The Root Cause of Canada’s Upcoming “War on Carbon Pricing” is a Failure of Leadership Within the Governments of Saskatchewan and Ontario
The recent show of solidarity between Ontario premier Doug Ford and Saskatchewan’s Scott Moe in opposing the federal government’s carbon pricing backstop provision within the Pan Canadian Framework on Clean Growth and Climate Change can only be ascribed to either ignorance as to the design of effective climate action plans or outright climate change denial.
Mr. Moe and Mr. Ford are of the opinion, that carbon pricing is costly and ineffective in reducing greenhouse gas emissions. This position flies against the conclusions and recommendations of climate economists, leading climate policy organizations, and a growing number of major corporations. The Intergovernmental Panel on Climate Change and the World Bank are strong proponents of carbon pricing. On the business side, the traditional energy giants, Shell and BP, are among the corporate founders of the Climate Leadership Council. CLC advocates for immediate imposition of a carbon levy of $40 US per tonne of CO2 that would be applied to fossil fuels at the mine, wellhead or port of entry.
Real world experience with the longest serving carbon pricing systems allows for an assessment of costs and benefits. In California, between 2000 and 2016, greenhouse gas emissions declined by 9% while GDP grew by 37%. California hit the 2020 target for emissions reduction four years ahead of schedule and is well positioned to achieve at least a 40% cut by 2030. California’s cap and trade system covers 85% of emissions and has been instrumental in incentivizing a progressive transition to lower emissions options. Greenhouse gas emissions from the aggregate of countries of the European Union have declined by 19% relative to emissions on record for the year 1990 and these substantial cuts were accomplished without significant economic costs. The long-standing EU cap and trade system covers 45% of total emissions and has been an important economic driver of declining emissions. BC’s revenue-neutral carbon tax was introduced in 2008 and currently sits at $30 per tonne of CO2. A detailed study by economists at Duke University and the University of Ottawa concluded that the tax has lead to a 5-15% cut in emissions relative to projections in the absence of carbon pricing. The study concluded that reducing emissions in BC through carbon taxation had a “negligible effect on aggregate economic performance”.
Economy-wide carbon pricing mechanisms are the core components of effective climate action plans. By establishing a price on pollution, innovation is incentivized, as are changes in consumer and industrial practice to lower cost, lower emissions options. In the absence of carbon pricing, governments are faced with the challenge of attempting to pick winners and losers in policy development. The net result in a complex web of policies that come at a higher cost by ignoring the efficiencies of the market place.
The, now defunct, cap and trade system in Ontario was linked to the California system and was the core component of what would have been a cost-effective climate action plan designed to achieve a 37% cut in emissions by 2030. Mr. Ford’s reckless cancellation of the cap and trade system along with other components of the Ontario’s climate action plan has transpired without any indications of how and when these policies could be replaced.
In Saskatchewan, the government has released a document that describes a potential climate action plan. In “Prairie Resilience: A Made-in-Saskatchewan Climate Change Strategy”, a hybrid carbon pricing/trading system of emissions allowances applied to some industries is discussed; however, there is no mention of emissions reductions that could be achieved through implementation of the system. The document describes policies to increase the use of renewable energy sources and to cut methane emissions from upstream oil and gas sector activities by 40-45% as required to comply with federal regulations. Together, these measures are projected to cut emissions by 11 million tonnes per year. However, the plan does not contain provisions for economy wide carbon pricing, no time lines for the shut down of coal power plants are provided, and there is no mention of targets to cut total emissions from the province. Using the government’s own estimates, with implementation of the electricity and oil and gas sector policies, net emissions for the year 2030 would be similar to emissions on record for 2005. Based on available information, Saskatchewan’s proposed climate action plan would not begin to approach any concept of a fair share regional contribution to the national effort.
Nationally, Canada has committed to achieving a 30% reduction in greenhouse gas emissions by 2030. Realistically, emissions reduction would not be uniform across the country. In the near term, demand for traditional fossil fuel products will continue and per capita emissions from the oil and gas rich provinces of Saskatchewan and Alberta will grossly exceed that of other provinces. Under a successful Canadian climate action plan that extends to 2030, the excess in emissions from Saskatchewan and Alberta would be balanced by deeper cuts in other provinces. In no way does this absolve Saskatchewan’s responsibility to follow the lead of Alberta and implement an effective climate action plan that includes economy-wide carbon pricing.
To be clear, carbon pricing will lead to higher costs for emissions intensive use of fossil fuel products including gasoline. Emissions are costly and should be priced as such. However, these costs can be largely offset by revenue recycling through cuts in other taxes or rebates to consumers, industry and farmers.
Underneath the surface of grandstanding and rhetoric against carbon pricing, is a preference for inaction and preservation of business as usual practices. Legal opinion suggests that Saskatchewan’s court case against the federal carbon price is unlikely to succeed. The real game on the part of the Saskatchewan and Ontario governments is to prolong inaction on climate change and extend the “war on carbon pricing” into the timeframe of the next federal election. This sad state-of-affairs can only be described as a failure in political leadership to recognize the reality of climate change and the need to implement significant measures to curtail emissions such that the current generation of decision makers does not impose the extreme costs and hardships of severe climate damage on future generations.
At a time when all levels of government should be working together to develop effective climate action plans, the governments of Saskatchewan and Ontario have chosen to follow an alternate, confrontational agenda. This agenda may well undermine Canada’s ability to meet our international obligations under the Paris agreement.