We’re a few weeks past what was a roller-coaster of an election in Ontario, ushering the Progressive Conservative party into power and placing the New Democrats as the official opposition, being sworn in this Friday.

The PCs were clear in their campaign: this government will focus on making life more affordable for average rural and urban Ontarians and on creating jobs in the province. These are worthy aspirations, ones that we share, but so far we’re seeing a push for changes that could end up being more costly for Ontarians.

On environment and transportation, the new government will need to realign several of their current plans if they are committed to achieving their goals of making life more affordable and creating jobs.

Cleaning up our air in the lowest-cost way

The new PC government has committed to protecting the environment and coming down heavy on polluters. We agree polluters should pay — this is what carbon pricing does in over 70 jurisdictions across the globe. It’s only fair that operations producing air pollution, including carbon pollution, pay a price or reduce their emissions. The current made-in-Ontario cap-and-trade system is a form of carbon pricing and has been operating successfully since early 2017.

The system ensures lowest-cost pollution reduction, while encouraging business innovation. The dollars collected from polluters have gone into programs to reduce emissions, including to homeowners for retrofits to save on energy bills, to companies for truck retrofits, and are funding infrastructure Ontarians want and need, like transit and cycling infrastructure. There was serious pushback from homeowners who had cost-saving renovations underway when the new government recently cancelled the popular retrofit program.

As one of his first acts after the election, Premier-designate Ford has announced his intention to cancel Ontario’s cap-and-trade system, making his priorities clear. What he hasn’t been clear about are the costs to Ontarians that will certainly result: businesses are wondering how they will be compensated for the credits they’ve already purchased, which will cost the government — and in turn, taxpayers — dearly in payouts, litigation, or both. Western Climate Initiative (WCI), the market that Ontario is a part of, has already closed off the rest of the market to trades from Ontario, meaning businesses that hold credits have no one to sell them to.

The Ontario government has even more to lose by repealing cap-and-trade without proposing an alternative to address carbon pollution. Under this scenario, the federal government will apply their own carbon pricing option (the “backstop”) and decide how to return the money to the province, without input from Ontario. Why throw away a custom-made pricing system designed to address Ontario’s unique competitiveness concerns for an off-the-rack one?

Premier-designate Ford has said that he’ll challenge the federal government’s authority to apply the federal carbon price. This is unlikely to yield a successful outcome. A legal opinion prepared for the Government of Manitoba in 2017 concluded that the federal government has the right to apply the carbon pricing backstop. If the government goes down this road, Ontarians will be on the line for the costs of litigation in the order of $30 million.

Instead of putting resources into fighting the federal government on the backstop, we invite the new government to work with the current cap-and-trade framework while making changes to address any concerns.

Tackling gridlock and providing housing options

It’s clear that Ontarians and businesses in urban regions are looking to their new government to tackle gridlock, as commuting is a growing problem that is keeping workers in their cars and away from their families, and making it harder for businesses to recruit the right people. Transportation is the biggest source of carbon pollution in Ontario and a serious threat to Ontarians’ health. Conditions like cardiovascular disease are caused by the toxic substances that people breathe in when cars and trucks burn gas and diesel in their streets.

In urban areas, there’s no question that transit is the cheaper way to get around. However, frequent and reliable transit in Ontario’s biggest cities isn’t available to enough people yet.

In the Greater Toronto and Hamilton Area (GTHA), the PC’s central idea on transit is to take over responsibility for subway infrastructure from the City of Toronto and add $5 billion in new subway funding. We welcome the recognition that Ontario needs continued transit investment, but it’s important to ask how many people $5 billion in capital funding will serve: subways cost vastly more per kilometre to build than other kinds of transit, take longer to build, and require much higher levels of ridership to be financially viable. The recent 9-km subway extension from Toronto to Vaughan alone cost about $3 billion, so it’s hard to see how a useful network could be built with $5 billion if only spent on subways.

To serve the rest of the region, $600 million from already-secured cap–and-trade revenue (again, funds collected from the biggest polluters) was directly earmarked by the previous government to help deliver and electrify two-way, all-day GO service (and other transit modernizations). GO expansion would give residents of communities like Waterloo Region, Hamilton and Markham the choice to use GO Transit throughout the day. If the new government is committed to cancelling cap-and-trade, it will need to find a way to replace the funds for these improvements.

To support transit viability and increase affordable housing supply, this government should work to accelerate development around transit by removing barriers for projects that fit with existing provincial policy. For example, the province could work with municipalities to speed up the right kind of development around transit and ensure family-friendly units are built. Compared to urban sprawl, which requires costly new roads and sewers, development on under-used land in existing communities reduces the property tax burden on residents across the municipality.

Keeping goods moving and supporting businesses

Goods movement is a backbone of Ontario’s economy, getting products to market and providing the things we need for daily life. Ontario exported nearly $200 billion in goods to the U.S. in 2017, and transportation and warehousing employs 340,000 Ontarians. The volume of goods moving by truck in Ontario is growing swiftly, fuelled by rapid economic and population growth: between 1990 and 2014, road freight activity in Ontario grew by 242 per cent. Trends like online shopping, just-in-time delivery, congestion and technological innovations are changing how and where goods move around. The trucking industry has to adapt to these realities.

Since fuel and maintenance account for about half of operating costs for most fleets, reducing fuel use is very important for business. It’s also important from a pollution perspective, since freight is now the source of just under 10 per cent of Ontario’s carbon pollution, and growing.

Building on the programs that exist to help businesses innovate and become more competitive, the PC government could champion efficient freight. As a first step, they should keep in place the provincial program that currently supports businesses, including family-run trucking companies, to retrofit their fleets to use less fuel (the Green Commercial Vehicles Program). Despite its strong support from the trucking industry, it will be lost unless the cap-and-trade system is kept in place or new funding is allocated. The government should also move forward with plans to establish a Strategic Goods Movement Network for the GTHA and better support municipalities who are leading the way on freight.

The next few months will have a lot of change in store for the province. Ontarians are looking to their new government to continue to safeguard their economic well-being and act with prudence in the best interest of all Ontarians. Early indications mean a course correction is necessary.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

This is the third of a four-part series on B.C.’s climate action plan. Be advised, it is a very long read, more like a short book of six chapters. Part One of this series addresses B.C.’s GHG reduction targets. Part Two addresses how that plan is at risk of being co-opted by Big Oil. Part Three takes a closer look at the B.C. Climate Leadership Team’s recommendations for the carbon tax. And Part Four focuses on how the oil and gas industry stands to profit from that advisory team’s proposed climate action plan.

British Columbia’s Climate Leadership Team (CLT) has offered a strategy aimed at achieving several new emissions reduction targets.

It proposes to do that by “right pricing” carbon with an ever-increasing and expanded carbon tax; by mitigating some of that tax’s competitive and consumer impacts; by supplementing that rising tax with additional (mostly unspecified) measures to further reduce emissions; and by regularly reviewing those three elements.

As such, its roadmap to carbon reductions is largely an updated carbon tax plan.

Six of its 32 recommendations (#4-8, 29, 31) relate to raising, extending, reallocating and reviewing the carbon tax over the next 32 years, and to integrating B.C.’s carbon tax with other province’s approaches to carbon pricing.

The importance of carbon pricing in any credible climate action plan cannot be overstated.

Equally important is getting the politics right and ensuring that however we act to price carbon, including through the carbon tax, those measures work as intended and are fair to everyone.

That is the subject of this analysis.

A Brief History of the Carbon Tax

At least as far back as the late eighties, governments have known that a carbon price signal is the single most important action they can take to influence investment, production and consumption decisions that will fundamentally drive the needed shift to a low-carbon economy.

The United Nation’s Intergovernmental Panel on Climate Change has long stressed the value and importance of carbon pricing, as it has also led the world’s efforts to quantify, stem and lower global greenhouse gas emissions.

Canada’s National Round Table on the Environment and the Economy reinforced that point in its 2007 report, Getting to 2050: Canada’s Transition to a Low-emission Future.

It stressed, “the policy package required to achieve deep long-term reductions must place a price on carbon emissions, and needs to be complemented by other policies, such as regulations for certain sectors that may not respond to a pricing mechanism.”

It also explained the options for carbon pricing.

“The choice of the preferred emission price policy involves considering either a tax on emissions, a cap-and-trade system or a combination of the two. A GHG emissions tax imposes a price on each unit of CO2e [carbon dioxide equivalent] emitted by a source, whereas a cap-and-trade system is a regulatory program under which government sets a limit on the volume of GHG emissions, distributes permits for allowable emissions and enables firms to buy and sell the permits after the initial distribution. Both options are market-based in that they transfer abatement decisions to emitters, and both will signal that GHG emissions have a monetary value, stimulating actions that will lead to emission reductions.”

Prime Minister Stephen Harper’s former Conservative government was not enamoured with its own advisors’ position, or with other urgings for climate action.

So it basically killed the Round Table altogether in 2013. Yet its arguments for carbon pricing are even more critical today than they were a decade ago, including in British Columbia.

Despite all of the actions taken over the last nine years since B.C.’s 2007 Throne Speech commitment to fight climate change, with bold targets and a comprehensive plan, the province’s net greenhouse gas emissions are once again on the rise.

And those GHG emissions are going to escalate exponentially under the government’s vision for carbon-intensive growth, fueled by natural gas development and LNG exports.

As the principal author of that 2007 Speech from the Throne, and of all of the Campbell administration’s 12 throne speeches from 2001 through 2010, I had more than a minor hand in shaping B.C.’s climate action commitments.

These words I wrote in the 2008 Throne Speech further laid that imperative on the line:

“Waiting for others to act is not a solution –— it compounds the problem. Taking refuge in the status quo because others refuse to change is not an answer. It’s avoiding responsibility and being generationally selfish. The argument that British Columbia’s mitigation efforts are, in global terms, too miniscule to matter misses the point.

Every molecule of carbon dioxide released into our atmosphere by human activities matters. It hangs there for decades or even centuries, and adds to the accumulated burden of global warming on our planet. The benefit of our actions is not negated by the actions of others who add to the problem. They are cumulatively beneficial, globally significant and scientifically discernible. They contribute to the efforts being taken by growing legions of people around the world who are acting today to prevent the problem from becoming even worse.

We cannot be paralyzed into inaction by the scale of the task at hand. Rather, we will act now to make a real difference, and to encourage behavioural changes that will drive sustainable growth as a global imperative. Market forces can play a positive role in this regard.”

B.C.’s carbon tax was introduced by premier Gordon Campbell’s B.C. Liberal government, in the 2008 provincial budget. It was to be guided by the following three basic principles:

1. All carbon tax revenue would be recycled through tax reductions and not used to fund government programs, a principle assured in legislation that would also require annual reporting of how that funding is allocated.
2. The tax rate would start low and increase gradually, to provide individuals and businesses time to adjust, to respect decisions made prior to the announcement of the tax, and to provide rate certainty for at least the first five years.
3. Low income individuals and families would be protected via a refundable Climate Action Tax Credit that would ensure that those with lower incomes are compensated for the tax, and that most are financially better off.

This piece from the David Suzuki Foundation provides a good primer on B.C.’s carbon tax and a bit more about its history.

The carbon tax was always intended to work in tandem with a cap-and-trade system, to make B.C. a global leader on climate action.

It was phased-in over five years, with annual increases of $5 per tonne, which raised its initial rate of $10 per tonne to $30 per tonne as of 2012.

That rate has been frozen ever since by B.C. Premier Christy Clark, who came to power in 2011. Her government has made it clear that it will not lift that freeze until at least 2018, a year after the next provincial election.

As the government said following its last review of the carbon tax, in the 2013 post-election Budget Update, “When other jurisdictions, especially those within North America, introduce similar carbon taxes or carbon pricing, government may again review and consider changes to the carbon tax.”

Perhaps Canada’s First Ministers will shock us all by coming to some sort of common agreement on that front, following the forthcoming report from their Working Group on Carbon Pricing Mechanisms and their commitments, in furtherance of their Vancouver Declaration.

The danger of the government’s politically expedient decision to freeze the carbon tax for at least six years has been noted by Clark’s own Environment Minister.

Her ministry’s 2014 Climate Action Report stated the obvious: “Some policies lose effectiveness over time if they are not updated. For example, the carbon tax impact effectively diminishes if the rate remains unchanged, as inflation dampens the price signal.”

The carbon tax drives down greenhouse gas emissions by raising the cost of carbon pollution, which makes renewable energy and energy efficiency options increasingly more affordable relative to fossil fuels.

That drives innovations in technologies, production, heating and transportation and anything dependent on the combustion of carbon-intensive, non-renewable fossil fuels.

It drives behavioural changes that rightly encourage people and companies to reduce their carbon footprints through increased energy conservation, efficiency, fuel-switching and carbon neutral choices.

The problem with the carbon tax is that it does not necessarily lead to a decrease in emissions if its rate increases can also be profitably accommodated through higher consumer prices for the end products that contain those embedded emissions.

If any industry can simply incorporate its carbon tax costs into the products it produces, and still sell them for a profit, they may not feel too pressured to use less energy, cleaner sources of energy, or cleaner technologies that lower emissions.

Same for consumers. If we don’t feel the cost of our carbon emissions, the financial incentive to change our lifestyles and to make cleaner choices will not motivate us to action.

Which is why the price of the carbon tax has to continually go up over time to be most effective.

Because even with a carbon tax, if it is not high enough to drive new low-carbon behavioural shifts and cleaner production processes, emissions will not go down; they will go up.

The carbon tax does not directly limit or reduce emissions, as cap-and-trade systems do. It only provides a price signal aimed at indirectly encouraging a low-carbon economy in individual’s and industry’s financial self-interest.

That problem is further aggravated by the fact that the current carbon tax does not even apply to industrial process emissions, including so-called “fugitive” emissions from non-combustion sources. It only covers about 66 per cent of industrial emissions in British Columbia.

The Climate Leadership Team does not propose to extend the carbon tax to those emissions for another five years, opting instead for a number of mostly voluntary measures to somehow achieve a 40 per cent reduction in methane emissions by 2021.

The Pembina Institute rightly argues that is too long to wait. Too bad its representative on the CLT was not successful in convincing his colleagues on that point.

Leaving any sector or any such huge source of carbon emissions exempt from the carbon tax does nothing to help its perceived fairness or its GHG reduction mission.

The oil and gas industry has already had eight years to make a serious commitment to reducing its untaxed emissions. Ditto for landfills, the cement industry and other key sources for those types of emissions.

The original climate action plan vowed to eliminate all routine flaring at oil and gas producing wells and production facilities by 2016 with an interim goal to reduce flaring by half (50 per cent) by 2011.

We are not there yet.

It also sought to “facilitate and foster innovation in sequestration …[including] market oriented requirements with a graduated schedule. In consultation with stakeholders, a timetable will be developed along with increasing requirements for sequestration.”

We are not there yet.

We need to get there, fast, as we also need to dramatically reduce fugitive emissions from oil and gas pipelines.

These sorts of glaring flaws in the current carbon tax pose a significant challenge for B.C.’s updated climate action plan.

It is folly to rely on shaky carbon modeling, aimed at quantifying how the carbon tax will actually perform over the next several decades, to reassure us that we will actually meet our GHG reduction objectives.

We need to supplement the carbon tax with other strategies that impose hard, measurable, incrementally lower caps on carbon emissions.

So as not to bet our last dollar — or the health of our planet — on any one government’s vision for an escalating carbon tax that only indirectly lowers emissions.

We surely should commit ourselves to fully using the tool that the carbon tax provides to help achieve its intended purpose, which means gradually raising its price.

Indeed, we must use every available tool at our disposal to have any credible hope of achieving B.C.’s target of an 80 per cent reduction in GHGs by 2050.

And we can’t afford to pretend that politics won’t play a critical part in the success of that endeavour. It already has and it always will.

In the final analysis, any climate action plan will only succeed if it is also a politically astute economic plan that is sustainable in every respect — environmentally, fiscally, socially, economically and politically.

The Politics of Carbon Pricing

Most British Columbians support the carbon tax because they know it is a responsible tax shift.

They understand that is intended to tax something that we don’t want — carbon pollution — to generate revenue for things we do want — be it other tax cuts or new public investments in public infrastructure, critically important public services, or environmentally sustainable technologies.

In short, the carbon tax is a very good policy tool to “do the right thing.”

Still, it’s a tax. And increased taxes are always a hard sell.

Any proposal to increase them, each and every year, for as far as the eye can see, is not bound to be very politically popular, to put it charitably.

Even if those tax hikes are supposedly “revenue-neutral.” Or if the politicians who want to impose them also suggest that those revenues will fund other tax cuts or new investments that people might want.

The imagined pain of tax hikes is always more palpable than its promised relief.

Particularly if the latter demands trusting politicians to keep their word. Especially if they are in no position to make promises on behalf of their successors.

The Climate Leadership Team wants to increase carbon tax by $10 per year until 2050, starting in 2018.

Count me among the decided minority of taxpayers who would support that plan. Indeed, I do.

But I sure wouldn’t want to bank on that as the pivotal feature of a politically viable plan to cut B.C.’s greenhouse gas emissions by 80 per cent. Even though I agree that the only way we will ever reach that goal is by dramatically increasing the price of carbon pollution, as the CLT suggests.

As eminently sensible as its proposal surely is, on so many levels, I would be utterly shocked if either the B.C. Liberals or the NDP will ever embrace it.

The Green Party, maybe. It doesn’t really hope to form the next provincial government, even if it succeeds in its quest to hold the balance of power in a minority government. But the two legitimate contenders for power? I think the CLT is dreaming in Technicolor.

To make such a far-reaching commitment on the carbon tax would be tantamount to political suicide. If either party unilaterally supported such an increase, its opponent would have a field day at their expense.

And that would very likely do more harm than good to the vital goal of carbon pricing, to the crucial role of the carbon tax in particular, and to the ultimate success of the urgently needed plan to dramatically reduce B.C.’s carbon emissions.

Any plan to raise the carbon tax must be politically sensitive and realistic.

It is hard to imagine any government that would be willing to hitch its political wagon to a carbon tax that would increase from today’s level of $30 per tonne to $360 per tonne over for the next three-and-a-half decades.

Not unless they have a death wish.

Moreover, it is probably not even constitutionally viable for any government to so bind its successors.

The most that any government could therefore really do is propose that those future governments follow its lead, by sticking to a plan for such annual carbon tax increases over the next 34 years.

A laudable vision, I agree, but not one that is likely to succeed as articulated, in political reality.

The only thing we can predict with certainty is that future governments will have very different plans.

Some might want to freeze, lower or (heaven forbid) even repeal the carbon tax. Others might want to increase it by more or less than $10 a tonne in any given year, or add to the list of exemptions that the Clark government has created and invited.

In fact, as much as it makes sense to price carbon with such predictable annual increments that steadily ratchet up the cost of unwanted greenhouse gas emissions, making that bold commitment would probably backfire.

There are simply too many voters and vested interests that would be easily mobilized by any party that promised to stop a proposed 12-fold increase in the carbon tax, dead in its tracks.

Those of us who are deeply supportive of a gradually escalating carbon tax that will succeed in its central role in driving B.C. ever closer to a low-carbon economy need to be politically smart.

We would be shooting our own mission in the foot if we inadvertently provoke a broad backlash that could irreparably harm today’s widely-supported carbon tax. It could wind up killing that mode of carbon pricing altogether.

Just ask Australia, where a similar taxpayers’ revolt resulted in the repeal of its nascent carbon pricing system. And it was only even applicable to large emitters, not to individuals or families.

There is a fine line between what is environmentally and/or socially desirable and what is politically prudent and possible.

In any case, in the most likely event that neither the B.C. Liberals nor the NDP dares to publicly support the CLT’s carbon tax plan, a fallback plan is essential for climate action.

This poses a significant problem for any government that only relies on a carbon tax as it chosen means for carbon pricing.

What About Cap-and-Trade?

Tax hikes always need social license for their long-term success, which is hard to achieve decades in advance, no matter how much the politicians might try to convince their constituents that they will be “revenue-neutral.”

It is why the chief alternative to a carbon tax — a cap-and-trade system — is so much more politically palatable.

That is the means for carbon pricing that Ontario, Quebec and California have embraced, which British Columbia had also intended to adopt in combination with its carbon tax.

In fact, B.C. was the first Canadian jurisdiction to join the Western Climate Initiative, in partnership with seven U.S. states, back in 2007.

In that same year it also joined the International Carbon Action Partnership, together with 14 other national and subnational governments from North America and Europe.

Both of those partnership initiatives were — and still are — aimed at creating a truly global emissions trading network that is integrated with the European Union Emissions Trading System, which is far the world’s largest cap-and-trade system.

The Campbell government was also the first government in Canada to pass a Cap-and-trade Act that authorized hard caps on emissions levels. It provided a legislative basis for B.C. to supplement its carbon tax with a cap-and-trade system.

Essentially, the Clark government walked away from all of those initiatives aimed at putting hard caps on carbon emissions and at partnering with others in cap-and-trade systems.

Its Greenhouse Gas Industrial Reporting and Control Act repealed the Cap-and-trade Act, to mimic the previous Alberta government’s approach, which was properly assailed in this article published by DeSmog Canada.

The NDP government that replaced that Conservative administration over a year ago has now embraced a carbon tax, similar to British Columbia’s, in force and design. Its initial rate of $20/tonne, to be imposed next January, will be increased to $30/tonne in 2018, making it the same as B.C.’s rate.

That move by the Clark government to do away with hard caps on regulated emissions that might have lowered overall absolute emissions, year over year, was a huge step backwards for B.C. climate reduction plan.

Instead, in its zeal to appease the LNG industry, the Clark government adopted “emission intensity” benchmarks, which it brags are the “cleanest in the world.”

Under its new policy, B.C.’s liquefaction terminals would be permitted to emit 0.16 tonnes of carbon dioxide for every tonne of LNG exported, without penalty.

Theoretically, companies that emit above that level would be subject to a penalty. They might pay $25 per tonne that would be paid into a technology fund, which will ultimately go back to their industry. Or they would have to buy offsets.

Here’s the catch.

The government has also announced plans to subsidize that penalty by as much 100 per cent, for any plants that have emission levels just above the new intensity benchmark.

That subsidy from taxpayers to the LNG companies drops on a sliding scale to 50 per cent of the penalty that would otherwise be applicable at 0.23 tonnes of CO2 emissions.

And that’s not even the half of it, as I will explain in my next installment. The Clark government has extended unprecedented tax concessions to the LNG industry that will be locked-in for 25 years and underwritten by B.C. taxpayers.

Any changes in those guaranteed tax rates, tax credits or to the carbon tax that is specifically applicable to the LNG sector will be fully compensable by B.C. taxpayers for at least the next 25 years.

If any subsequent LNG plant gets a more favourable tax deal than the Pacific Northwest LNG proposal, headed by Malaysian state-oil giant Petronas, that project will get it too.

Bottom line of that sweetheart scheme is that B.C. taxpayers will be obliged to shell out potentially tens of millions of dollars to subsidize LNG companies’ rightful penalties on their uncapped emissions. And they get to make billions in profits.

At the same time, the government has exempted those LNG plants from having to account for their upstream natural gas production emissions from fracking, processing and pipelines.

The emissions from those LNG plants, as defined, only account for 30 per cent of the natural gas industry’s GHG emissions in British Columbia.

To make matters worse, the Clark government has simply redefined any gas-fired energy used to drive those LNG plants as “clean power.”

That flatly contradicts the Campbell government’s definition of clean, renewable power, which underpinned its clean energy plan and laws. It is anathema to the CLT’s vision for 100 per cent renewable power, as opposed to the 93 per cent renewable power portfolio requirement that exists today, as a result of the 2008 climate action and clean energy plans.

As Clean Energy Canada has rightly argued, the government has a long, long way to go before it can credibly claim that B.C.’s LNG industry will be even close to the “cleanest in the word.”

Those standards for regulating the amount of carbon that is allowable per unit of LNG only deal with the intensity of those carbon emissions.

Reducing emissions intensities is a necessary step to reducing the overall volume of emissions produced. But in itself, it does nothing to stop that total volume of carbon pollution from increasing along with higher production levels.

The government’s approach will allow carbon emissions to dramatically increase, despite those efficiency gains in the emissions intensity levels.

It is yet another sop to Big Oil that has co-opted B.C.’s climate action plan for the sake of liberating new investments in fossil fuel developments and higher profits for those companies.

By comparison, a cap-and-trade system works very differently, most importantly, by ensuring that overall net carbon emissions go down, not up.

That system purports to let the market decide how much the price of carbon should be, as regulated emitters buy, sell or bank their needed or unused emissions allowances, to meet the hard caps that governments impose upon them for their allowable emission levels.

A huge downside of such cap-and-trade systems is that they only cover a portion of any jurisdictions’ carbon emissions. Mostly those from large, regulated industrial sectors. So it is not a total solution and should be employed with a carbon tax to capture those emissions from the rest of the economy.

Those cap-and-trade systems don’t much affect individual behaviour or the vast amount of carbon emissions that are created by individuals, families and small businesses that are not subject to those emission caps.

Plus, those cap-and-trade systems do not provide much certainty or predictability to the industries and sectors they regulate about the costs of those carbon prices, as emissions caps go down and as the cost of meeting those ever lower emission thresholds goes up.

The environmental upside of that system is that it provides more certainty in regulating and reducing absolute emissions levels in each regulated sector.

The political upside of that system is that no government has to quantify its escalating price of carbon, let alone decades into the future.

The politicians don’t have to set the price for carbon, or even impose a carbon price on the voters, per se.

Instead, they can simply tell their constituents that the “free market will decide” the price on carbon that is necessary to achieve the absolute reductions in emissions levels that are mandated by government for each regulated sector.

Whether such emissions trading systems actually work as intended is another question. Especially if they are embraced without also having some type of carbon tax in place.

The European experience in that regard is not very encouraging, to say the least, as Greenpeace has highlighted in its excellent prescription for putting the EU’s Emission Trading System back on track.

It has been open to all sorts of abuses that have allowed large emitters to meet their legal obligations without yet adopting the types of measures that are essential for ensuring that they actually reduce their own emissions.

The very elements of cap-and-trade that are intended to give those emitters flexibility in meeting their emissions caps are in some cases legally used as license for them to pollute.

Emissions allowances are typically initially allocated either by grants from government to industrial emitters, by auctions that sell those allowances to the highest bidders, or a combination of both.

Too many allowances have been granted for free or for next to nothing, which has reduced the price of their associated carbon emissions, as it has also subsidized corporate polluters.

Those allowances are also usually “bankable,” to be sold or used by those who hold them as they see fit, when most opportune. It’s not unlike trading stocks. The price impacts of how and when those allowances are offered for sale are wildly unpredictable.

Large polluters can meet their declining caps on emissions by buying allowances from others who don’t need them, because they acted to cut their own emissions.

In essence, the price of carbon was not in itself sufficient to force them to cut their emissions as envisioned, to the extent that they could achieve those reductions and still have so many surplus emissions allowances left over, to sell or use at a later date.

The Slippery Slope of Carbon Offsets

Emissions trading systems allow polluters to claim credit for reducing their own emissions, even when they have not. That is equally true of the Clark government’s new emission intensity benchmarks for LNG plants, which can be met through most of the same mechanisms.

To meet their legislated emissions caps or intensity standards, the regulated sectors can buy others’ unused emissions allowances or they can buy carbon “off-sets.”

Such offsets provide emissions credits for theoretically offsetting an equivalent amount of emissions through new green investments.

Typically they are investments in energy efficiency, carbon sequestration, fuel switching or GHG destruction that facilitate net new reductions in greenhouse gas emissions that would not otherwise occur.

Indeed, that was what the now defunct Pacific Carbon Trust was set up to facilitate, to help B.C.’s public sector entities meet their new legal obligations to be “carbon neutral” — which they have been since 2010. Another first in North America.

That commitment to carbon neutrality has also been supported by 96 per cent of all local governments in B.C.

At least 182 of those local government signed onto the B.C. Climate Action Charter that was initiated in 2007, as yet another part of the initial climate action plan, which among other things, obliged those institutions to be carbon neutral in respect of their operations by 2012.

They, too, use offsets to help them meet that self-imposed requirement.

Those offsets are only potentially credible if they are additional, verifiable and conform to stringent international standards and jurisdictional regulations.

But the reality is, they are very much open to abuse, and they are extremely hard to confirm, especially in countries that specialize in creating offset projects that look great on paper, but are essentially fraudulent upon closer inspection.

Even in B.C., the history with offset purchases is sketchy at best.

Many of those reinvestments in British Columbia effectively amounted to gifts to industries — the forest industry and the alternative power industry especially — that gave them money for projects that many believe they would undertaken anyway.

As well, public-sector organizations that were obliged to buy offsets from the Pacific Carbon Trust at a rate of $25 per tonne to meet their legal obligations for carbon-neutrality sometimes paid over twice what the Trust has been charged for those carbon credits.

Still, offsets are an integral part of any emissions trading system and with the right safeguards, they certainly can and do serve to reduce the planet’s overall greenhouse gas pressures.

As with so many debatable climate action areas, the CLT plan calls for “a review of the current offset policy to determine if changes are required to support the new Climate Leadership Plan.”

How bold. Not.

The prelude to that almost meaningless recommendation points to its real purpose: “The province could expand the use of offsets beyond the Carbon Neutral Government Program to specific industrial sectors, or use them to help meet provincial carbon reduction targets.”

It is further aimed at allowing greater provincial use of offsets, including from investments in jurisdictions outside of B.C., which isn’t necessarily a bad thing, and is common in cap-and-trade systems.

But as the CLC also noted, “given concerns about the credibility of offsets from some jurisdictions outside of B.C. and their ability to ensure greenhouse gas reductions, any external offsets considered should meet or exceed the standards set in B.C.”

Good luck with enforcing that.

Although to be fair, B.C. has a lot of home-grown expertise in that area, including some great companies that are helping the B.C. government to develop and assert its leadership role in shaping North American offset policies and standards.

Virtually everyone accepts that the only way that we will hope to meet our GHG reduction targets is if we “properly price” carbon by continually raising the tax penalty on greenhouse gas emissions, as we also act to mitigate those emissions in every other conceivable way.

Carbon taxes and cap-and-trade systems have different strengths and benefits that should be fully utilized, if only to help offset their respective weaknesses.

Towards a Fairer and More Effective Form of Carbon Pricing

To my mind, there is no point in getting bogged down in a political argument about how much the price of carbon will be obliged to rise over the next 34 years. Whether it is through a carbon tax, a cap-and-trade system, or a combination of both, as I would advocate.

Such a debate would only most hurt the party that most wants to responsibly fight and adapt to climate change. It would help to re-elect the Clark government, which I submit, has shown it does not care a fig about that imperative.

In that sense, it would be counterproductive to its cause.

In any case, as the Climate Leadership Team basically also acknowledged, British Columbia’s carbon prices cannot be too far out of synch with the price that other jurisdictions are imposing on carbon through other systems, like cap-and-trade.

The key is to keep B.C. on the leading edge, slightly ahead of its competitors on carbon pricing, attuned to the global free market realities and to the domestic political realities of the capacity to sustain carbon tax increases.

To that end, B.C.’s Opposition parties would be wise to focus on ‘right pricing’ carbon with firm commitments for the next four-year term in government, instead of prescribing annual increases to the carbon tax over the next 34 years that they are beyond their ability to control.

They should commit to raising the carbon tax by $10 a year — or maybe even by $15 per year — over each of the next four years, starting in 2017, a year earlier than the CLT called for.

And they should commit to integrating the carbon tax with a cap-and-trade system that also imposes hard emissions caps on large industrial polluters, to ensure they cannot simply pay to pollute for profit without restriction, as the current carbon pricing regime allows.

We must remain vigilant not to allow B.C.’s heaviest carbon polluters to transfer their risks and costs to other taxpayers, especially to individuals and families.

That is what is now happening and it is a key weakness in the CLT’s plan, as I argued in the second installment of this series. I will have much more to say about that problem in the next and final installment.

Having said that, it is important to put the CLT’s recommendation on the carbon tax in perspective, especially for voters who might be too easily swayed by those who promise to freeze the carbon tax or minimize its increases in the near term.

It is equally important to obtain voters’ buy-in for the ways in which any incremental carbon tax revenue will be recycled, either through additional tax cuts, as is now legally required, or through new public investments.

To that end, we would be wise to take our cue from what has politically worked in other jurisdictions.

At least 15 jurisdictions have introduced some form of direct carbon tax, as this short publication from the World Bank points out.

In Canadian-equivalent dollars, Denmark’s carbon tax is about $45 a tonne and Finland’s carbon tax is over $50 a tonne.

Switzerland’s carbon tax is almost $89 per tonne. Norway charges up to $90 per tonne, depending on the type and usage of fossil fuels covered by its carbon tax.

Like that country, Sweden has had a carbon tax since 1991 that has increased over time and now stands at about $219 CAD a tonne.

You can bet that it will easily exceed the CLT’s target of $360 a tonne in 34 years’ time, even with the exemptions that are creeping in, under the European Union Emissions Trading System.

The world hasn’t ended for any of those countries, many of which are large energy producers. Their economies have not collapsed.

Sweden’s example, in particular, shows that the CLT’s vision for a carbon tax is completely doable, if it is not derailed by politics born of its zeal for “proving” the unprovable and of a debate about timelines and long-distant tax hikes that undermines its own purpose.

Just last year Sweden announced that it is also intent on being one of the first nations in the world to become fossil-fuel free.

So it can be done, if we are smart about how we “right price” carbon in British Columbia.

The CLT’s plan for an annual $10/tonne increase in the carbon tax from 2018 to 2050 would mean that it would rise from today’s level of $30 per tonne, to $360 per tonne by 2050 — a 12-fold increase.

Simple multiplication suggests that that increased carbon tax would mean that the price of gasoline would rise from the 6.67 cents per litre now charged for that tax, to about 80 cents per litre over those 33 years.

That should not be too hard to absorb over those next three-plus decades.

After all, in joining the International Zero-Emission Vehicle Alliance last December,

the Clark government also signed onto to a pledge “to make all passenger vehicle sales in our jurisdictions Zero Emission Vehicles as fast as possible, and no later than 2050.” (Emphasis added.)

If we achieved that goal, through fully electric vehicles, the carbon tax basically would not even apply to most people’s cars or trucks, or even to many buses and other public transit vehicles.

The CLT plan offers some suggestions to help encourage electric vehicles, but much more needs to be done.

As well, the incremental demand that those electric vehicles will impose on British Columbia’s electrical system has not been properly quantified by anyone.

That plan also makes recommendations to encourage fuel switching, to help buses, large and medium-duty trucks convert to less carbon intensive fuels, like compressed natural gas.

While that might make sense as a bridging strategy, we should not be investing a lot of money in infrastructure aimed at perpetuating fossil fuel dependency, even from non-renewable natural gas.

Which brings me to home heating.

Under the CLC’s plan, the carbon tax on that energy would go up from the current rate of about $1.49 per gigajoule to about $17.88 per gigajoule in 2050.

Considering a typical home in Vancouver uses about 60-90 gigajoules of natural gas, that cost would be considerable. That annual carbon tax bill would rise from around $89-$134 currently, to about $1,072-$1,609 by 2050 — just for the carbon tax, not including the price of the natural gas itself.

You can see how that escalating tax might motivate most families to seek lower carbon transportation and heating alternatives.

The CLT vision calls for all sorts of targets and unspecified best practices to make buildings more energy efficient and to reduce “built sector” emissions by 50 per cent.

Those are all great goals to pursue, but the CLT plan says little about how to achieve them.

Suffice it to say, there are many ways we can rebalance that carbon price burden, to lay more of it where it properly belongs: at the feet of the heavy industrial emitters who should be obliged to pay the full freight of their carbon pollution.

Rethinking the “Revenue-Neutral” Carbon Tax

Most British Columbians do not really believe the current carbon tax is actually revenue-neutral, even though the government’s annual accounting treatments purport to prove otherwise.

Nevertheless, it’s all there on page 58 of the 2016 Budget and Fiscal Plan, for anyone who cares to look.

This year, the government expects to collect $1.2 billion in carbon tax and it plans to return $1.7 billion in tax relief. In other words, it is budgeting to return $500 million more in tax breaks than it projects it will collect in carbon tax revenue.

As such, the carbon tax scheme is not just revenue-neutral, it’s revenue-negative.

The law requires the province to at least pay back in tax cuts an amount equivalent to what it receives from the carbon tax.

Because it cannot be sure what either that amount of carbon tax revenue will be, or what the cost of its associated tax relief measures will be, the province always budgets to return more than it takes in.

Plus, the cost of that tax relief attributed to offsetting the carbon tax has tended to outpace the growth of that revenue over time. Hence the widening gap between carbon tax revenues and carbon tax relief expenditures.

The problem is, precious few taxpayers feel that they are breaking even on the carbon tax that they pay.

That is partly due to the fact that most people tend to vastly overestimate what the carbon tax is costing them.

But it is mostly due to the reality that most taxpayers and businesses actually do pay more in carbon taxes than they get back in discernible tax breaks.

Then again, some families more than break even on the exchange — typically, those on lower incomes and those who live in rural and Northern areas, as counterintuitive as that may seem.

In fact, of the $601 million in total tax relief for individual and families that will be funded this year from carbon tax revenues, almost half — $278 million — will be dedicated to those beneficiaries.

That includes $195 million for the low income climate action tax credit of $115.50 per adult, plus $34.50 per child. And it includes $83 million for the Northern and rural home owner benefit of up to $200, which is only available to people living outside of the Capital, Greater Vancouver and Fraser Valley Regional Districts.

Most of the balance of that $601 million in personal carbon tax-related relief goes towards funding the five per cent reduction in personal income tax rates that was extended when the carbon tax was launched, eight years ago.

Few people remember that tax cut or perhaps even notice it, especially those with modest incomes.

When you look at how the carbon tax revenues are reallocated back into taxpayers’ pockets, the benefits they provide are not as material to most individuals and businesses as the highly visible costs that confront them at every turn.

This is one reason why the CLT recommended using some of the incremental revenue from a higher carbon tax to lower the provincial sales tax from 7 per cent to 6 per cent.

I think that would be a big mistake. Sales tax cuts are regressive, insofar as they most benefit those who spend the most — namely, people with large incomes.

Cutting that tax by a point won’t do much to help those with lower incomes, many of whom are already receiving a low income carbon tax credit.

As the David Suzuki Foundation has said, that should be increased and indexed to the rate of any future carbon tax hikes, to maintain its effective support for those on low incomes.

Given the heavy weighting in favour of tax relief for businesses, the last thing we should be doing is devoting an even larger share of an ever-larger amount of carbon tax revenue back to businesses.

Especially not the oil and gas industry.

Yet that, too, is something the CLT recommends to help those emissions hogs remain globally “competitive” and to help them offset their costs of reducing their emissions.

It proposes to eliminate the sales tax on electricity for industry, just as it was previously eliminated for households.

That would represent a massive tax transfer to industry, especially to B.C.’s heaviest carbon emitters, in the hope of encouraging them to switch from fossil fuels to renewable electricity.

I will address that issue a greater length in my next piece, but for now it is enough to note that whatever its intended benefits, that recommendation would be yet one more needless subsidy to business that will make public acceptance of any future carbon tax increases that much harder to swallow.

It would represent another hidden subsidy to some of B.C.’s worst carbon polluters that is only contemplated to help attract more carbon-intensive investment. Wrong, wrong, wrong.

If anything, as carbon taxes go up, as they should and must, proportionately more of that revenue should be reinvested to mitigate cost pressures on families.

At least some of it should be used to invest in carbon reducing social “goods,” such as public transit, LiveSmart BC programs, targeted tax relief, affordable “green” housing, and more.

The CLT plan acknowledges those needs, but it also proposes all sorts of new measures that are mostly aimed at further subsidizing businesses, including the oil and gas industry.

As it is, the Clark government has already badly distorted the very notion of a revenue-neutral carbon tax by using that revenue for so many tax cuts and subsidies that should properly be funded from General Revenue, if at all.

In fact, of the $1.7 billion in tax relief attributable to the revenue-neutral carbon tax scheme, over $1.1 billion is dedicated to business — almost twice the amount going to individuals.

And that gap is projected to grow wider, not smaller, over the next three years.

Fully one-third of the $1.2 billion generated in carbon tax revenue this year will go towards subsidizing the film industry — $400 million for film incentive and production services tax credits.

Another $150 million of that carbon tax revenue is also now ostensibly funding the scientific research and experimental development tax credit. And a further $45 million is going towards the interactive digital media tax credit.

All of those tax credits have increased under the Clark government. They all used to be funded from General Revenue, not from the carbon tax.

The five per cent reduction in their personal income taxes that was extended with carbon tax revenue way back in 2008 has not been increased in all that time.

Before any cuts are made to the sales tax from carbon tax revenue, it would be much fairer to reduce income taxes for middle-income earners, adding a high-income surtax to offset those benefits for B.C. wealthiest individuals.

Truth is, the initial five per cent income tax is barely discernible in most middle class families’ take-home pay. They only see it once a year, at tax filing time, which is perhaps one of the reasons that the CLT is suggesting a more highly and constantly visible sales tax cut at some point down the road.

The low income climate action tax credit and the Northern and rural home owner benefit have also not changed in years, and they only apply to a relatively small subset of individual taxpayers. Most taxpayers don’t receive or feel those tax relief benefits.

Other tiny tax credits funded from the carbon tax were mostly cheap political ploys introduced by the Clark government to curry favour with their targeted constituencies.

They include a children’s fitness tax credit, a children’s arts credit, a training tax credit, a B.C. seniors’ home renovation tax credit and even a small business venture capital tax credit.

All arguably enough worthy measures, and all ones that were or should otherwise be funded from General Revenue, or from the LiveSmart BC program — not from the carbon tax.

Again, their reach and their actual tax benefits are so small, almost no one knows they even exist.

So it is not surprising that most taxpayers do not see the connection between the carbon taxes they pay and the tax relief or other social benefits they receive.

That needs to change — dramatically — as part of any plan to raise the carbon tax.

The government should end the carbon tax exemption it put in place two years ago for coloured gasoline and coloured diesel fuel that is used for farm purposes, including for on-farm equipment and for eligible farm trucks on the highway.

It should end the Greenhouse Carbon Tax Program that provides greenhouse growers a grant equal to 80 per cent of the carbon tax paid on their purchases of natural gas and propane burned for heating and CO2 production within their greenhouses.

The Clark government opened the door to the slippery slope of carbon tax exemptions that arbitrarily exempt some sources of carbon emissions from that tax on pollution that only works if its charged on all measurable emissions, across the board.

Tax exemptions are always a mug’s game that is politically manipulated for mostly political gain. We should avoid them like the plague in respect of the carbon tax, which is all about taxing all carbon pollution as if it matters.

In future, we should be rethinking the revenue-neutral carbon tax to use some of that money, as the CLT suggests, for public investments in carbon-reducing infrastructure, technology, facilities and behavioural incentives.

This is the approach that Alberta has chosen for its new carbon tax. It makes sense to more dedicate carbon tax revenue to the thing it is supposed to encourage — lower GHGs.

If governments hope to maintain and build broad public support for any carbon tax, they would be well-advised to clearly demonstrate that linkage with every penny it collect from that tax on carbon emissions.

People very much want and need major improvements in public and rapid transit. They want more pedestrian and bicycle-friendly communities. They want more green spaces, with more trees that clean the air as they sequester carbon.

They want much more help in making their personal transitions to more energy efficient homes, to electric and hybrid vehicles, and to cleaner, more sustainable consumer products that contain less packaging.

They want to make smart choices that will help to heat their homes and run their appliances using truly renewable sources of electricity and renewable biogas that helps to eliminate methane emissions.

Those are only a fraction of the most obvious targets for needed public investment that might be supported by using at least some of B.C.’s carbon tax for carbon-reducing priorities that taxpayers want.

They offer the types of benefits that more people would actually see and feel, which might make them more amenable to paying gradually higher carbon tax rates.

They are the types of investments that can really make a difference in helping taxpayers to make smarter choices that can truly save them money, net of the carbon tax.

Finally, we should consider imposing differential carbon tax rates, as Norway has done, that impose a heavier proportional carbon tax burden on carbon-intensive industries and activities that demand a distinctly more onerous price signal to achieve the carbon tax’s intended purposes.

Far from charging the oil and gas industry less, we should be charging it more, especially in the absence of cap-and-trade, which might achieve the same end at a lower cost, by dint of absolutely limiting and decreasing those related carbon emissions.

Martyn Brown was former B.C. premier Gordon Campbell’s long-serving chief of staff and a key architect of B.C.’s climate action plan and clean energy plan. He was the top strategic advisor to three provincial party leaders, and a former deputy minister of tourism, trade, and investment in British Columbia. A frequent contributor to the Georgia Straight, Brown is also the author of the ebook Towards a New Government in British Columbia. Contact Brown at towardsanewgovernment@gmail.com.

Image: Province of B.C./Flickr

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

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

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

This is a guest post by David Suzuki

The principle that polluters should pay for the waste they create has led many experts to urge governments to put a price on carbon emissions. One method is the sometimes controversial cap-and-trade. Quebec, California and the European Union have already adopted cap-and-trade, and Ontario will join Quebec and California’s system in January 2017. But is it a good way to address climate change?

The program sets an overall limit — a cap — on the amount of greenhouse gas emissions a province can emit. It then tells polluters, such as heavy industry and electricity generators, how many tonnes of carbon each can release. For every tonne, polluters need a permit or “allowance.” So, if a company’s annual limit is 25,000 tonnes, it would require 25,000 allowances. If a company exceeds its limit, it can purchase additional allowances from another firm that, because of its greater efficiency, has more allowances than it needs. This is the “trade” part of the equation.

Although an individual company can exceed its greenhouse gas limit by purchasing credits, the province as a whole can’t. The overall limit is reduced every year, so if the law is followed, cap-and-trade guarantees annual emissions reductions. The declining cap is the system’s great strength and the way it protects the environment.

How effective is it? Although the answer isn’t straightforward, there’s evidence cap-and-trade played a key role in reducing acid rain in the United States. The 1990 Clean Air Act allowed power plants to buy and sell the right to emit sulphur dioxide. Since then, U.S. sulphur dioxide concentrations have gone down by more than 75 per cent. As Nobel Prize-winning economist Paul Krugman wrote in the New York Times, “Acid rain did not disappear as a problem, but it was significantly mitigated.”

Despite this and other successes, some experts are skeptical, arguing that cap-and-trade amounts to little more than a cash grab by government, a tax in everything but name. Others say it’s a mistake to expect climate change can be addressed through markets, when the problem actually requires changing our entire approach to economics, with a commitment to a steady-state economy and an end to the commodification of nature.

Some experts have also noted that the emissions reductions it brings are often modest. A 2015 paper in Canadian Public Policy claimed Quebec’s system “is still too weak to meaningfully address the environmental imperatives as outlined in the Intergovernmental Panel on Climate Change’s 2014 Fifth Assessment Synthesis Report, in which fully eliminating carbon emissions is the benchmark for long-term policy goals.” From 2013 to 2014, California’s allowance cap went from 162.8 to 159.7 megatonnes, a drop of less than two per cent.

Ontario’s proposed legislation indicates its program will have some great strengths and a number of shortcomings. It will likely have wide coverage, applying limits on most of the province’s emissions, including those from transportation fuels. (California's system did not initially include these fuels.)

Ontario is expected to reduce emissions by over four per cent a year — about twice the initial rate of California — and generate $1.9 billion annually from the plan. That money will be invested in “green” projects throughout the province with the goal of reducing carbon emissions even further.

Ontario’s proposal to give away many allowances to big emitters is less encouraging. The government says it will eventually phase out this free disbursement, but in the meantime millions of dollars in government revenue that could be used to support renewable energy and public transit will be lost.

To keep the bulk of fossil fuels in the ground — as scientific evidence says we must — we need a variety of strategies. Cap-and-trade helps reduce emissions and generates billions of dollars for other strategies to address climate change. It also embodies the polluter pays principle. But it’s not enough on its own.

The David Suzuki Foundation and others have long argued that provinces and the federal government should put a price on carbon, through carbon taxes, cap-and-trade or a combination of both. The urgent need to address global warming means provinces that have adopted cap-and-trade need to strengthen it by ensuring emissions drop faster and polluters pay a price that truly reflects the damage caused by carbon pollution.

Written with contributions from David Suzuki Foundation Climate Change and Transportation Policy Analyst Gideon Forman.

Learn more at www.davidsuzuki.org.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Prime Minister Justin Trudeau confirmed Wednesday the federal government will meet with Indigenous leaders and premiers in Vancouver in early March in the hopes of laying out the framework for a national climate strategy.   “I look forward to working with the premiers on combatting climate change and moving toward a greener, more sustainable Canadian economy better positioned to compete globally in the areas of clean knowledge and technologies,” Trudeau said in a media release.

The Prime Minister announced he will meet with Indigenous leaders on March 2 to inform a national climate framework discussion with the premiers in a First Ministers' Meeting scheduled to take place March 3. First Ministers' Meetings did not occur under former prime minister Stephen Harper.

According to Clare Demerse, Ottawa-based energy policy adviser with Clean Energy Canada, the meeting provides an unprecedented opportunity to discuss Canada's renewable energy transition.   “The right people will be in the room to move forward on a national approach [to climate change]," Demerse told DeSmog Canada. "Whether it’s electrical production, or natural resources extraction, provinces make big decisions on energy in Canada."

Meeting to Capitalize on Low-Carbon Economy

According to the Prime Minister's press release, the Vancouver meetings "will focus on effective ways to adapt to climate change, reduce greenhouse gas emissions, and capitalize on the opportunities presented by a low-carbon economy to create good-paying and long-term jobs." 

“We’d really like to see the conversation in Vancouver be about what we're going to build, not just about what we’re going to cut,” Demerse said. “How many electric cars will we see on the road? How are we going to make buildings more energy efficient? How much solar, wind and water power needs to be produced in 2020 or 2030?”   “This is not to say reduction targets shouldn’t be discussed. But the discussion needs to be more focused on the ‘how’ instead of just the number."   Canada was one of the only countries among the world’s top ten greenhouse gas gas emitters not to provide a national clean energy plan to the United Nations in the lead up to the Paris climate talks last December. Other heavy emitters like the United States, European Union, China and even Mexico submitted plans with clean energy targets along with their GHG reduction targets.    The $125 billion the Liberal Party promised during the federal election to invest in infrastructure could go a long way encouraging provinces and territories to adopt strong climate policies.    “The low-carbon infrastructure dollars could be used to reward a province or territory for raising its carbon price, or for adopting stronger climate policies,” Demerse said.   Green infrastructure and public transit were two priorities in the Liberals infrastructure spending pledge. The Liberals also committed to increasing Canada’s Low Carbon Economic Trust to $2 billion.

Feds Could Set a National Minimum Carbon Price

Carbon pricing could also play an important role during the first ministers meeting.   “The First Ministers will consider all policy measures at their disposal to make sure Canada can take advantage of the significant appetite for expertise in the clean growth economy,” the PMO announcement states.   Currently, British Columbia, Alberta, Ontario and Quebec all have some sort of carbon pricing system: either cap and trade or carbon tax. Last December, Manitoba announced it would join Ontario and Quebec’s cap and trade market, which is linked with California’s.   Unlike his predecessor, Trudeau is a supporter of making polluters pay for their greenhouse gas emissions. He is also an advocate of the provinces and territories choosing the system that suits them best.   The problem now lies with the different prices on emissions in different provinces. B.C.’s carbon tax is $30 per tonne of carbon, but Quebec’s carbon price, which is meant to fluctuate, is about half that.    “Eventually Canada will want one coherent national carbon pricing market. The bigger the market, the more diverse the opportunities to reduce emissions,” Demerse said.   “But we aren’t quite there yet, and certain provinces have done a lot of leg work to create their own carbon pricing systems. So, to create consistency between the different system and jurisdictions, the federal government should set a national minimum price on carbon."

Image Credit: PMO Photo Gallery

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

A small, conservative movement is growing in Ontario to “reset the conversation” around carbon pricing and bring the centre-right back to an originally-conservative position, one in support of a market-based approach to fighting climate change. But the movement faces an uphill battle.

“It’s very ironic — the idea of carbon pricing, came more from the right than the left originally,” Mark Cameron, executive director for Canadians for Clean Prosperity, and former policy director to Prime Minister Stephen Harper, told DeSmog Canada.

“There are well known conservative economists who endorsed carbon taxes for decades.”

“You don’t need to feel alone, there are a number of people coming into this tent,” said Chris Ragan, chair of the Ecofiscal Commission, associate professor at McGill University and research fellow at the C.D. Howe Institute.

Those hoping for a reset will soon see how the Ontario Progressive Conservative party engages on the topic when the governing Liberals introduce a cap-and-trade plan in the near future.

“It’s coming, it was campaigned on by the Liberals, “ said Progressive Conservative finance critic and Nipissing MPP Vic Fedeli.

Fedeli was the moderator of a recent discussion with Cameron and Ragan on market-based solutions to climate change. The event in downtown Toronto was organized by Blue Skies Ontario, an idea incubator for Ontario’s centre-right (interestingly managed by Jamie Ellerton, formerly of Ethical Oil), and Canadians for Clean Prosperity, a non-profit organization working to educate Canadians about the “benefits of the polluter pay system.”

If the Ontario right does reset the conversation and agree with the left-leaning parties and economists that carbon pricing is the right approach, the debate would become focused on the details: how is the carbon tax or cap-and-trade system set up and what happens to the money? Will the revenue collected go into general government coffers, get spent on developing clean technology, building infrastructure or get returned in tax cuts?

“Once we get to the debate how we should recycle revenue, I’m going home,” Ragan told the crowd during his opening presentation on carbon pricing.

“Once we have gotten to that point, apparently we have accepted the idea that carbon pricing is sensible.”

Ontario Tories at Cross Roads

With the election of Patrick Brown as the leader of the Ontario Progressive Conservatives in May 2015 and then to the legislature in early September, the Ontario Tories have the opportunity to redefine their party’s position on climate change. Brown has in the past come out against the idea of pricing carbon, but Fedeli says Brown is open to ideas if they work.

“He is very quick to suggest to all parties that a good idea can come from any party and he has agreed and vocalized whether if it is a Liberal idea, an NDP idea, or a PC idea, if it is a good idea, our party should be looking at supporting it,” Fedeli said.

The Liberals tried to portray Brown as an extreme social conservative during the by-election based on his voting record as an MP — a label Brown is quick to say is false. On the energy file, the Ontario Tories have for years hammered the Liberals for the mismanagement and cover-up of the cost of cancelling two gas plants. The former Ontario PC leader campaigned in the 2014 provincial election to cancel the Green Energy Act — an act that paid preferential rates to green energy producers — because it caused electricity prices to skyrocket.

Ontario shut down its coal-fired power plants, resulting in a big improvement in air quality, a major reduction in greenhouse gases and eliminated up to $4.4. billion in environmental and health costs. The plan to replace some capacity with green energy significantly underestimated the cost increase to electricity bills.

When Green Energy Act act was introduced in 2009, the Liberals projected a one per cent increase per year in electricity rates, but a 2010 forecast by the Ministry of Energy predicted a 7.9 per cent annual increase, with 56 per cent of the increase coming from renewable energy sources, reported a 2011 Ontario Auditor General report. Ontario electricity prices are now among the highest in the country and may force one in 20 Ontario businesses to close, a recent Ontario Chamber of Commerce report said.

Supporting a price on carbon and by extension a policy to further increase energy prices may prove difficult for the Ontario Tories after years spent hammering the Liberals on the energy file.

Right-wing Idea?

When finding a policy to reverse climate change, there are really only three options that economists say can work: regulation, a carbon tax or cap and trade. 

Regulation can achieve the goal of reducing greenhouse gases but is economically “inefficient” and “moral suasion and green subsidies are ineffective,” according to environmental economist Mark Jaccard and researcher Nic Rivers.

“One of the problems — age old problems — with regulation is that it becomes a source of potential corruption,” Ragan said.

Markets are remarkably flexible in responses to changes, they decentralize power away from a central authority and they drive innovation, but do a poor job of protecting the environment because “we don’t put a price on it,” Ragan said.

Cap and trade and a carbon tax are market mechanisms that leave the decision-making to industry to determine how to cut emissions and beat their competition.

Originally a cap-and-trade scheme was a right-wing idea, implemented by the first Bush administration to successfully reduce ozone-depleting chemicals. The plan, putting a hard cap on emissions and allowing polluters to buy or sell pollution credits to meet the target, gave industry the power to determine what was the best approach. The idea was disempowered the regulators used to overseeing command-and-control regulations and created an economic incentive to cut pollution. As a result, emissions fell by three million tonnes in the first year, well below targets.

A carbon tax sets a price per tonne of carbon emissions, requiring industry to either pay the tax or cut emissions. Granted a new tax, is not normally an idea a right-leaning politician would support to get re-elected, but if it used as a way to cut other taxes — taxes that hinder economic growth — then the argument shifts. Furthermore when compared to regulation or cap-and-trade, it is the most efficient policy tool to implement.

“In B.C., it took them six weeks to implement the carbon tax,” Cameron said.

A cap-and trade system is more administratively complex to set up and the complexity can open the system to exemption and backroom maneuvering, but that can happen with any system, says Ragan.

“We need to hold governments to account for doing what they said they would do,” Ragan said.

Follow the Money

Prime Minister Harper says a carbon tax is a tax grab dressed up as an environmental policy.  A carbon price could be designed in a way to funnel billions into government coffers, but as the British Columbia model demonstrates, all of the money collected is returned to consumers and businesses in the form of revenue neutral tax cuts with accountability baked into the legislation.

“The [B.C.] Auditor General has to certify that the carbon tax is being treated in a revenue-neutral manner,” Cameron said.

The B.C. model demonstrates the tax as an environmental policy can work. Since the tax was implemented, the B.C. GDP per capita grew faster than the Canadian average, the per-person consumption of fuels dropped over 16 per cent, while in the rest of Canada it grew by three per cent, reported the Economist in 2014. Denmark, Ireland, Sweden have all cut emissions using carbon taxes, while Norway’s emission have risen largely because of the boom in their oil production.

Canadian Opinion

78 per cent of the Canadian population believes the climate is changing. Of those who believe the climate is changing, 72 per cent think it is caused by human activity, according to a Forum Research poll. Those numbers drop for conservative voters to 63 and 50 per cent, respectively. The May 2015 poll is considered accurate +/- 3 percentage points, 19 times out of 20.

When the climate change debate hits the Ontario provincial floor, the Progressive Conservatives, under their new leader Patrick Brown, will have to weigh the fact that a large segment of their base sees no change in the climate or doesn’t believe humans are too blame.

So will the Progressive Conservatives debate the minutia around revenue neutrality, administrative complexity and industry exemptions or decry the whole exercise as a job killing tax on everything? Time will tell if the conversation gets reset.

When asked if Fideli believed that “climate change is happening and we need to do something about it?”

He said: “Carbon pricing will be presented to the legislature in the fall, we need to be ready to be part of the debate because Kathleen Wynne is going to pass something with or without our input.”

So was that a yes or a no?

Image: Blue Skies Ontario via Twitter

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Despite the federal Conservative government’s seven-year attack on carbon pricing as a “job-killing carbon tax,” Canada is actually making progress provincially on pricing carbon pollution.

Without any direction from the federal government, Alberta, British Columbia, Quebec and recently Ontario have all introduced systems that require polluters to pay for the greenhouse gas (GHG) emissions they produce (as we’ve pointed out elsewhere in this series, those systems have had varying success).

But without an overarching carbon pricing system there is only so much the provinces can accomplish. [view:in_this_series=block_1]

“There’s nothing stopping the federal government from attempting to help provinces and territories strengthen and expand their existing GHG programs,” Katie Sullivan, North America policy and climate finance director at the International Emissions Trading Association, said.

“Ottawa could provide model rules, methodologies, guidance, tools and centralized infrastructure and architecture for a variety of program elements,” she said. “The federal government could play a valuable ‘enabling’ role.”

Dave Sawyer, a leading economist with EnviroEconomics, told DeSmog Canada a national system doesn’t have to be overly complicated.

“[A] national system could be just an amalgam of provincial policies that align on key administrative features and prices,” he said, adding, “long-term, we need to transition to a national system to keep costs down as we seek more [emissions] reductions.”

Every ship needs a captain.

Is A National Carbon Pricing System In The Cards?

As DeSmog Canada reported last April, the majority of Canadians want a national carbon pricing system. The latest Angus Reid poll shows 75 per cent of Canadians want a national cap and trade system, while 56 per cent support the idea of a national carbon tax. 

So where do the major federal parties stand?

GHG reductions targets according to federal party platform from Environmental Defence's climate scorecard.

Environmental Defence recently released a helpful climate scorecard that compares the four major political parties in Canada on their climate policies.

While the federal NDP and Greens both support their own versions of a national carbon pricing system — via cap and trade and fee and dividend, respectively — the Conservatives and Liberals have expressed no similar support.

Prime Minister Stephen Harper has been openly critical of carbon pricing in the past, although he did have a few positive words for Alberta’s carbon levy last year. 

Liberal leader Justin Trudeau told Calgary’s Petroleum Club last February he does not support a “one-size-fits-all solution from Ottawa” when it comes to pricing carbon. He said the choice should be left up to the provinces.

An overview of Canada's federal parties from Environmental Defence's climate scorecard.

Bridging the Provincial-Federal Divide

Philip Gass, senior researcher at the International Institute for Sustainable Development (IISD), said a province-by-province approach makes sense but that federal support could help encourage provinces hesitant to commit.

“Each province should be allowed to adopt its own approach,” Gass said. “Provinces should adopt whatever carbon pricing system they think will deliver the most reductions, they can administer and most importantly, a system that is politically acceptable.” 

“For provinces that are not going that way we do need some federal direction.”

“There are many of examples in Canada of issues that crossover both federal and provincial jurisdictions like pricing GHG emissions,” Nathalie Chalifour, law professor and co-director of the Centre for Environmental Law and Global Sustainability at the University of Ottawa, told DeSmog Canada.

Take the federal Species At Risk Act as an example, she said. While the provinces have jurisdiction over species at risk within their borders, the federal government is responsible for federal lands or species that fall under federal jurisdiction like fisheries.

“Given this shared power, there is a provision in the Act allowing the federal government to intervene and manage endangered species under provincial jurisdiction if the provinces are not getting the job done,” Chalifour told DeSmog Canada. 

(It’s worth nothing that in the thirteen years of the Species At Risk Act the federal government has never exercised this provision.) 

The federal government could set a minimum price on GHG emissions. This approach has been described as a “key policy leveler” for carbon pricing in Canada. It could help resolve certain disparities, like the fact that B.C.’s carbon price is currently twice as high as that of Alberta’s or Quebec’s.

But a minimum price isn’t necessary, just like a national minimum wage isn’t necessary for the federal government to enforce the Canadian Labour Code across the provinces.

According to Sullivan from the International Emissions Trading Association the federal government has an important role in ensuring the monitoring and reporting of emissions is “consistent and aligned from coast-to-coast.”

Even basic things like “establishing a centralized registry to record and track emissions data and transactions,” is a central role the federal government can play, Sullivan said.

Setting basic rules on who pays, how to track emissions and what kinds of offsets are acceptable would go a long way to bringing the existing provincial systems in line with one another.

It would also provide a foundation for other provinces to build their own systems on.

“It's not that a common model…and guidance across the provinces can't be done without Ottawa's support, but it would be a heck of a lot more efficient and less-costly to governments and business if Ottawa could step-in to provide this support and common infrastructure at the federal level,” Sullivan told DeSmog Canada.

Federal Leadership Needed

Policy analysts across the board agree carbon pricing on its own cannot solve Canada’s soaring GHG emissions problem. Yet it’s still a step in the right direction and likely won’t be done without strong leadership.

“It takes leadership, courage and vision to stand up and deliver a carbon pricing policy,” Merran Smith, executive director of Clean Energy Canada, said.

Clean Energy Canada, an energy think tank, recently took an in-depth look at the implementation of B.C.’s carbon tax and Quebec’s cap and trade program. They found the climate leadership of the premiers at the time — Gordon Campbell in B.C. and Jean Charest in Quebec — was “one of the key requirements to getting a carbon price in place,” Smith told DeSmog Canada.

“Those leaders also told us that putting in place a price on carbon was the (or one of the) thing they were most proud in their careers — which will hopefully encourage others to step forward,” she said.

The federal government also has an important role to play in implementing long-overdue oil and gas sector regulations, phasing out the use of coal and demanding greater efficiency in the transport sector — all of which nicely align with carbon pricing.

Beyond that, as a recent report from Clean Energy Canada demonstrated, Canada could do much, much more to support the clean energy sector.

Matt Horne, associate B.C. director at the Pembina Institute, said the federal government could simply begin by changing the conversation around carbon pricing.

“The first and easiest step the federal government could take is offer a more constructive voice on the issue, instead of regularly talking about a ‘job killing carbon tax.’”

“Talk about B.C.’s successful experiment or Quebec’s experiment — any of that will help facilitate a conversation in the country that is way more productive and way more constructive than what they have done to date which has been to attack and demonize carbon pricing approaches,” he said.

Image Credit: Clean Energy Canada

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

B.C.’s carbon tax has been called both elegant and a template for the rest of the world. Because it increases taxes on things we don’t want (emissions), reduces taxes on things we do want (income), is popular with the public and has actually worked to reduce the province’s carbon footprint, it’s been called a win-win-win-win.

So how does it work?

Pretty simply: if you burn fossil fuels (oil, gasoline, natural gas, etc.), you pay the tax. British Columbians see the tax on their heating bills and at the pump when they fill up their cars. But because the system is designed to be revenue neutral, British Columbians also see the benefits of the tax feeding back into the system, benefiting consumers through tax credits and breaks.

Every dollar collected by the government through the tax (approximately $1 billion annually) is funnelled back to the people of B.C.

The system also has the highest price on carbon pollution: $30 per tonne — although B.C. got there gradually growing from $10 per tonne in 2008 to $30 in 2012.[view:in_this_series=block_1]

As in Quebec’s system, this gradual price increase gave businesses and British Columbians time to adjust to the incremental rise in costs. In 2008, the carbon tax resulted in a two-cent increase on a litre of gas.

Unlike Alberta’s carbon levy and cap and trade, this $30 must be paid on every single tonne emitted. They are no ‘caps’ on emissions with the carbon tax: the price alone is meant to drive down emissions.

A report released in 2013 — five years into the carbon tax — showed the system had been a resounding success: within four years, B.C.’s per person fuel consumption had dropped 17.4 per cent while in the rest of Canada that number grew by 1.5 per cent.

Total carbon emissions also dropped by 10 per cent during that time while the B.C. economy continued strong. And, amazingly, the carbon pricing mechanism is B.C.’s most popular tax. Who knew there was such a thing?

There are some downsides to B.C.’s prized carbon tax, however.

B.C.’s revenue neutral model means taxes collected are immediately returned to the system and aren’t redirected toward renewable energy, for example.

In the Alberta and Quebec systems, revenue on allowances or credits makes its way into clean technology or green funds. 

The biggest stain on the carbon tax’s nearly spotless reputation is B.C.’s booming natural gas sector. Due to loopholes, the gas industry is exempted from paying for enormous amounts of vented and fugitive methane emissions or for enormous refrigeration facilities used to cool natural gas to create liquefied natural gas (LNG).

And the Christy Clark government’s push for massive LNG exports will likely prevent B.C. from meeting its goal of a 33 per cent reduction in emissions by 2020. 

Image Credit: Magnus Larsson via Flickr

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Cap and trade is in the new kid in town as far as carbon pricing goes in Canada. In April, just before the Premiers' Climate Summit, Ontario made headlines by announcing it will join Quebec’s cap and trade system, which is linked to cap and trade in California.

So just how does it work? Here's our short primer.

The system was first adopted by Quebec in 2013 (although it’s worth noting the province did impose a tax on gas and diesel fuel back in 2007).

“The benefits of emissions trading, beyond ensuring the climate goal is reached in a measurable manner, is that business has flexible compliance options and ‘carrots’ — incentives for making smart, economic business decisions,” Katie Sullivan, director for North America and Climate Finance at the International Emissions Trading Association, said.

Like Alberta’s carbon levy, Quebec’s system puts a price on emissions above a certain level.[view:in_this_series=block_1]

The limit in Quebec is 25,000 tonnes of carbon pollution annually — an amount significantly lower than the limit in Alberta. Emitters unable to keep their emissions productions below this level must either buy allowances (also referred to as credits or units) or offsets to cover all emissions they produce, not just those emissions over the 25,000 limit.

A flexible and critical tool for keeping costs in check is the ‘offset,’ Sullivan explained.

“[The offset] allows an economy’s non-regulated players, such as farmers, foresters and other clean project developers, to join the climate solution while generating new revenue streams associated with eligible low-carbon — ‘offset’ — projects.”

Carbon offsets are investments in projects that either reduce GHG emissions or draw carbon pollution out of the atmosphere. Planting trees is an example.

Offsets are meant to be like emissions reductions because in theory they cancel out carbon pollution.

There is some dispute about whether offsets actually reduce emissions or simply are a cover to produce more carbon pollution.

“Offsets are probably one of the most contentious parts of a cap and trade. In Quebec and California's system, offsets can only make up to eight per cent of total compliance obligations,” Sarah Petrevan, a senior policy advisor at Clean Energy Canada, said.

The other 92 per cent must be paid for in the form of allowances and this is where the price on carbon comes in.

Allowances can be purchased from the Quebec government or traded for with another company that is below the GHG limit and has allowances to spare. Quebec ‘caps’ the amount of allowances available for purchase and the cap is lowered gradually each year.

Where cap and trade significantly differs from B.C.’s carbon tax and Alberta’s carbon levy is in the price of allowances. These prices actually fluctuate based on supply and demand in an auction-style system.

In order to keep that fluctuation in check, Quebec imposed a “price floor” at $12 per tonne of GHG emissions but increases that floor by five per cent each year, adjusted for inflation.

“One of the things [Quebec] did learn from the EU program was having that price floor, which is very important,” Sullivan wrote in a report. “The safety valve at the top end also gave comfort to industry that prices wouldn’t go skyrocketing in the near-term.”

Although it’s administratively complex and at times difficult to understand, cap-and-trade is the world’s most popular carbon pricing system.

The European Union’s Emissions Trading System is the world’s largest cap and trade market — for now. China plans on introducing cap and trade next year.

“The biggest pro to cap and trade is the flexibility it presents to industry. There’s trading, offsets, etc., and this allows industry to meet their reductions in a number of ways,” Philip Gass from the International Institute for Sustainable Development told DeSmog Canada. 

Quebec’s cap and trade system is still in its infancy, but it looks promising: more emissions are covered in Quebec’s system than the other provincial systems.

Eighty-five per cent of Quebec’s GHG emissions are subject to the system versus only 50 per cent in Alberta and 75 per cent in B.C. 

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

For the first time in several years, carbon pricing in Canada is back on the national radar.

Recently a group of more than 60 Canadian experts published a report, Acting on Climate Change, that outlined Canada's path to a low-carbon future. Their first recommendation? Put a price on carbon. The idea seems to be gaining serious traction with Canadians, the majority of which support carbon pricing according to a recent Angus Reid poll. 

In the lead up to this month’s Premiers’ Climate Summit in Quebec City, Ontario’s premier Kathleen Wynne announced her province would join Quebec’s cap-and-trade agreement with California — putting major stock in a carbon-pricing solution to provincial emissions.

The conservative Manning Centre conference was praised for holding an “adult conversation” about carbon pricing in March just after a collaboration between oilsands majors and green groups working together for a carbon tax hit the press.[view:in_this_series=block_1]

Even Preston Manning and David Suzuki can agree that pricing carbon is at least one important part of addressing climate change.

The vast majority of Canadians think the federal government, not the provinces, should take the lead on establishing carbon pricing in Canada, according to a recent Nanos poll. Meantime a new Angus Reid poll shows a slight majority across the provinces are in support of a national carbon tax system.

Source: Angus Reid

So what’s keeping Canada from a serious national price on carbon?

The Job Killer: Canada’s Controversial Carbon Price Past

To answer that question, you need to look back to 2008 when Stephen Harper’s Conservatives defeated the Liberals and their national carbon tax proposal by claiming the tax would be a job-killer.

It seemed the very mention of a carbon tax had, rather unfortunately, become politically toxic.

But there’s now ample evidence that pricing carbon doesn’t hurt economies.

British Columbia is Canada’s most championed example of a successful carbon tax regime. It has been called the “most significant carbon tax in the Western Hemisphere by far.”

The province’s tax has been in place for seven years and B.C. continues to perform above the national average in terms of economic activity (more on B.C.’s carbon tax in Part 2 of this series).

Internationally, no economy has crashed due to placing a price on carbon pollution.

So it was something of a surprise when Harper said late last year that “it would be crazy” to regulate the oil and gas sector.

The comments came after Harper’s very public condemnation of carbon tax alongside Australian Prime Minister and notorious climate villain Tony Abbott.

Just months later, however, Harper vocalized support for Alberta’s carbon levy, saying “we’re very open to see[ing] progress on this on a continental scale.”

The new tone seems to indicate the 2015 federal election will carry a very different carbon price tune. As it currently stands, all federal parties support carbon pricing to varying degrees this time around.

The debate will now shift to a conversation about how Canada should move forward on pricing carbon pollution.

What Does a Carbon Price Do?

“Carbon pricing lets you provide an incentive across the economy to reduce GHG emissions and lets, to some extent, the markets figure out where the most cost-effective solutions are,” Matt Horne, associate regional director at the Pembina Institute, told DeSmog Canada.

The idea behind carbon pricing is simple — put a price on using or burning GHG-producing fossil fuels (oil, natural gas, coal) and an incentive is created to produce fewer emissions.

The ‘polluter pays’ principle signals to companies, governments and individuals that the ‘business-as-usual’ scenario — freely emitting carbon pollution — is no longer acceptable.

“Carbon pricing is about correcting the true costs of burning fossil fuels to account for damages,” Nic Rivers, Canada research chair in climate and energy at the University of Ottawa, said. “Right now, we don’t pay for dumping CO2 (carbon dioxide) and other greenhouse gas emissions [into the atmosphere].”

So if you want to make polluters pay, “carbon pricing meets the criteria,” Dave Sawyer, one of Canada’s leading environmental economists, told DeSmog Canada.

“If you believe we need to go much deeper in our [emissions] reductions, as most of the world does and clearly the science indicates, you want to do it in a cost-effective manner.”

An effective carbon price can really help a government or industry achieve greenhouse gas reductions, Sawyer said. More importantly, “you can do it cost effectively, while minimizing adverse impacts on households and businesses.”

Key Elements Of A Good Carbon Pricing System

Getting to the appropriate ‘cost’ of carbon is where major divergences in pricing schemes seem to appear.

“When I am looking at a carbon pricing system, I am more interested in the design and the policy details as opposed to whether it is a carbon tax or cap and trade. How stringent is the system?” Rivers said.

“What emissions does it cover? How fast does it ratchet down [those emissions]?”

Canada currently uses a blend of carbon-pricing approaches.

B.C. has its carbon tax, Alberta’s system is called a carbon levy and Quebec and Ontario have adopted another variation known as cap-and-trade in cooperation with California.

A well-designed carbon pricing system should have two outcomes: reducing GHG emissions and allowing businesses, industry and the economy to remain competitive. Much of this hinges on the per tonne charge a system puts on emissions.

Carbon Price Outcomes: The Specifics

Take B.C.’s carbon tax, which currently charges polluters $30 for every tonne of carbon pollution they emit.

When the tax was implemented in 2008, the ‘carbon price’ was $10 per tonne and slowly increased over time. This low price on GHG emissions at the start was meant to give companies the opportunity to adapt to the new economic realities and modernize their business practices to low-carbon and low-energy consumption.

Slowly increasing the price also has the advantage of strengthening the incentive to produce less GHG emissions as time goes on.

Quebec and Ontario’s cap and trade system works along the same lines with some notable differences (more about that in Part 2).

A good carbon pricing system will also want to avoid placing a seemingly ‘unfair’ or ‘burdensome’ financial penalty on everyday Canadians. But that doesn’t mean consumers aren’t implicated in carbon prices.

In B.C., prices went up at the pump and on home heating bills. But for British Columbians, there was an acceptable balance between costs and rewards.

“It made climate action real to people,” Merran Smith, the head of Clean Energy Canada, told Grist.

“I think it really increased the awareness about climate change and the need for carbon reduction, just because it was a daily, weekly thing that you saw.”

One of the keys behind broad support for B.C.’s carbon tax is that it’s revenue neutral, meaning taxes have been cut in other areas, resulting in B.C. now having the lowest personal income tax in Canada.

The same Nanos poll that found Canadians want the federal government to lead on carbon pricing, also found around 60 per cent of Canadians do not want to see fuel and heating prices go up even if it is to combat climate change.

Yet, in B.C. the majority of residents support the carbon tax.

“Polls have shown anywhere from 55 to 65 percent support for the tax,” Stewart Elgie, director of the University of Ottawa’s Institute of the Environment, said.

“And it would be hard to find any tax that the majority of people say they like, but the majority of people say they like this tax.”

Carbon Pricing ‘Not A Silver Bullet’

“We certainly would not look at carbon pricing as a silver bullet solution, but it is an important contributor to an overall solution,” Horne said.

If Canada is going to meet its international obligation to drastically reduce its carbon footprint, new GHG emissions reduction initiatives are needed in addition to a price on carbon.

The federal government could play a game changing role here — something we’ll take a closer look at in Part 3 of this series.

“You would want [carbon pricing] to be complimented with other policies and regulations where appropriate,” Horne said.

Image Credit: PM Photo Gallery

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

A new poll released today by Angus Reid finds the majority of Canadians support carbon pricing programs and more than half the population would like to see a national climate policy instituted at the federal level.

Although Canadians say they’re ready for climate action, there’s a lot less certainty surrounding climate leadership at the federal level, according to poll results.

There also appears to be some question about the actual impact of a carbon price but, despite the uncertainty, 75 per cent of Canadians support the idea of a national cap and trade program, and 56 per cent support the idea of a national carbon tax.

Currently Canada has a smattering of province-led carbon price initiatives — B.C.’s celebrated carbon tax being perhaps the most notable — although no national program to reduce emissions exists.

"Thankfully, we are past the point of debating whether something should be done and into a discussion of how we are going to stop climate change," Keith Stewart, energy and climate campaigner with Greenpeace Canada, said.

Canada’s premiers recently met at a climate summit to discuss provincial contributions to lowering the country’s greenhouse gas emissions. Major steps were taken at the summit — most notably Ontario’s decision to join Quebec and California’s cap and trade program — but Canada’s national contribution to tackling climate change remain a question.

Canada has no climate legislation and, according to Environment Canada, growing emissions from the Alberta oilsands will prevent the country from meeting its emission reduction targets under the Copenhagen Accord.

The majority of Canadians see climate change as a serious threat to the planet, according to a previous study from Angus Reid, and more than half of the population says the federal government is not doing enough to tackle climate change.

One in five Canadians said climate change would likely be a deciding factor for them in the upcoming federal election. About half of survey respondents indicated climate would be of moderate election importance (four to seven on a 10-point scale).

Stewart was blunt in his reading of the results: "The poll results show that a large majority of Canadians support taking action on solutions to climate change and that anyone looking to replace Stephen Harper as Prime Minister should talk a lot more about how they would do this," he said. 

The federal election is expected to take place in October. 

In December, countries will meet in Paris at the United Nations Framework Convention on Climate Change (UNFCCC) to reach a new global agreement on climate change. Nations were expected to release their reductions targets at the end of March but Canada declined to submit its plans.

"The only thing the Conservatives are on target to meet is complete failure," NDP environment critic Megan Leslie said at the time. "Mexico has announced its plan. The U.S. is moving forward. When will we stop being international laggards on climate change?"

Image Credit: Kris Krug

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.