Federal government about to release its proposals for promised national carbon pricing system as California debates radical changes to its cap-and-trade program

In advance of a consultation paper by the federal government, expected to be released in the week of May 15, the Pembina Institute released a Backgrounder report , Putting a price on carbon pollution across Canada . The Pembina report  outlines the current federal and provincial carbon pricing policies in Canada, and makes recommendations for the national benchmark plan promised by 2018. Recommendations  include that any benchmark should at least  provide guidance on treatment of Export Import Trade Exposed sectors and be designed to minimize carbon leakage and competitiveness impacts; and stipulate that cap-and-trade systems must have a cap decline rate in line with a 30% reduction below 2005 levels by 2030. Pembina places emphasis on the need for a 2020 carbon pricing review, as well as frequent carbon pricing and climate policy reviews to ensure that Canada meets its obligations under the Paris Agreement.

A briefer paper on carbon pricing, also released in May, also summarizes the existing provincial carbon pricing plans – but from a right-wing point of view. From the Fraser Institute:   Poor Implementation undermines Carbon Tax efficiency in Canada  .

Also on the topic of carbon pricing, Pembina posted a blog  on May 11 “Time for Premier Brad Wall to focus on carbon price implementation” , in which Nathalie Chalifour, a Professor of Law at University of Ottawa, explains her opinion that the federal government is within its constitutional authority to impose a carbon pricing mechanism on the provinces, despite Saskatchewan Premier Brad Wall`s recently stated opinion to the contrary.

Meanwhile, as reported in the National Observer (May 4) , “California tables new cap-and-trade plan that jumps ahead of Quebec and Ontario” . Quebec and California  have a linked carbon credit market that expires at the end of 2020, and Ontario`s cap and trade plan is schedule to link to the California−Quebec system in 2018.  Continued partnership with California  will demand that those provinces raise their minimum price per tonne of carbon and abolish offsets, among other changes outlined in the  bill currently before the California state Senate . For a full discussion of the proposed legislation, read “California is about to revolutionize climate policy … again” (May 3) in Vox.  Author David Roberts states: ” The changes that SB 775 proposes for the state’s carbon trading program are dramatic — and, to my eyes, amazingly thoughtful. I know some environmental groups have reservations (on which more later), but in my opinion, if it passes in anything close to its current form, it will represent the most important advance in carbon-pricing policy in the US in a decade. Maybe ever.”

How will Canada’s 2017 Budget support the environment and green job creation?

The shocking budget cuts proposed   by  the Trump administration on March 16  will make it easier for  Canada’s Finance Minister  to shine when the Canadian  Budget for 2017  is unveiled  on March 22.  Once made public, the Budget document will be available here .   Amongst the “10 Things Unions are looking for in Budget 2017” , released by the Canadian Labour Congress on March 15,   #6 is “Green Job Creation”. Mirroring the language of the Clean Growth Century initiative, the CLC states: “Canada needs to envision the next hundred years as a Clean Growth Century, and we know it can be done in a way that is economically and socially responsible, without leaving behind workers and their communities. Budget 2017 should kick off ambitious programs to expand renewable energy generation, support home and building retrofits and dramatically increase the scale and quality of public transit in Canada.” Many other proposals  were outlined in the CLC’s Submission to the House of Commons Finance Committee in the pre-Budget consultations , including:  green bonds; expanded access to Labour Market Development Assistance programs  and skills development for workers in the oil and gas, mining, steel production, and manufacturing industries; and renewable energy policies to improve access to renewable energy and facilitate local, renewable energy projects  and reduce dependency on diesel in remote and First Nations communities.

Green Budget Coalition cover 2017The Green Budget Coalition  represents sixteen of Canada’s largest environmental and conservation organizations.  Their Submission regarding the 2017 Budget (November 2016)  includes economic proposals  – including an end to fossil fuel subsidies, and a carbon tax set at a realistic level based on the Social Cost of Carbon.  With their strong, green focus, the Green Budget Coalition also includes specific proposals regarding conservation issues – freshwater resources, oceans and fisheries, habitat protection, and air quality.  One specific, unique proposal relating to air quality – because of  the link between radon and lung cancer, a federal income tax credit for individuals and small-scale landlords of 15 percent of the cost of radon mitigation work. Each recommendation is written by an expert member of the coalition, with specific, costed proposals and an indication of the federal government department needed to take the lead on action.

The Canadian Centre for Policy Alternatives is well-known for its  Alternative Budget,  CCPA alternative budget 2017which takes a broader approach to the  inequalities of the economy . Some of its main recommendations in the 2017 edition:  a federal minimum wage of $15 an hour, indexed to inflation; a national pharmacare program; improved access to child care; elimination of post-secondary education tuition; and  investment  in First Nations housing, water, infrastructure and education.   The full report is titled High Stakes, Clear Choices.  Proposals relating to Just Transition are mainly outlined in the section on Employment Insurance (page 60) , which frames it as  “a major opportunity to move unemployed, underemployed, and low-paid workers into better jobs as a part of a strategic response to meeting our climate change targets. We can expand access to EI training programs with a focus on labour adjustment and transition. That way, Canadian workers could benefit from the transition to a green economy by accessing new, green jobs created by public investment programs and sector strategies.” Other (costed) proposals  regarding the environment and climate change (page 63) : an end to federal fossil fuel subsidies; reinstatement of  energy efficiency incentive programs;   assessment of the environmental impact of energy, tar sands, mining developments;  and reinstatement of water programs at Environment and Climate Change Canada and Fisheries and Oceans Canada.

Alberta reinvesting carbon levy revenues in clean energy programs

cropped-worksolar.jpgAlberta announced  a new Residential and Commercial Solar rebate program  on February 27, funded with $36 million from revenues from the province’s carbon levy. The government estimates that the program will stimulate up to 900 jobs in the solar sector, while reducing GHG emissions and cutting installation costs for residences by 30 per cent and  for businesses and non-profits by 25 per cent.  In combination with a December 2016  change to the  Micro-generation Regulation ,  which increased the allowable capacity of  micro-generation systems to five megawatts, the rebate program  is meant especially to encourage solar commercial  and community operations .  The Pembina Institute reaction    highlights the aspect of microgeneration and distributed energy; DeSmog Blog   gives more details and context about the overall growth of solar in Alberta. Iron and Earth , the workers’ organization promoting the transition from oil and gas to renewables, calls the announcement a “great first step” on their Facebook page   , and notes their previous call to the Alberta government for increased access to solar skills training programs.

smart-thermostatOn  Febrary 28,  the government issued an invitation for Albertans to register for a Residential No-Charge Energy Savings Program   ,  encouraging all households, regardless of income, to upgrade to more energy-efficient products, including LED lights, high efficiency shower heads, and smart thermostats. Installation and product costs will be borne by the province and financed, again, through carbon levy revenues.

Finally, on March 3, Alberta announced matched funding of $10 million from the province and the federal government for a Calgary-based Alberta Carbon Conversion Technology Centre (ACCTC) .  The facility will “test breakthrough technologies that convert CO2 from harmful emissions into applications for everyday use.”  It will be owned and operated by InnoTech Alberta   , a subsidiary of Alberta Innovates; the goal is to support “Alberta-based technology developers, as well as attracting global companies and world-class researchers to the province”.  The Pembina Institute calls it “a plug and play technology sandbox”  and “an excellent way to create partnerships and accelerate our learning with respect to new technologies, in order to develop emissions solutions and create economic opportunities.” The Alberta Clean Technology Industry Alliance also approves.  The investment follows a February 13 meeting to expand and renew the Alberta – Canada Collaboratory on Clean Energy Research and Technology Memorandum of Understanding.

Carbon pricing in Canada: Recent research, and implementation in Alberta and Ontario

Research about carbon pricing continues in the effort to implement the Pan-Canadian Framework.   In November,  Carbon Pricing and Intergovernmental Relations in Canada was released by the Institute for Research on Public Policy,  evaluating  the federal government’s national carbon pricing plan to that point (i.e. before the announcement of the Pan-Canadian Framework ), with an emphasis on the flexibility required for provincial differences. It then discusses the intergovernmental coordination in other policy fields in Canada ( income taxes, goods and services taxes, and environmental standards) as a possible model for carbon pricing.

As part of the Pan-Canadian Framework in December , the comprehensive  Final Report of the Working Group on Carbon Pricing Mechanisms  was released, providing an overview of Canadian and international practice, as well as a discussion of principles for design and implementation.

Finally, a report about British Columbia, the home of Canada’s first carbon tax. A  December report modelled the impact of the 2016 provincial Climate Leadership Plan and a federal carbon price on GHG emissions. It concludes that even  if all provincial policies were implemented,  B.C.’s emissions will exceed the targets for 2020 and for 2050. The report provides a breakdown of emissions by sector and forecasts that the largest single source of emissions in 2050 will be from shale gas operations and liquefied natural gas projects.  Modelling the Impact of the Climate Leadership Plan and Federal Carbon Price on British Columbia’s Greenhouse Gas Emissions  was commissioned by Clean Energy Canada,  the Pacific Institute for Climate Solutions and the Pembina Institute, with analysis by Navius Research.

In the meantime, two provinces have moved ahead with previously announced policies. Alberta’s carbon levy came into effect on January 1, 2017, cushioned by the government press release of  December 31  titled  “Carbon levy supports diverse, green economy and jobs”  which summarized the details. The levy will be charged on transportation and heating fuels  – diesel, gasoline, natural gas and propane – at a rate of $20 per tonne, increasing to  $30 per tonne in 2018.  As further explained on a government website  , farmers and First Nations are generally exempt; a 33 per cent small business tax rate cut will help offset costs for small businesses, and the direct and indirect costs to consumers  are estimated. Rebates started flowing for a majority of Alberta households on January 5, with a payment  of $200 per year for a single adult earning up to $47,500 per year , and $300 for a couple earning up to $95,000 per year.   In addition to the government explanation, see “What you need to know about Alberta’s Carbon Levy”   from the Pembina Institute ,  or a CBC  interview with Andrew Leach , generally considered the architect of Alberta’s climate plan . “The Cost of Carbon Pricing in Alberta and Ontario”, by professors Trevor Tombe and Nic Rivers, appeared in Maclean’s magazine (Jan. 4). It explains the differences in the two approaches and explains the methodology for their estimate that  “Overall, for the average Alberta and Ontario household in 2017, direct costs will likely be on the order of $150 to $200 annually and indirect costs will add an additional $80 to $100 or so.”  The conclusion:  “heated political rhetoric that suggests carbon pricing will lead to skyrocketing price increases throughout the economy is misplaced at best and misleading at worst.”

Media rhetoric seems to have been directed at Alberta, rather than Ontario, where the cap and trade system, a cornerstone of the Climate Action Plan , also took effect on January 1, 2017.  The government’s Explainer is here , and estimates that “it will cost the average Ontario household about $13 more per month to fuel a car and heat a home in 2017”.  The government also estimates  proceeds of $1.9 billion per year , which must be re-invested to reduce GHG emissions, such as social housing retrofits, public  transit, and electric vehicle incentives.  See details of the related Green Investment Fund here.  The 2016 Annual Greenhouse Gas Progress Report  (November 2016) of Ontario’s Commissioner of the Environment  offers an explanation of how the system works, and discusses pitfalls, solutions, the need for transparency, and the likelihood that the system will deliver the scale of GHG reductions promised.

 

Canada’s Pan-Canadian Framework on Clean Growth and Climate Change: an important first step

first ministers.jpgOn December 9, a Communique from the First Ministers of Canada announced the Pan-Canadian Framework on Clean Growth and Climate Change, following the commitments made in the Vancouver Declaration of March 2016 . The Framework promises that 90 percent of Canada’s energy needs will be met by clean sources by 2030, and  emphasizes carbon taxes and new investment in clean technologies.  For a general summary, see the CBC here  .  Unsurprisingly, Saskatchewan, which has been steadfastly opposed to carbon taxes, refused to sign the agreement; Manitoba, more surprisingly, also refused, and has been accused of attempting political horsetrading by linking support for the climate pact to health care budget needs.  See “Trudeau claims victory on national climate framework”  and  “Inside Christy Clark’s climate change brinksmanship”  in Maclean’s (Dec. 9 &  10) for reporting on what went on behind the closed doors of the premiers’ meeting.

There is scant reference to jobs or workers in the Pan-Canadian Framework.  A weak and unique reference to Just transition appears in this statement on page 40, in the “Section on Clean Technology, Innovation and Jobs”:  “Further development of clean technologies could create new opportunities in Canada’s resource sectors, increase the productivity and competitiveness of Canadian businesses, and create new employment opportunities, while also improving environmental performance. Canada will need to be able to access the skills and expertise of talented workers from around the world to enable Canadian businesses to succeed in the global marketplace. It will also be important to ensure a commitment to skills and training to provide Canadian workers with a just and fair transition to opportunities in Canada’s clean growth economy.” Civil society groups are only vaguely indicated in the statement:  “Governments, Indigenous Peoples, industry, and other stakeholders all have a role to play and must be engaged.”

See a dedicated website with details of the Pan-Canadian Framework on Clean Growth and Climate Change . The Framework document is here .   The Ministers’ discussions were informed by the reports of the four Working Groups struck following the Vancouver Declaration : the Working Group Report on Carbon Pricing;    the Working Group Report on Clean Technology, Innovation and Jobs;  the Working Group Report on Specific Mitigation Opportunities ; and the Working Group Report on Adaptation and Climate Resilience .

Climate Action Network has compiled responses to the Framework  in “ Civil Society Responds to Release of Canada’s National Framework for Climate Action”;  most reactions reflect the  common theme that this is a commendable good start, but much more is required to meet our Paris commitments.  The comment from the David Suzuki Foundation was also typical:  “For a plan to be credible, it must not send mixed signals about national priorities. Responsible action on climate change means shifting from fossil fuels and diversifying the economy to ensure Canadians have good jobs today and into the future while also protecting the environment.”

The Pembina Institute says specifically:   “We applaud the first ministers’ effort made to date and expect continued collaboration and swift implementation of all recently announced climate measures. In particular, it is essential that provinces work with the federal government to adopt strengthened building codes, to implement an effective clean fuels standard, and to increase the carbon price after 2022.”

The Climate Action Network also cites specifics  in  A Canadian Accountability Mechanism ,   asserting: “Canada must adopt a more ambitious climate pledge (NDC) in 2018, by which time all countries should come up with the tougher actions they will take after 2020. …  “It’s time to break the cycle of empty target-setting in Canada. We know it’s absolutely possible to reach Canada’s current goal of reducing GHG emissions by 30% below 2005 levels by 2030. We also know the 2030 target does not represent our fair share of addressing global climate change and that Canada needs to do more. CAN-Rac’s estimations of Canada’s fair share contribution suggests we should be reducing emissions by 50% below 2005 levels by 2030 while increasing our contribution to international climate financing to $4 billion/year by 2020.”

The Framework highlights all the right things, including: “ respecting the rights of Indigenous Peoples, with robust, meaningful engagement drawing on their Traditional Knowledge” , and  “the importance of ongoing collaboration”, “leveraging technology and innovation to seize export and trade opportunities for Canada, which will allow us to become a leader in the global clean growth economy”.  But it is not yet a plan: (“We have tasked our ministers and officials to implement the Framework and report back to us on progress within a year, and annually thereafter.”) Nor will it be implemented quickly: (“ Federal, provincial and territorial governments will work together to establish a review of carbon pricing, including expert assessment of stringency and effectiveness that compares carbon pricing systems across Canada, which will be completed by early 2022 to provide certainty on the path forward. An interim report will be completed in 2020, which will be reviewed and assessed by First Ministers. As an early deliverable, the review will assess approaches and best practices to address the competitiveness of emissions-intensive, trade-exposed sectors.”)    An essay by the Pembina Institute, from the Pembina Institute, “Canada is back” — on Friday, let’s hope for one more time with feeling”  (Dec. 8) anticipates what should be included, and thus   provides a yardstick by which to measure how successful the Framework agreement will be.