Newfoundland and Labrador announces its “lax tax” on carbon

offshore oil rigA “ Made-in-Newfoundland and Labrador Approach to Carbon Pricing” was announced and  described in a press release on October 23 , with a carbon tax rate of $20 tonne starting on January 1, 2019.  The details are many, as published here . Exemptions are granted for consumers (e.g. for home heating fuel) , and for industry – specifically “for agriculture, fishing, forestry, offshore and mineral exploration, and methane gases from venting and fugitive emissions in the oil and gas sector.”  These exemptions make sense in light of the province’s Oil and Gas  growth strategy announced in February 2018,  Advance 2030 , which aims for 100 new exploration wells to be drilled by 2030.

Despite the weakness of the provincial plan, it has been accepted by the federal government – thus, Newfoundland will avoid the stricter regime which would have been imposed by the federal backstop plan in 2019.  For a brief overview: “Why the lax tax? Finance minister says Muskrat burden played role in carbon pricing” (CBC) . In depth analysis appears in  “Newfoundland’s carbon tax gives ‘free pass’ to offshore oil industry” in The Narwhal.   (Nov. 9)

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”.

Research and opinion support a carbon tax for Canada

Carbon taxes continue to be a hot topic in Canada for many reasons, including the October Intergovernmental Panel on Climate Change report , the Nobel Prize in Economics  to William Nordhaus, and the report from Ontario’s Financial Accountability Officer on October 16, which estimates that the cancelling the province’s cap and trade program will drive the provincial deficit up by $3 billion, ($841 million in the first fiscal year alone).  And as provinces rebel against the federal carbon pricing plans, the January 1 2019 deadline approaches, by which the federal government will impose its “backstop” carbon pricing on any province without it own equivalent carbon pricing regime in place.

In response to these developments, there are many responses.  Recent articles emphasize William Nordhaus’ work: for example, “Nordhaus Nobel Recognizes What We’ve Long Known: Carbon pricing works” by Scott Vaughan at the IISD ;  “Nobel award recognizes how economic forces can fight climate change” in The Conversation Canada (Oct. 9); “Hurricanes, hog manure and the dire need for carbon pricing” in The Conversation Canada (Oct. 14);  and “Opinion: To avoid catastrophic climate change we need carbon pricing” from the Ecofiscal Commission , one of Canada’s strongest proponents of carbon pricing.  From the horse’s mouth: “After Nobel in Economics, William Nordhaus Talks About Who’s Getting His Pollution-Tax Ideas Right”  (New York Times, Oct. 13),  in which William Nordhaus is interviewed by Coral Davenport and states:  “…. I think the model is British Columbia. .. It would have the right economic effects but politically not be so toxic. … British Columbia is not only well designed but has been politically successful.”

CARBON DIVIDENDS:  The issue of political acceptability of carbon taxes generated an academic discussion  in “Overcoming public resistance to carbon taxes” by Carattini  , Carvalho and  Fankhauser  in  WiRES Climate Change  in June 2018.  In Canada, a change in vocabulary in taking hold. “Carbon Dividends could save carbon pricing – and create a new national climate consensus”  say Mark Cameron (from Canadians for Clean Prosperity) and David McLaughlin (from the International Institute of Sustainable Development) in the Globe and Mail .   The commissioned studies released by   Canadians for Clean Prosperity in September showed  that most  households, regardless of income level, would receive more money in the form of carbon dividend cheques than they would pay in carbon taxes under the backstop plan.  They have produced estimates for Alberta, Manitoba, Saskatchewan, Ontario, and New Brunswick, and maintain an online petition at a website called  Canadians for Carbon Dividends  .

rocky road tableIn  “The Rocky Road to Canada-wide Carbon Pricing,”  released by the C.D. Howe Institute on October 17,  author Tracy Snoddon from Wilfred Laurier University offers recommendations on how the revenues should be distributed after January 1, 2019, when the minimum carbon price backstop comes into force.  The author estimates carbon revenues of $ 2.8 billion in 2019 if the backstop was implemented in Ontario, Saskatchewan, New Brunswick, Newfoundland and Prince Edward Island. She recommends that the federal government should impose the backstop price and return the revenues as an equal per-capita rebate to residents- with the justification that such an approach minimizes intrusion in provincial fiscal matters, reinforces the environmental goals  rather than revenue generation, and is most progressive in its  distributional impacts.  A summary appears in the C.D. Howe press release  and in  “C.D. Howe Institute throws its weight behind federal carbon tax” in the Globe and Mail (Oct. 19).

put a price on itFinally, a new organization launched in October. Put A Price On It Canada promotes carbon pricing as a solution to climate change – and asks “why does Canada need another group fighting for carbon pricing?”  The difference: it aspires to be a national network to empower students on university campuses – currently at Simon Fraser University, the University of Ottawa, University of Waterloo, and Carleton University.

So in response to the  National Observer Opinion piece on October 18, asking  “Is it time to torch the carbon tax debate?” , the answer seems to be a strong “no”.

Canada’s progress on emissions reduction: New reports from OECD, UNFCCC , and policy discussion

An excellent overview article about Canada’s  “staggering challenge” and policy options to meet its emissions reduction targets appeared in The Conversation on January  11, 2018),  written by Warren Mabee, Director of the  Institute for Energy and Environmental Policy at Queen’s University and a Co-Investigator in  the Adapting Canadian Work and Workplaces to Respond to Climate Change (  ACW) project.   “How your online shopping is impeding Canada’s emissions targets”  outlines  the issues of clean electricity, transportation emissions (where your online shopping can make a difference), greener homes,  and rethinking fossil resources, and concludes that  “If we’re to succeed, Canada will need an integrated, holistic suite of policies – and we need them to be in place soon.”

oecd-environmental-performance-reviews-canada-2017_9789264279612-enOther recent publications take stock of Canada’s emissions reductions in greater detail.  In its  3rd Environmental Performance Review for Canada released on December 19, the OECD warns that  “Without a drastic decrease in the emissions intensity of the oilsands industry, the projected increase in oil production may seriously risk the achievement of Canada’s climate mitigation targets… …“Canada is the fourth-largest emitter of greenhouse gasses in the OECD [in absolute terms], and emissions show no sign of falling yet.”  Canada’s emissions actually did decrease since the last report was issued in 2004, but only by 1.5 per cent compared to reduction of 4.7 per cent by the OECD as a whole.  In addition to the impact of oil sands production, the OECD singles out a regime of poor tax incentives: “Petrol and diesel taxes for road use are among the lowest in the OECD, fossil fuels used for electricity and heating remain untaxed or taxed at low rates in most jurisdictions, and the federal excise tax on fuel-inefficient vehicles is an ineffective incentive to purchase low-emission vehicles.”

The OECD analysis finds support in a report from two researchers from the University of Toronto, in “How the oil sands make our GHG targets unachievable”   in Policy Options.  They state: “… only with a complete phase-out of oil production from the oil sands, elimination of coal for electricity generation, significant replacement of natural-gas-fuelled electricity generation with electricity from carbon-free sources, and stringent efficiency measures in all other sectors of the economy could Canada plausibly meet its 30 percent target.” The authors recommend a  gradual (12-to-15-year) phase-out of oil sands operations, with workers and capital redeployed to emerging sectors  such as renewable energy and building retrofits, and contend that  the importance of oil sands production is overstated. “….  the direct contribution of the entire oil, gas and mining sector to Alberta’s 2016 GDP was 16.4 percent, of which oil sands mining and processing was likely about one-third (or 5 to 6 percent of total provincial GDP)” ….and oil sands oil production is estimated to account for only 2 percent of Canadian GDP.”

Yet the federal government continues the difficult balancing act of a  “have-it-all” approach – for example, in a speech by Natural Resources Minister Jim Carr  in November 2017, in which he defended the approval of the Trans Mountain Pipeline with: “We need to prepare for the future, but we must deal with the present …..That means continuing to support our oil and gas resources even as we develop alternatives – including solar, wind and tidal…. new pipelines will diversify our markets, be built with improved environmental safety and create thousands of good middle-class jobs, including in Indigenous communities. They were the right decisions then and they are the right ones now. ” A recent blog by Patrick DeRochie of Environmental Defence, “Trudeau Thinks We Can Expand Oil And Still Reduce Carbon. Let’s Put That To A Test” , challenges this view .

On December 29, Canada issued a press release announcing that it has submitted its Seventh National Communication and Third Biennial Report to the United Nations Framework Convention on Climate Change , required by the UNFCCC to document progress towards its 2030 greenhouse gas emissions reduction goal of 30% reduction from 2005 levels.  The title of the government press release, “Canada’s Climate action is Working, Report to United Nations Confirms” is justified by including estimates of the effects of policies still under development in a “with additional measures scenario”. Under that scenario, the government forecasts an emissions decline across all economic sectors,  equivalent to approximately a third of Canada’s emissions in 2015 by 2030… ”

Meanwhile, the federal government has released a number of announcements and legislative proposals in December 2017 and January 2018. Regarding  the planned carbon pricing backstop under the Pan-Canadian Framework, which will come into effect by January 2019:  Details are set out in:  Supplemental Benchmark Guidance   Timelines ,  and the Letter to Ministers in December, and on January 15, the  proposed carbon backstop  legislative framework was released as Legislative and Regulatory Proposals Relating to the Greenhouse Gas Pollution Pricing Act and Explanatory Notes (French version here) .  Also on January 15, the federal government released for comment the proposed regulatory framework for  carbon pricing for large industrial facilities – an Output-based Pricing System (OBPS) described in more detail in a separate WCR post here.

On December 12, the  Clean Fuel Standard Regulatory Framework was released for comment.  The government has also committed to developing a national strategy for zero emission vehicles in 2018 to increase the supply of zero-emission vehicles.

Also on December 12, and capping six months of consultation under the banner Generation Energy,  the Minister of Natural Resources announced the creation of a 14-member Generation Energy Council to be co-chaired by Merran Smith,  Executive Director of Clean Energy Canada, and Linda Coady, Chief Sustainability Officer at Enbridge. (Bios of all members are here ). The council is tasked with preparing a  report to advise the government on an “ energy policy that ensures meaningful engagement with Indigenous peoples; aligns with Canada’s Paris Agreement commitments and the Pan-Canadian Framework on Clean Growth and Climate Change; and complements the work being done by the provinces and territories, building on the shared priorities identified at the Federal, Provincial and Territorial Ministers Meeting at the Forum.”