energy costs. The poll indicates that Canadians prefer a cap-and-trade system over a carbon tax.

Although the previous Conservative government claimed that carbon pricing would kill jobs in October last year Desmog reported on a Clean Energy Canada study that indicated action on carbon pricing could create a million jobs in the province of BC alone.

To further refute the claims of the Harper Conservatives, all around the world countries are adopting carbon pricing and the economic hit promised by detractors has not materialized. Carbon pricing has the support of the president of the World Bank and the World Economic Forum, it is already being implemented in Europe, China, South Korea and Mexico

In the US California and other states are showing the carbon pricing works, this includes the RGGI and there are already working carbon pricing schemes in Canada, BC has a carbon tax, Ontario and Quebec have a cap and trade system. Most recently the new provincial government in Alberta has come onside with a carbon levy.

Although the introduction of carbon pricing in Canada may appear to be a major step forward for climate action, there are concerns that the greening of Canada will be financed through the construction of new crude oil pipelines. This would be an oxymoron.

Trudeau and the provinces will meet again in six months to deal with the specifics of the plan.