Updating the political battle of carbon pricing in Canada

Justin TrudeauOn October 23,  Prime Minister Justin Trudeau announced that the federal government will hold its resolve to impose a carbon pricing policy across all Canadian jurisdictions in 2019 – see the press release, “Government of Canada Putting a price on pollution”   (Oct. 23).  Key to the plan: the Climate Action Incentive, whereby all carbon revenue will go directly back to people in the provinces from which it was generated.  David Roberts of Vox hits the nail on the head with  “Canadian Prime Minister Justin Trudeau is betting his reelection on a carbon tax” (Oct. 24) , stating,  “It’s a thoughtful plan, remarkably simple, transparent, and economically sound for something cooked up in a politically fraught context. If it’s put into place (and stays in place), it would vault Canada to the head of the international pack on climate policy.”

Reaction from the Canadian mainstream media: From the Globe and Mail, an Editorial:  “For the Liberals, a spoonful of sugar helps the carbon tax go down” ;  “Arguments against the carbon tax boil down to a desire to do nothing” (Oct. 24)   by Campbell Clark ; “Carbon tax vs. climate change will be an epic contest” by John Ibbitson  and “Trudeau’s carbon tax rebate is smart – but complicated”  by Chris Ragan of the Ecofiscal Commission . From Andrew Coyne in the National Post: “Liberals’ carbon tax plan has its faults — but who has a better option?”  and from Chris Hall of the CBC, “How the Liberals hope to escape the ‘Green Shift’ curse in 2019”  (Oct.23)  .

The National Observer provides some detail to the complex calculations of the backstop rebates of the Climate Action Incentive, but the detail is at the government’s webpage, Pricing Pollution: How it will work  which provides links to individual explainers for each province and territory.

Other Responses: Rabble.ca Elizabeth May of the Green Party of Canada ;  Canadians for Clean Prosperity ;  and the Smart Prosperity Institute , which also provides a compilation of reaction and reports .

There seems to be general agreement that it is politics, not economics, which will determine support for the carbon plan.  Ontario Premier Doug Ford has been making the rounds with other Conservative politicians in Canada to coordinate their messaging and opposition to the federal carbon tax – culminating in the introduction of Bill No. 132—The Management and Reduction of Greenhouse Gases Amendment Act , 2018 in Saskatchewan on October 30, and on October 31, passage of Ontario’s Bill 4, The Cap and Trade Cancellation Act.  The National Observer describes the events of October 31 and summarizes the recent  political dance in “Doug Ford and Andrew Scheer play fast and loose with facts about carbon tax”  . Other press coverage: from the CBC:   “‘The worst tax ever’: Doug Ford and Jason Kenney hold campaign-style rally against carbon levy”  on Oct. 5 ;   “Doug Ford attacks ‘terrible tax’ on carbon alongside Saskatchewan Premier Scott Moe” on Oct. 29; and  “Doug Ford meets Andrew Scheer as carbon tax war heats up”  on October 30, describing their meeting in Toronto.  The gist of their arguments:  the carbon tax is a money-grab which will “drive up the price of heating your home”, with Doug Ford stating “It’s just another Trudeau Liberal tax grab. It’s a job-killing, family-hurting tax. ”  After the rebate details were announced on October 23, Ford has added that the promised rebates are “a complete scam”, “trying to buy Canadians with their own money.”   But as iPolitics reported on October 26, “Ford gets his facts wrong while bashing federal carbon tax”  and  “Ford doubles down on falsehoods about federal carbon tax”  .  iPolitics cites the independent analysis of the carbon tax’s impact by  Ontario’s Financial Accountability Officer, Ontario financial office cap and tradewhich supports the federal government’s numbers, and differs from Premier Ford’s public statements.  Meanwhile, the Ontario government promises to release their climate plan in November,  according to the Toronto Star   (Oct. 29), and Andrew Scheer also promises a climate plan “in 183 days”.

Activists force consultation re Ontario’s cap and trade policy as Environment Commissioner pans government’s actions to date

Ontario commissioner Report-Cover-In the annual Greenhouse Gas Reduction Progress Report for 2018, titled Climate Action in Ontario: what’s next? , the Environmental Commissioner of Ontario has published a blunt critique of the Conservative government’s actions to date.

As was widely reported, the  government in Ontario (among other actions) tried to dismantle the province’s cap and trade program after its election, introducing  Bill 4, the Cap and Trade Cancellation Act, 2018  on July 25 .  The Environmental Commissioner wrote:

 “Unfortunately, cap and trade was both complex and poorly communicated; for some, its costs were more obvious than its benefits. Today, cap and trade, the low-carbon programs that it funded, and 752 renewable energy projects have all been swept away, with nothing in their place. The government’s proposed replacement, the Cap and Trade Cancellation Act (Bill 4), currently lacks most of the features of a good climate law.…. There is no perfect answer, but the best international model for long-term consistency is the United Kingdom’s Climate Change Act. The U.K. Parliament sets legally binding long-term emission limits, plus five-year carbon budgets 12 years in advance, based on non-partisan, expert advice and reporting. Ontario should do the same.”

The Commissioner’s report includes appendices, including Appendix B: Revenue from cap and trade: What was it used for?

On September 11, environmental activists filed a lawsuit against Bill 4, alleging that it violates the Ontario Environmental Bill of Rights because no public consultations were held on the  matter.  On the same day, a notice appeared in the Environmental Registry,  allowing  for comments online or in writing, until October 11.    EcoJustice, one of the groups behind the lawsuit, (along with Greenpeace  and the University of Ottawa) has posted a summary of all these developments on September 25 in “Let Premier Ford know where you stand on climate action”, urging comments.

Jumping in to this debate:  Canadians for Clean Prosperity, which commissioned a study to examine the costs and benefits of carbon “costs” (e.g. fuel and household heating) in Ontario, Saskatchewan, and Alberta, in the event that the federal carbon price backstop is triggered in 2019.  The author, Dave Sawyer of EnviroEconomics, concludes that most households, regardless of income, would receive more money through rebates than they would pay out through a carbon price, assuming that all fees are rebated to consumers.   The report summary is here ; the formal report is  Federal Carbon Price Impacts on Households in Alberta, Saskatchewan and Ontario  .  An economist’s (Brendan Frank) explanation of the EnviroEconomics report appears in an  EcoFiscal Commission blog “How carbon dividends affect incentives (hint: they don’t)”  (Sept. 26).

Ford government sued by Greenpeace for cancellation of cap and trade without consultation

Doug FordUpdated September 11:

On September 11, CBC News broke the news that “Greenpeace suing Ontario government over cancellation of cap-and-trade program” The lawsuit was filed  in Ontario Superior Court by EcoJustice and the University of Ottawa’s Ecojustice Environmental Law Clinic.  It asks the Court to quash the legislation, on the grounds that the Conservative government “unlawfully failed” to hold public consultations before cancelling  the program, as required by Ontario’s Environmental Bill of Rights. An expedited hearing on the matter has been granted and scheduled for September 21.  The EcoJustice press release of September 11 is here .

At issue is Bill 4, The Cap and Trade Cancellation Act, 2018 , introduced in July to honour a campaign pledge to repeal Ontario’s cap and trade program, authorized through the Climate Change Mitigation and Low-carbon Economy Act, 2016  of the previous Wynne government.  Yet as the National Observer  reported on August  15, “Ontario legislature adjourns without adopting Ford government bill to cancel cap and trade” .  The article also compiles expert opinion and reaction to the move, and notes  that the government will be expected to propose new greenhouse gas emissions reduction targets when the Ontario legislature returns for its fall sitting on Sept. 24.

In “Ford government does U-turn, expands electric vehicle rebates for Tesla buyers”  (Aug. 31), CBC reports on another Court case involving the rookie Ford government.  The Court ruled against the government and in favour of  Tesla, which had claimed that it had been discriminated against when the government discontinued electric and hybrid vehicle sales incentives.   The CBC quotes Sara Singh, an Ontario NDP MP, who stated in August:  “This is likely only the first of many decisions against the Ford government’s decision to rip up hundreds of cap-and-trade and green energy contracts.” The Huffington Post compiled a list the legal actions against the government, on a variety of fronts, on Sept. 5.

Others who have weighed in on Ford’s climate and energy policies: Climate Action Network, along with 37 signatories,  sent an Open Letter to Premier Ford  on August 8.  It documents the heat and fire emergencies throughout the province in the summer of 2018, and calls for a public commitment, along with a detailed plan,  to achieve Ontario’s existing legislated emissions reduction goals.  Environmental Defence maintains an online petition calling for similar action.

Regarding Ford’s cuts to renewable energy programs: A widely-cited article appeared in Forbes magazine: “Ontario’s Economic Investment Outlook Dims With New Government Energy Actions”  (Aug. 13)   (and was re-posted by the Pembina Institute )  stating:  “In one fell swoop Ontario’s government has dramatically slashed a source of funding for clean transportation infrastructure to help consumers lower travel costs, erased hundreds of clean energy projects to help consumers reduce electricity costs, dimmed the prospects for jobs and economic growth from clean tech industries, and took a major step backwards in making the province an attractive climate for business and investment today – and into the future.”

Against the evidence for its efficiency, Ontario’s Cap and Trade program axed

Doug Ford clappingIn Ontario, newly-elected Premier Doug Ford quickly fulfilled a central campaign promise, as the Province revoked the cap-and-trade  regulations and prohibited all trading of emission allowances, officially announced on July 3, 2018.   A further July 25  press release  announced the introduction of Bill 4, The Cap and Trade Cancellation Act, 2018  and claimed that “The average Ontario family will receive $260 in annual savings thanks to the elimination of the cap-and-trade carbon tax.”  All programs currently funded through the cap-and-trade revenues have been cancelled, including the immediate wind-down of the Green Ontario Fund, which funded many energy efficiency incentive programs.  The Cap and Trade Cancellation Act repeals the Climate Change Mitigation and Low-carbon Economy Act, 2016  of the previous Wynne government “and provides for various matters related to the wind down of the Cap and Trade Program.”

Earlier, on July 13, the province had announced  the cancellation of 758 renewable energy projects, calling them “unnecessary and wasteful” – one notable example, the almost-completed White Pines wind project in Prince Edward County.  And on August 2, in addition to the previously announced court challenge  to the federal government’s carbon pricing requirements under the Pan Canadian Framework,  Ontario’s  Attorney General announced a second court challenge  – this time in  the Ontario Court of Appeal.  “Doug Ford’s Ontario pursues ‘doomed’ plan to stop Trudeau government’s efforts to fight climate change”   in the National Observer (August 2) summarizes the development from a political viewpoint, and the Globe and Mail’s editorial is titled: “Caroline Mulroney’s carbon-tax court challenge is a partisan waste of money

Reactions :

Ford government Attempts to minimize Ontario taxpayer losses after abandoning carbon markets”   (July 25) in the National Observer;

“Ontario’s fiscal watchdog to probe cancellation of cap and trade,at Horwath’s request”   in the Globe and Mail (July 24);

From Professor Mark Winfield, York University:  “Doug Ford’s energy shake-up could cost Ontario”  in The Conversation (July 25)   ;

Clean power advocates disappointed but defiant in the face of Ford’s sweeping cuts” from the National Observer (July 17)

Solar companies may exit Ontario for Alberta after Doug Ford kills rebate program”  from CBC News (June 21) ;

Scrapping of cap and trade revenues a big loss for Ontario tenants badly in need of apartment retrofits”   from ACORN Canada;

  “From Cap-and-Trade to White Pines: What Lies Ahead In Ontario’s Energy Sector” from Toronto law firm Gowlings .

Before his election but based on the platform statements,  Unifor said in June  : “Workers in Ontario need forward-looking policies with the intention to build a green economy, but instead Ford announced his intention to cancel a successful program and pick an unnecessary fight with the federal government…. “Workers accept that climate change is real and need our government to lead with a real, predictable plan to reduce emissions and grow green jobs.”

Was there a problem with Ontario’s cap and trade system?  The April 2018 WCR article “New evidence supports benefits of cap and trade policies”  summarized several favourable studies, including  A Progress Report on Ontario’s Cap-and-Trade Program and Climate Change Action Plan: Year One ,  published by the Clean Economy Alliance –   which concluded that, in the first year of cap-and-trade employment had grown at the same time that Ontario economy grew to a 7-year high.  Environmental Defense published “Carbon pricing has no downside: why are we still arguing about it?” , which summarized the Clean Economy Alliance report, as well as No Bad Option: Comparing the Economic Impact of Ontario Carbon Pricing Scenarios  by Hadrian Mertins-Kirkwood, published in April 2018 by CCPA in partnership with the Clean Economy Alliance.

More recently, Dale Beugin, Don Drummond, Glen Hodgson and Mel Cappe asked “If not carbon pricing in Ontario – which works well – then what, Mr. Ford?”   in a blog published by the Ecofiscal Commission.   The purpose of the brief summary is to “correct the record on some of the myths and misunderstandings surrounding carbon pricing. The economic evidence clearly contradicts some of the recent rhetoric coming from Ontario.”  Earlier Ecofiscal opinion appeared in “Tread Carefully: Ontario’s cap-and-trade system meets a fork in the road” (June 8)  , and  “Can Ontario hits its targets without carbon pricing?”  .

In the U.S.,  economist Marc Hafstead  recently published “Carbon taxes and employment: Rhetoric vs research” in the Summer Issue of Resources, the online newsletter of Resources for the Future (RFF) , stating  “Opponents of policies to price carbon will likely continue with the “job-killing” rhetoric, but careful economic analysis suggests that these arguments are seriously exaggerated.”  (the brief article is based largely on his academic working paper Unemployment and Environmental Regulation in General Equilibrium: Considering a US Carbon Tax: Economic Analysis and Dialogue on Carbon Pricing Options  )  .

 

Doug Ford has begun to dismantle Ontario’s climate leadership – Step 1, exit the cap-and-trade agreement

Doug FordAs a result of the provincial election on June 7, Progressive Conservative leader Doug Ford will take power as the premier of Ontario on  June 29, 2018.  Even before that hand-over date, he has begun to make the changes many feared –  announcing on June 15 that Ontario will exit the cap and trade market of the Western Climate Initiative (which includes California and Quebec)  and on June 19,  cancelling the $377-million Green Ontario Fund,  financed by the proceeds of cap-and-trade auctions and which provided consumer incentives for energy efficiency improvements.  On June 21, he committed to keep the Pickering Nuclear Generating Station in operation until 2024  –  in the name of protecting 4,500 local jobs and an additional 3,000 jobs province-wide.  Some general articles about the Ford government appeared in The Tyee  “Green hopes, NDP fears, and PC Dreams: The challenges that await Ontario in Ford Nation” (June 15);  “What does a Doug Ford victory mean for the climate?”  in The Narwhal (by DeSmog Canada),  and “Doug Ford’s Environmental policies light on details, advocates say” on CBC News (June 13).

Ford’s decision to end the cap and trade market has many implications – the possibility of lawsuits from investors and companies who had bought carbon credits, as well as a direct confrontation with the federal government, which requires all provinces to enact carbon pricing by 2019, under the Pan-Canadian Framework for Clean Energy and Climate Change.  Additionally, the federal government  just passed Bill C-74, which includes Part 5: The Greenhouse Gas Pollution Pricing Act on June 14 , the day before Ford’s announcement.  For discussion of the carbon pricing issue, see  “Ontario’s Doug Ford says the province is abandoning its price on carbon pollution” in the National Observer (June 15) ;  “PC’s will end Ontario cap and trade program, Ford vows” in the Globe and Mail (June 15).  An official reaction from Environmental Defence is here , with more detail in their blog, “What you need to know about Ontario’s carbon pricing drama” . From the Ecofiscal Commission, “Tread Carefully: Ontario’s cap-and-trade system meets a fork in the road” (June 8) , and “Can Ontario hits its targets without carbon pricing?”  (June 21) , which discusses the two remaining options for reducing emissions: regulations and incentives.  Finally,  the arguments are summed up in the Unifor press release, “Unifor urges Premier-designate Doug Ford to maintain the cap and trade system” : “Workers in Ontario need forward-looking policies with the intention to build a green economy, but instead Ford announced his intention to cancel a successful program and pick an unnecessary fight with the federal government…. Workers accept that climate change is real and need our government to lead with a real, predictable plan to reduce emissions and grow green jobs.”