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.

Ontario Court of Appeal rules against the provincial challenge to the federal carbon price – Seven provinces will intervene in the Supreme Court appeal

doug ford scrap the taxOn June 28, the Ontario Court of Appeal issued their Decision , 4 to 1 in favour of the federal government’s right to impose a system of carbon pricing across Canada, under the Greenhouse Gas Pollution Pricing Act.   Some important excerpts from the majority decision:

“Parliament has determined that atmospheric accumulation of greenhouse gases causes climate changes that pose an existential threat to human civilization and the global ecosystem ….The need for a collective approach to a matter of national concern, and the risk of non-participation by one or more provinces, permits Canada to adopt minimum national standards to reduce [greenhouse gas] emissions…

The Act does this and no more. It leaves ample scope for provincial legislation in relation to the environment, climate change, and GHGs, while narrowly constraining federal jurisdiction to address the risk of provincial inaction.

The charges imposed by the Act are themselves constitutional. They are regulatory in nature and connected to the purposes of the Act. They are not taxes.

The Act is the product of extensive efforts – efforts originally endorsed by almost all provinces, including Ontario – to develop a pan-Canadian approach to reducing GHG emissions and mitigating climate change. This, too, reflects the fact that minimum national standards to reduce GHG emissions are of concern to Canada as a whole. The failure of those efforts reflects the reality that one or more dissenting provinces can defeat a national solution to a matter of national concern”

The Ontario government immediately announced that it will appeal the decision to the Supreme Court.  The Premier of Alberta, part of the Canada-wide Conservative opposition to the federal carbon tax, said that Alberta is reviewing the decision in his press release.  Saskatchewan, which lost its own court challenge to the GGPPA  in May 2019, has already filed an appeal in the Supreme Court of Canada, scheduled for December 5 2019 – notably after the coming federal election, in which climate change issues are widely expected to be a top priority for voters.

For a thorough discussion of the decision and compilation of reactions, read: “Doug Ford loses carbon tax battle with Trudeau” in the National Observer .  “Ontario Court of Appeal Upholds Federal Carbon Tax” appeared in The Energy Mix on July 2 and also compiles reaction from many sources. “Federal Carbon Pricing Regime Now Two-for-Two” (July 2) in Lexology offers a more lawyerly perspective.   And for the mood in Ontario, read “Doug Ford’s $30 million carbon tax fight is money down the drain but it keeps his brand afloat” in the Toronto Star (July 3) or in the Globe and Mail, The real carbon tax is the money provinces are spending on lawyers.”

Provinces line up to participate in Supreme Court appeal: ( Updated as of July 10):  As of July 8, seven provinces are  registered as intervenors in the Saskatchewan challenge to the carbon tax, scheduled to be heard by the Supreme Court of Canada in December 2019.  On July 8, CBC reported that  New Brunswick Premier Blaine  Higgs  abandons  planned carbon tax court fight , stating that the province will not waste taxpayers’ money on their own carbon tax court case, but will act as an intervenor in the Saskatchewan’s appeal.  Prince Edward Island is also intervening, as explained in  P.E.I. intervening in Saskatchewan’s carbon tax court challenge” (July 5).  The Premier of PEI states they are “absolutely not” joining the fight against a carbon tax, but are intervening as a way to reserve the right to participate in future. Even more surprisingly, “Quebec intervenes in Saskatchewan’s challenge of carbon tax“, as reported in the Montreal Gazette on July 8.  Quebec has joined the case to ensure its provincial rights are upheld in any court decision, and to protect Quebec’s existing cap and trade system. 

stampede ford 2019Aaron Wherry of CBC posted an analysis of the Conservative premiers’ positions against the federal carbon price in Premiers say they want a ‘co-operative’ approach to climate policy. Are they serious? (July 10).  It discusses the differences amongst  Alberta’s Jason Kenney, Ontario’s Doug Ford, Saskatchewan’s Scott Moe, New Brunswick’s Blaine Higgs and Bob McLeod of the Northwest Territories, who are meeting separately, in advance of the formal Council of the Federation meeting in Saskatoon, July 9 to 11.

 

Climate policy progress in Canada suffers from an overemphasis on carbon pricing, an absence of supply-side energy policies

heating up backing downcoverHeating up, Backing Down  by Hadrian Mertins-Kirkwood was released on June 13, updating the author’s previous 2017 report Tracking Progress: Evaluating government plans and actions to reduce greenhouse gas emissions in Canada.   It analyzes emissions data and policy announcements in the last two years to assess federal, provincial and territorial governments’ progress toward Canada’s domestic and international greenhouse gas (GHG) emission reduction targets.  The report identifies and discusses two new important issues in the Canadian climate policy discussion: an overemphasis on carbon pricing and an absence of supply-side energy policies. These are in addition to the three key obstacles to effective climate policy identified in the 2017 report, and still considered relevant: (1) an ambition gap between government policies and official targets; (2) Canada’s  deep economic dependence on fossil fuels, and; (3) an under-appreciation of the need to support workers in the transition to a cleaner economy.

Following a succinct overview of policy developments and emissions statistics for each province, the author concludes that positive progress in British Columbia and Quebec is outweighed by backsliding in the rest of Canada, and future progress is further threatened by the legislative reversals enacted by the recently-elected conservative governments in Alberta and Ontario, which are Canada’s two biggest carbon polluting provinces.

Heating up, Backing Down is co-published by the Canadian Centre for Policy Alternatives and the Adapting Canadian Work and Workplaces to Respond to Climate Change research program (ACW) .

New Brunswick launches consultation on industrial emissions – updated

The Government of New Brunswick opposes the federal government carbon tax and maintains a “We can’t afford a carbon tax” page on the government website – which estimates the costs (but none of the benefits) of the federal carbon backstop in effect in the province.  On June 13, New Brunswick introduced its own Made-in-New Brunswick  Regulatory Approach for Large Emitters ,  an output-based pricing system which will cover roughly 50 per cent of greenhouse gas emissions in the province and will require large industrial emitters, including electricity generators, to reduce their greenhouse gas emissions intensity by 10 per cent by 2030.

The CBC summarized the plan and reaction in “Province proposes carbon tax on tiny fraction of emissions from big industrial polluters”  (June 13) . CBC states that the proposed system would tax only 0.84 percent of greenhouse gas emissions from the province’s biggest emitters, such as Irving Oil,  far below the 20 per cent in the existing federal system. However, it covers the same industrial sectors, applies to the same gases and applies the same price scale of $20 per tonne this year, rising to $50 per tonne in 2022.

A Discussion paper , Holding Large Emitters Accountable: New Brunswick’s Output-Based Pricing System  forms the basis of a public comment period about the proposed system, which runs from June 13 to July 12.  One public response has been published by the Ecofiscal Commission in Exception to the Rule: Why New Brunswick’s Industrial Carbon Pricing System is Problematic (June 19) , which contends that under the proposed regulations, “firms can very easily achieve their emissions intensity benchmark, because it will be essentially set to current levels.”

The Conservation Council of New Brunswick reaction was quoted by the CBC, and also states that the proposed regulations are too weak.  Emphasizing the importance of the issue, on June 25 the Council released Healthy Climate, Healthy New Brunswickers: A proposal for New Brunswick that cuts pollution and protects health,  by Louise Comeau and Daniel Nunes. The Council characterizes the report as “the first comprehensive look at how climate change will affect the physical and mental health of all New Brunswickers, but particularly the very young, seniors, the isolated, and those living on low incomes.”  The report combines climate projections and existing community health profiles for 16 New Brunswick communities, emphasizing the risks of more intense precipitation, flooding and heat waves. It includes recommendations for action and attempts to end on a hopeful note. The report is available in English and French versions from this link .

Updates on New Brunswick’s carbon tax:  On July 8, CBC reported “New Brunswick Premier Blaine  Higgs  abandons  planned carbon tax court fight” , which explains that the province will save taxpayers’ money by supporting Saskatchewan’s Supreme Court of Canada challenge to the carbon tax as an intervenor, since Saskatchewan’s arguments are the same as New Brunswick’s.   Also in  July, an historical and political analysis appeared in Policy Options, “ New Brunswick’s timid foray into carbon pricing”, as part of the week-long series , The Evolution of Carbon Pricing in the Provinces .

 

New Alberta government all-in for oil and gas, beginning with repeal of carbon tax

Jason-Kenney Open for businessThe new UCP government of Alberta, led by Premier Jason Kenney,  kicked off  its legislative session agenda on May 22  with a Throne Speech  promising to “show the world that Alberta is open for business by restoring investor confidence and re-establishing the province as a job-creating investment magnet.” That “open for business” approach, applied to the oil and gas sector, includes some ominous statements : …”Protect and maximize the value of Alberta’s resources – including using, as necessary, the Preserving Canada’s Economic Prosperity Act” (Rachel Notley’s law which gives Alberta the right to restrict oil and gas exports to British Columbia)…. “Challenge those who misrepresent our industry and launch a public inquiry into campaigns to landlock Alberta’s energy”…and “Make life more affordable for Albertans by repealing the carbon tax and focusing climate change action on large emitters.”  More positively, “Be transparent and honest about how Alberta produces energy to the highest environmental, labour and human rights standards on earth” ….”Take action on climate change by introducing the Technology Innovation and Emissions Reduction Fund through regulation targeting large emitters.”  Columnist Chris Varcoe provides one Alberta viewpoint  in “Throne speech ‘roadmap’ to revive oilpatch hinges on pipelines” in the Edmonton Journal (May 23) .

The first legislation to be introduced, on May 22, was Bill 1, An Act to Repeal the Carbon Tax . The government press release claims that “Scrapping the carbon tax will free up nearly $1.4 billion of tax burden, create 6,000 jobs, save the average small business $4,500 annually and save Alberta families up to $1,150 a year.”  Even before the Bill was passed in the legislature, the Kenney government ended collection of the tax, on May 30.  In a press release titled “Albertans lose more than they gain with carbon tax repeal”, the Pembina Institute disagrees: “With the tabling of Bill 1 to repeal the Climate Leadership Act, the Alberta government is cutting existing jobs, stunting innovation, removing financial benefits for small- and medium-size businesses, families and communities, and is allowing greenhouse gas emissions to continue to increase. The government has yet to produce a plan that will make up for these losses and build on previous progress.” The National Observer summary is here  . And of course, there is also the issue that, by repealing Alberta’s own carbon tax, the government has made the province subject to the federal backstop carbon levy.

Without the revenue stream of the carbon tax, energy efficiency programs initiated by the NDP government are in jeopardy. On May 24, the Calgary Herald reported  “UCP steps back from scrapping NDP’s Energy Efficiency Alberta; will look at programs ‘with an open mind’” .  Although Jason Kenney derides the Energy Efficiency Alberta programs  as “subsidizing showerheads and lightbulbs”, in fact, the agency supports major economic programs, including those encouraging  the growth of Alberta’s solar industry.  Efficiency Canada documents the benefits for Alberta and points out that Alberta would be the only jurisdiction in North America not to have an energy efficiency program if it is scrapped .

On May 23, the Alberta legislature gave unanimous approval of a motion condemning federal bills C-69 , An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act,  and C-48, the Oil Tanker Moratorium Act . The Alberta government  claims that the legislation “poses a very real threat to hundreds of thousands of jobs in Alberta and across Canada, and the $16 trillion in economic potential within Alberta’s oilsands that could be lost if they proceed.”  After the Senate Committee tabled its controversial amendments to C-69, the Alberta party leaders sent a joint letter to Prime Minister Trudeau on May 28, stating: “While we remain concerned about the overall spirit of Bill C-69, we believe that with the inclusion of all these amendments, that the bill would be acceptable to the interests of Albertans” . The letter is summarized by Energy Mix in “Alberta Party Leaders Unanimously Back C-69 Amendments from Unelected Senate Committee”.  The marked-up version of Bill-69 with the Senate Committee amendments is dismaying to environmentalists;  a 2018  analysis of the original Bill-69 by Environmental Defence is here .  (The complicated issue of the unelected Senate’s hearings and recommendations regarding Bill C-69 will be the subject of a future WCR report.)

Other  new Alberta legislation in the ”Open for Business” agenda: On May 27,  Bill 2, the Open for Business Act,  promises to “reduce unfair burdens on businesses and give workers more rights in unionized workplaces. Recent changes to employment rules, such as requiring employers to provide holiday pay even if they are not open that day, created an unfair cost burden on job creators.”  The Alberta Federation of Labour reacted,  as did The Parkland Institute in a blog: “Bill 2 grinds wages, complicates payroll, and impedes union drives” .  On May 28, Bill 3: the Job Creation Tax Cut (Alberta Corporate Tax Amendment) Act  was introduced, promising to  lower the corporate tax rate from 12% to 8% over the next 4 years. The Alberta Union of Provincial Employees calls the tax cuts “corporate welfare” in Bill 3 Is UCP’s Second Gift In As Many Days To Wealthy Corporations.  And on May 29, Bill 4, The Red Tape Reduction Act was introduced.

None of these Bills have been passed or enacted as of May 30, although Premier Kenney announced that Albertans were “liberated” from the carbon tax as of May 30,  according to a CBC report , and retailers were forbidden from collecting it.