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”.

New climate legislation in Saskatchewan – Prairie Resilience without carbon pricing

On October 30,  the first Bill introduced to the new session of the Saskatchewan legislature was Bill No. 132—The Management and Reduction of Greenhouse Gases Amendment Act, 2018 , which, according to a Regina Leader-Post article , carries on  Bill 95, which was introduced in 2009 by the previous government of Brad Wall .  The government’s press release   states that the new legislation: “provides the regulatory framework for performance standards to reduce industrial greenhouse gas emissions, a provincial technology fund, performance credits and offset credits…. In addition to performance standards and compliance options, these amendments require large emitters to register with the province, provide for administrative efficiencies in governance of the technology fund, and enable associated regulations and standards. ”   The press release carries on the province’s existing climate change strategy from December 2017,  titled Prairie Resilience, which rejects carbon pricing.   saskatchewan Prairie Resilience cover

Saskatchewan introduces climate change legislation as feud with Ottawa continues”   in the National Observer  provides a summary; the “feud” referred to was most recently in the news on October 29,  “Doug Ford attacks ‘terrible tax’ on carbon alongside Saskatchewan Premier Scott Moe” .

As yet, the text of the Bill is available only through a two-step process: Bills are listed here , which lists a PDF file “ Progress of Bills 2018 – 2019”  which includes a live link to Bill 132.

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”.

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).

Global Commission proposals for clean growth forecasts 65 million new low-carbon jobs in 2030

The Global Commission on the Economy and Climate released its 2018 flagship report at the G20 meetings in Argentina  on September 5 . Under the title, Unlocking the Inclusive Growth Story of the 21st Century: Accelerating Climate Action in Urgent Times , the report acknowledges that all models are imperfect, but its extensive research and modelling predicts that its “bold climate action” prescription could deliver at least US$26 trillion in economic benefits through to 2030, and over 65 million new low-carbon jobs in 2030, as well as avoid over 700,000 premature deaths from air pollution.  As the final point in its action road map, it calls for Just Transition measures and a role for civil society and trade unions in their creation.

The report is structured around a sectoral approach, focused on energy, cities, food and land use, water, and industry. Across those economic sectors, every chapter hammers the theme of urgency, calling this the world’s “use it or lose it moment”. “The decisions we take over the next 2-3 years are crucial because of the urgency of a changing climate and the unique window of unprecedented structural changes already underway. The world is expected to invest about US$90 trillion on infrastructure in the period up to 2030, more than the entire current stock today. …. Investing it wisely will help drive innovation, deliver public health benefits, create a host of new jobs and go a long way to tackling the risks of runaway climate change. Getting it wrong, on the other hand, will lock us into a high-polluting, low productivity, and deeply unequal future. “

Unlocking the Inclusive Growth Story of the 21st Century  calls for the following urgent actions:

  1. “governments should put a price on carbon and move toward mandatory climate risk disclosure for major investors and companies.”  (Specifically, the carbon price for the G20 economies should be at least US$40-80 by 2020, with a predictable pricing pathway to around US$50-100 by 2030, accompanied by a phase-out of fossil fuel subsidies and harmful agricultural subsidies and tax-breaks by 2025);
  2. all economies should place much greater emphasis on investing in sustainable infrastructure as a central driver of the new growth approach;
  3. “ the full power of the private sector and innovation needs to be harnessed.” (Specifically, “ By 2020, all Fortune 500 companies should have science-based targets that align with the Paris Agreement.”  Governments need to change regulations, incentives and tax mechanisms that are a major barrier to implementing a low-carbon and more circular economy, and public-private partnerships should be encouraged.
  4. “a people-centred approach is needed to ensure lasting, equitable growth and a just transition. It is good economics and good politics.”….“All governments should establish clear Energy Transition Plans to reach net-zero energy systems, and work with energy companies, trade unions, and civil society to ensure a just transition for workers and communities. Successfully diversifying local economies as we shift away from coal and eventually other fossil fuels will require multi-stakeholder dialogue, strategic assistance, re-training, and targeted social protection.”

The Global Commission  is comprised of government leaders, academics, and business leaders, including Sharan Burrow of the ITUC, and Lord Nicholas Stern. Established in 2013, the Commission published its first, landmark report in the New Climate Economy initiative in 2014:  Better Growth, Better Climate , which established its position that there is no trade-off between growth and strong climate action. In addition to the annual policy document, international climate issues are published  in a Working Paper series, available here .