Updating carbon pricing in Canada: PBO Report , Supreme Court case, and provincial opt-outs

On October 8, the Office of Canada’s Parliamentary Budget Officer (PBO) released its latest report on carbon pricing, Carbon pricing for the Paris target: Closing the gap with output-based pricing . The report concludes that the government’s existing and announced policies and measures – including a carbon tax which rises to $50 per tonne in 2022 and an Output-Based Pricing System (OBPS) will not be sufficient to allow Canada to meet its emissions target under the Paris Agreement – 30 per cent below 2005 levels by 2030. The PBO models three complex scenarios to estimate that the level of the carbon price necessary to achieve the Paris target ranges from $67 per tonne to between $81 and $239 per tonne.

A critique by Clean Prosperity , a Toronto NGO focused on carbon tax research and education,  finds two of the PBO scenarios “unrealistic” and calls for a fourth approach, which transitions the industrial output-based pricing system to economy-wide pricing plus a border carbon adjustment. Clean Prosperity concludes:  “The bottom line is that carbon pricing works and should continue to increase after 2022 at roughly the same level as today in order to help us meet our Paris targets.”  Clean Prosperity promises to  release its own modelling of such an approach “in the near future”.

The report was released while a constitutional challenge to the federal carbon pricing system is still before the Supreme Court, and does not reflect the September 20 announcement that “The Government of Canada will stand down the federal carbon pricing system for industry in Ontario and New Brunswick as of a date in the future.” (that date and formal change to the systems to be determined in consultation with each province.) 

Smart Prosperity (a University of Ottawa research centre)  posted a blog and a report Ontario’s Options: Evaluating How Provincial Carbon Pricing Revenues Can Improve Affordability on October 8 .  Smart Prosperity has published a number of relevant working papers, including : Environmental Taxes and Productivity: Lessons from Canadian Manufacturing  (April 2020);  Border Carbon Adjustments in Support of Domestic Climate Policies: Explaining the Gap Between Theory and Practice (Oct. 2019) and Do Carbon Taxes Kill Jobs? Firm-Level Evidence from British Columbia in March 2019.  Canada’s Ecofiscal Commission also researched and published numerous reports (archived here ) before it closed its doors in November 2019.

B.C. Budget delivers $902 million to fund Clean B.C. initiatives

BC government news open micThe government of British Columbia tabled its Budget on February 19- officially detailed in  Making Life Better- A Plan for B.C. 2019/20 — 2021/22 .  As summarized by the National Observer article, “B.C. provincial budget funds nearly $1 billion for climate action” , it included $902 million  over the next three years to support the 2018 Clean B.C. Plan . Here are some of the big-ticket items:  $107 million for transportation initiatives – mostly providing incentives for zero-emission vehicle purchases (up to $6000 per vehicle) and funding for new charging stations;  $58 million for making homes and commercial buildings more energy efficient – as a result, homeowners can get up to $14,000 for energy efficiency improvements such as  switching to high-efficiency heating systems or upgrading their doors or  windows. $168 million is dedicated to funding  an incentive program to encourage large industrial polluters to reduce their emissions; $15 million is dedicated to help remote communities transition to clean energy solutions, and  $299 million is unallocated as yet. In addition to the Clean B.C. funds, the budget includes $111 million over three years to fight and prevent wildfires, another $13 million for forest restoration, and $3 million for the BC Indigenous Clean Energy Initiative, to help First Nations communities build clean energy projects.

Reaction has generally been positive – for example, from Clean Energy Canada . The Canadian Centre for Policy Alternatives B.C. Office, in “Nine things to know about the B.C. Budget” commends the  $223 million which is  budgeted to increase the climate action tax credit for low- and middle-income earners, but says, “action needs to be ramped up further—and fast”.  CCPA’s  Special  Pre-budget Feature  included an essay by Marc Lee “Expand climate initiatives to reflect the urgency of the crisis”  (Feb. 1). Lee had called for the  reinstatement of  annual increases to the carbon tax, beginning in 2019 with an increase of $10 per tonne – but no such policy was announced. (Lee had also called for more realistic budget allocations for wildfire response, which was addressed).

Finally, the Pembina Institute response is generally positive, though it calls for an independent panel to publicly monitor accountability and report on progress annually, echoing the Op-Ed “wish list” it had released before the budget was handed down.  . That had  stated: “B.C.’s Climate Change Accountability Act needs more teeth. What’s required is a transparent process whereby the government forecasts carbon pollution (including reduction goals for each sector), tracks and publicly reports on our progress, submits this data for independent verification, and adjusts policies as necessary.”   Other key items which Pembina had called for include  stronger regulations than those announced in January to limit methane pollution, and a strategy to use clean electricity to power the controversial LNG production which threatens to make the province’s GHG emissions targets unreachable.

Economists weigh in on deceptive carbon pricing messages

Economist Brenda Frank contributes to the ongoing battle of ideas about carbon pricing in Canada with his  January 9 blog : “Carbon pricing works even when emissions are rising”. Frank begins:  “An old, debunked argument against carbon taxes has flared up recently: If total emissions aren’t falling, the tax must not be working. Let’s quash that myth.”  Continuing the arguments he published in a 2017 blog, “The curious case of counterfactuals”, his central question is, “if emissions are still rising, how fast would they have been rising without a carbon price?”  He cites recent studies, such as “The Impact of British Columbia’s Carbon Tax on Residential Natural Gas Consumption” (in  Energy Economics, Dec. 2018), as well as  the extensive carbon pricing reports produced by the Ecofiscal Commission, most recently Clearing the Air: How carbon pricing helps Canada fight climate change (April 2018).  The  conclusion: carbon pricing is more “complicated than something you can fit in a tweet”, and  complex analysis demonstrates that it does work.

Marc Hafstead , U.S. economist and Director of the Carbon Pricing Initiative pursues a similar theme in  “Buyer Beware: An Analysis of the Latest Flawed Carbon Tax Report” ( November 28).   Hafstead contends that “some papers can introduce confusion and misinformation”, and demonstrates how this is done in  The Carbon Tax: Analysis of Six Potential Scenarios , a study commissioned by the Institute for Energy Research and conducted by Capital Alpha Partners.  Hafstead critiques the modelling assumptions and concludes they are flawed ; he also charges that the paper fails to explain its differences from the prevailing academic literature.

Even without Hafstead’s economic skills, one might be wary of the U.S. paper after a check of the DeSmog’s  Global Warming Disinformation Database , which provides mind-blowing detail about the financial and personnel connections between the Institute for Energy Research and  Koch Industries . DeSmog maintains records on organizations and individuals engaged in “climate change disinformation” in the U.S. and the United Kingdom.

New B.C. Plan weds a clean economy with economic growth and worker training

cleanbc logoBritish Columbia’s long-promised climate plan, CleanB.C.  was released on December 5. The press release summary is here , details are in a 16-page Highlights Report . Top-line summary: the CleanBC plan is at pains to emphasize that it is a plan for economic growth as well as a cleaner environment.  B.C.’s existing carbon tax will increase $5.00 per year from 2018 to 2021, with rebates for low and middle income British Columbians and support for clean investments in industry.  CleanB.C. repeats some already announced initiatives, such as the the zero-emissions vehicle sales mandate and ZEV consumer incentives,  and the requirement for new buildings to be  “net-zero energy ready” by 2032.  Publicly-funded housing will benefit from $400 million to support retrofits and upgrades.  Cleaner operations by industry will target a 45% reduction of methane emissions from upstream oil and gas operations , and incentives “will provide clean electricity to planned natural gas production in the Peace region”.  There is also support through “a regulatory framework for safe and effective underground CO₂ storage and direct air capture “.

CleanB.C. recognizes the needs of workers.  From the Highlights: “As new jobs and professions emerge, post-secondary education and training need to keep pace. The Province is working with employers, Indigenous communities, labour groups and postsecondary institutions to analyze the labour market and identify: -where the strongest job growth is likely to be, – what skills are needed to meet the demand, – what specific training we need to develop and deliver in our communities, and – what support students and apprentices need to excel in these programs. As a first step, we are investing in two key sectors where we already know demand is strong and growing – cleaner buildings and cleaner transportation:  – Developing programs like Energy Step Code training and certification and Certified Retrofit Professional accreditation – Expanding job training for electric and zero-emission vehicles.” The government also states it is developing a  CleanBC Labour Readiness Plan, which is part of the reason that  Unifor responded with “Unifor supports introduction of Clean B.C. Plan”.  Laird Cronk, president of the  BC Federation of Labour calls the new strategy an “historic opportunity” to develop a sustainable economy, and states: “We’re committed to working together on just and fair transition strategies to protect existing workers and to ensure that new employment opportunities created by the CleanBC plan are good, family- and community-supporting jobs.”

The general acclaim for Clean B.C. is compiled in a Backgrounder at the B.C. government website, with statements from politicians, environmentalists, business leaders, First Nations, labour unions, and academics- among them,  Marc Jaccard from Simon Fraser University, who states:  “This plan returns B.C. to global climate leadership.” From other sources:  Clean Energy Canada:  “CleanBC marks a turning point for B.C.’s environment and economy”  (Dec. 5);  The Broadbent Blog , which singles out the exemplary commitment to equity and reconciliation with First Nations people; the Pembina Institute, “B.C. climate plan sets a course to Canada’s clean future”   and  “Five bright spots in B.C.’s new climate plan”, which highlights the importance of the accountability mechanism.   The David Suzuki Foundation   calls it a “Big Step Forward”, but points out that there is more to be done – a Phase 2 is needed.

The Phase 2 of further initiatives (and implementation legislation ) are promised. The  Government clearly admits that the initiatives announced on December 5 will only  achieve 18.9 Mt GHG reduction, leaving a 25% gap with what is required by the  legislated target for 2030 ( 25.4 Mt GHG from a 2007 baseline).

The response from West Coast Environmental Law  applauds and endorses CleanB.C. and its accountability measures, but raises the elephant in the room question:  “We know that the Province needs to go further: the map set out in CleanBC is not complete, nor does it go far enough. Some recent decisions, for example on LNG, are difficult to square with this climate plan”.  This big LNG question also appears in “Critics question B.C.’s LNG pursuit in wake of climate plan announcement” (updated on December 6), stating that “ the already-approved LNG export facilities — LNG Canada and Woodfibre in Squamish — would take up almost all of B.C.’s allowable carbon footprint under the current targets.”  The government’s current LNG Framework   was released in March 2018 , allowing the approval of a controversial  $40-billion LNG project centred in Kitimat  in October 2018.  At that time, the Green Party leader linked his Party’s support for the clean growth strategy and promised the Greens “would have  more to say” about LNG after the Clean Growth strategy was finalized.

B.C. consultation on “Clean Growth” policies for transportation, industry, and the built environment

Flag_of_British_Columbia.svgWhile British Columbia is understandably preoccupied with the devastating wildfires raging across the entire province, an engagement process called Towards a Clean Growth Future in B.C.  was launched on July 20, with a short, summertime deadline of August 24.

Three brief Intentions Papers have been published to solicit public input : Clean Transportation ,which discusses policies to incentivize Zero Emissions Vehicles – including the possibility of a ban the sale of new gasoline and diesel light duty vehicles by 2040;  Clean, Efficient Buildings,  which proposes five steps to cleaner buildings, including Energy efficiency labeling information, financial incentives, and additional training for workers in energy efficient retrofitting and in the new-build Energy Step code; and A Clean Growth Program for Industry , which includes the province’s Industrial Incentive under the carbon tax regime and addresses the potential dangers of “carbon leakage”.

Public Submissions are available online  and to date have been submitted by: Canadian Centre for Policy Alternatives (CCPA), written by Marc Lee ; Closer Commutes ;   The Wilderness Committee ; and  The Pembina Institute , which at 37 pages is extremely detailed, and includes 5 recommendations relating to Training and Certification for Clean Buildings,  including  a call for “a construction labour strategy that addresses skilled labour gaps and equity issues in the building industry. Integrate with emerging technology and innovation strategy to foster greater use of automation and prefabrication.”

The West Coast Environmental Law Association (WCEL)  also posted a thorough discussion of the Clean Growth proposals on its own website on August 16.  “BC’s decade-delayed climate strategies show why we need legal accountability” by Andrew Gage notes that the intentions papers are largely built on existing proposals (some dating back to the 2008 Climate Action Team  Report ), and that they are not complete, as the government is also developing proposals through its  Climate Solutions and Clean Growth Advisory Council  and the newly appointed Emerging Economy Task Force .  (The Wilderness Committee calls the proposals “underwhelming”). Whatever the final policies that flow from these consultations, WCEL emphasizes the importance of demanding accountability, and like Marc Lee in his submission, points to the success of the U.K.’s Climate Accountability Act (2008). WCEL has previously critiqued  Bill 34, B.C.’s  Climate Change Accountability Act which received Royal Assent on  May 31 2018.

Another commentary, appearing in the National Observer (July 27) addresses the weakness of the transportation proposals.  “B.C.’s climate plan needs a push – from you”  refers to the author’s more detailed report, Transportation Transformation: Building complete communities and a zero-emission transportation system in BC , which was published by the CCPA in 2011.

The CCPA also published an article on August 2, 2018 in Policy Note:  “The Problem with B.C.’s Clean Growth climate rhetoric” . Author Marc Lee reviews the history of the term “clean growth” and offers his critique, noting that clean growth “promises change without fundamentally disrupting the existing economic and social order.”

Individuals have until August 24 to can email their input to clean.growth@gov.bc.ca .