The federal government’s announced $10 per tonne price on carbon was greeted last week with praise from some of the same groups that have criticized B.C., where a carbon tax is already three times as high.
Both the Pembina Institute and Clean Energy Canada last week praised the news that, starting in 2018, the Trudeau government will start imposing a carbon price on provinces that don’t have one.
The tax will rise by $10 per tonne of carbon dioxide annually until it reaches $50 per tonne by 2022. A $50 per tonne price would add an estimated $0.11 to a litre of gasoline in Canada.
Both organizations have criticized Premier Christy Clark for freezing B.C.’s carbon tax at $30 per tonne since 2013.
But the new federal carbon price means B.C. could continue to freeze its carbon tax until 2021 and still stay within national pricing guidelines.
Matt Horne, the Pembina Institute’s B.C. regional director, said the institute’s criticism of B.C.’s climate action policies were not so much about the carbon tax itself, but the fact that B.C. appears to no longer be on track in meeting its own greenhouse gas (GHG) reduction targets.
B.C. met its first GHG reduction target (6% below 2007 levels in 2012) but admits it’s not likely to meet its 33% reduction target in 2020. Without stringency (increasing carbon prices or lowering carbon caps over time), such tools become ineffective.
The federal government’s planned floor price for carbon is high enough to have angered the premiers of Saskatchewan and Nova Scotia, who want to tackle climate change their own way, but low enough that it could mute any criticism of B.C. for not hiking its own carbon tax.
As energy economist Mark Jaccard has recently pointed out, carbon prices do not need to be all that high, so long as they are accompanied by other mechanisms, like regulations for key sectors – transportation, for example, which accounts for 28% of Canada’s GHGs.
While Jaccard says a simple, broad-based carbon tax like the ones in B.C. and Alberta are the cheapest and most effective tool, they aren’t the only ones. Regulations can work, too, and might be more palatable to the public than a tax.
Jaccard is the lead author of a new report on climate change policies published by Simon Fraser University’s School of Resource and Environmental Management, where Jaccard is a professor.
He said his report was motivated, in part, to counter the dogmatism of some of his peers who have fixated on carbon pricing (taxes or cap and trade) as the only effective tools for fighting climate change.
“That was one motivation for this report: there was this rising chorus that had a lot of academics behind it saying we must price emissions,” Jaccard said. “And that is factually wrong, and I have an ethical problem with experts saying that when they know it’s wrong.”
If Canada is to meet its climate change commitments (a 30% GHG reduction below 2005 levels by 2030) using carbon pricing alone, it would need to start at $30 per tonne and increase every year by $15 to $200 per tonne by 2030.
“It is highly unlikely that our political leaders will implement such a price, given the severe political consequences,” the report states.
Jaccard therefore offers a middle way that would allow a national carbon price of $40 per tonne by 2030.
But it would also require additional regulations for high-emission sectors like transportation. One example is a policy designed to shift vehicles from gasoline and diesel to low or zero-emission fuels, like electric power or biofuels.
Jaccard’s report also suggests that provinces that invest in things like carbon capture and storage could be given credit for that, although he cautions against subsidies as innefective. Saskatchewan, for example, invested $850 million in a carbon capture and storage project for the Boundary Dam coal power plant.
Jaccard’s report estimates that project to have an “implicit” carbon price of $60 to $80 per tonne. Closing a coal power plant in Ontario would have an implicit carbon price of $80 to $100 per tonne.
Saskatchewan Premier Brad Wall welcomes those kinds of alternatives to carbon pricing.
“For Dr. Jaccard, the path forward appears to be clean energy regulations on high carbon emitters,” Wall said in an email to Business in Vancouver. “I have already said Saskatchewan will consider these measures, as economic conditions improve.
“I believe the federal government’s current emphasis on carbon pricing is an approach that will have the least impact on global GHG emissions, while potentially doing the greatest harm to the Canadian economy.”
Economist Chris Ragan, chairman of the Ecofiscal Commission and a C.D. Howe Institute fellow, makes no apologies for championing carbon pricing as the best way forward to a lower carbon economy.
He thinks it odd that Jaccard would argue for a system that might be more expensive than carbon pricing in order to make it more palatable politically.
“If you think that the carbon price that you need to achieve your targets is a high price – which is probably correct – but that that’s not feasible, but some other approach is better, then what they’re really arguing is in favour of another approach that is actually costlier for the economy,” Ragan said.
Jaccard said the federal government’s new carbon pricing “fits into our scenario of using a minimum emissions price across the country,” but added that it will also need additional regulations.
Specifically, Jaccard said, Canada needs regulations that will push light and heavy-duty vehicles to transition to zero-emission power sources: electricity and biofuels.
As for criticisms that B.C. is not doing enough on its own climate change policies, Jaccard agrees with the Pembina Institute.
While B.C.’s carbon tax might be three times what the federal government is proposing, because it has been frozen since 2013, it now lacks the increasing stringency that is key to any climate action policy.
“The carbon tax is declining in value because of inflation,” Jaccard said.
“Every year it gets a little bit weaker.”
In terms of greenhouse gas emissions, B.C.’s remained relatively even between 2012 and 2014, according to the National Inventory on Greenhouse Gases: 63 megatonnes each year.
GHGs increased in that same period in Saskatchewan (to 76 megatonnes from 72) and Alberta (to 274 megatonnes from 260).
Nova Scotia’s GHGs dropped in that same period (to 17 megatonnes from 19).
Nova Scotia has exceeded its own GHG reduction targets by phasing out coal power and investing in renewable energy, including the Bay of Fundy tidal power project.
