Regulations, Not Carbon Pricing, Are Key to Reducing Emissions, Expert Says

Environment Minister Catherine McKenna earlier this month said the federal government does not have a preferred carbon pricing system. Whether the provinces and territories go with cap and trade or a carbon tax, McKenna simply wants to see Canada produce less greenhouse gas (GHG) emissions.

“I just care about how do we reduce emissions at the end of the day,” McKenna said during a panel discussion on Canadian climate action in Ottawa. “That is the most important piece.”

Unlike the previous federal government, Prime Minister Justin Trudeau’s government has made putting a price on carbon pollution a priority. A recent meeting between premiers and the federal government on a national climate strategy nearly broke down last March because of the Trudeau government’s insistence on a national minimum carbon price.

“The carbon pricing lobby sucked all the air out of the room,” leading Canadian energy economist Mark Jaccard told DeSmog Canada. “What we should be doing is looking at those jurisdictions that have made progress and learn from them instead of closing our eyes saying ‘I want a carbon price and don’t bother me with the evidence.'"
Jaccard is not opposed to carbon pricing. In fact, he believes given Canada’s current political climate a national cap and trade system is feasible.

What concerns Jaccard is policymakers pushing for emissions pricing as the centerpiece of a Canadian climate plan are overlooking the success regulations have had in reducing GHG output.  

“You can meet our Paris Agreement targets strictly with emissions pricing whether cap and trade or a carbon tax. You can also do it strictly with regulations,” Jaccard said. “What looms large in the discussion is political acceptability.”

Jaccard’s and his research team at Simon Fraser University have put together a rather convincing case showing regulations are responsible for cutting more GHG emissions than carbon pricing systems in Canada and elsewhere in the world.

The evidence is not that hard to find either.

“The policy that had the biggest effect in B.C. was the electricity regulations I helped design for Gordon Campbell’s government in 2007, not the carbon tax,” Jaccard told DeSmog. “It forced BC Hydro to tear up two proposals for coal plants and abandon its own plans for a large natural gas plant.”

Halting the construction of three fossil fuels powered electrical facilities prevented four times more emissions than B.C.’s world famous carbon tax will cut, according to Jaccard. The carbon tax is expected to reduce B.C.’s annual emissions by 3 to 5 megatonnes in 2020. The province’s clean electricity regulation on the other hand will keep between 12 and 18 megatonnes out of the atmosphere by the same year.  

Ontario eliminating coal-fired power plants remains the “single largest regulatory action” in North America to reduce GHG emissions, the equivalent of taking seven million cars off the road.

Nova Scotia does not have a carbon price and yet the province is expected to lead all provinces and territories in future GHG reductions. Regulations like adopting North America’s first “hard caps” on GHG emissions in the electricity sector, setting ambitious renewable energy targets and tightening up energy efficiency standards have all put Nova Scotia in position to shrink its carbon footprint by 37.5 per cent in 2020.

“Is a carbon price more economically efficient? Of course it is more economically efficient,” Jaccard said. “All I am saying is can’t we — we so-called experts like me — learn a little bit from evidence from around the world, from what’s gone on in Canada and that’s the reason I might talk about regulations.”

Regulations and Carbon Pricing: A Fair Comparison?

Promising GHG regulatory actions are on the horizon in Canada as well.

The Alberta government last year pledged to phase out coal-powered electricity by 2030, which will take a 17 per cent bite out of the province’s large carbon footprint. Alberta produces more emissions than Ontario and Quebec combined.

Last March, Canada and the U.S. agreed to introduce national regulations halving methane emissions in their respective oil and gas sectors. Methane is a powerful greenhouse gas packing a global warming punch far more potent than carbon dioxide.

Measuring Canadian carbon pricing systems against Canadian GHG regulations may not seem like a fair comparison. For an entire decade, the previous federal government went out of its way to slam the mere idea of making polluters pay from their emissions.

Carbon pricing has only recently recovered from this unwarranted attack.

But the success of regulations in reining in GHG emissions can be seen outside of Canada as well. Jaccard says analysts in Sweden and California — two carbon pricing pioneers — have told him regulations are responsible for reducing the majority of their emissions. Sweden adopted a carbon tax in 1991 and California has had a cap and trade system since 2012.

Joseph Pallant, manager of Brinkman Climate, said regulations do have a role to play in addressing climate change although they may not be enough on their own.*

“The question is not regulation or carbon pricing – we must clearly do both. Governments should regulate greenhouse gas emitting activities where doing so is efficient, but regulation alone can be a bit of a blunt instrument. We find it much more effective to spur innovation and implement new, clean technologies across the whole economy by putting a price on carbon,” Pallant told DeSmog Canada.

“Otherwise,” Pallant added, “we set 10 year targets and then wring our hands in year eight because we're off track and need to set another distant goal. Can’t stop climate change with discipline like that.”

Pallant argues regulations are not always a slam dunk. He points to the promised oil and gas regulations of the Harper government, which were years in the making, and never saw the light of day. Emissions from oil and gas grew substantially during the Harper years and now the sector is Canada’s biggest contributor to climate change.

Regulations can take more time than carbon pricing systems to be crafted and implemented as well. It took Ontario roughly five years to produce province-wide coal phase out regulations, but only a year to table legislation for a cap and trade system.

With Canada and the rest of the world in a race against the clock to curb emissions in order to avoid the worst effects of climate change, delays on climate action have the potential of exacerbating an already dire situation.

“Carbon pricing is at its best where we implement a cap and trade system, making it more expensive to pollute by creating a specific limit on emissions. The carbon price then automatically rises to the level needed to pay for the required emissions reductions,” Pallant said. “Transparency is a key feature, as we can draw a line between our emissions today, and what we've committed in the future and know that we’re hitting our target year on year.”

“People interested in stopping climate change should be wary if pundits or governments try to pivot from carbon pricing and concrete emissions reductions because of some perceived difficulty in implementing such systems,” Pallant told DeSmog. “Nobody said this would be easy — but if we can’t do it in today’s socio-political climate, when will we ever be able to?”

But for Jaccard, ‘trying’ might mean finding more creative ways of understanding new roles for regulations in the energy marketplace.

Jaccard said he sees great value in what he calls “niche market” regulations. These regulations create space in the economy for the technological solutions to the climate crisis like electric cars or solar panels.

“What you want is a growing share of vehicles, for example, that have the desired characteristics of the future penetrating your market,” Jaccard said. “Regulations tell manufacturers that if you want to keep selling Hummers or big Ram trucks you can still do that, but you need a growing share of sales in low, ultra low and zero emission vehicles.”

“With niche market regulations the retailer has to pay a penalty per car if they miss their target. What they do or what they must be doing even though they don’t talk about it is cross subsidizing,” Jaccard told DeSmog Canada.

An example of cross subsidization is a California car retailer adding an additional $70 per vehicle on big sellers like SUVs and then using that money to decrease the price of lower emissions vehicles like Teslas, and hybrids. Increasing the affordability of low emissions vehicles could in turn help boost sales and meet the quota. A new, clean energy industry can expand without being utterly dependent on government subsidies.

“With a cap and trade you are trying to limit a bad like carbon dioxide,” Jaccard said. “With regulations like the renewable portfolio standards and the vehicle emissions standard in California instead we have decided we want more of something.”

California’s Zero Emissions Program requires 10 per cent of vehicle sales to be zero emissions vehicles. By 2025, the quota increases to 15 per cent or 270,000 new vehicle sales.

Canada does not have zero emissions vehicle quotas for cars. Close to two million vehicles were sold in Canada last year and an estimated 5,700 or 0.33 per cent were zero emissions vehicles.

The transportation sector is Canada’s second largest producer of GHG emissions.

*Correction: This article has been updated to reflect Joseph Pallant is manager of Brinkmann Climate, not president of the Carbon Solutions Project as previously stated.

Image: Kris Krug