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In climate change debate, what counts as carbon pricing?

An internal report shows how this key debate is going. (Hint: not the way Brad Wall would like.)
Sask Harper Highway 20150312
Prime Minister Stephen Harper, left, and Saskatchewan Premier Brad Wall speak during a media event to announce new federal funding for Highway 7 in Saskatoon on Thursday, March 12, 2015. THE CANADIAN PRESS/Liam Richards
Saskatchewan Party leader Brad Wall speaks to supporters at a Saskatchewan Party rally in Regina on Friday April 1, 2016. (Michael Bell/CP)
Saskatchewan Party leader Brad Wall speaks to supporters at a Saskatchewan Party rally in Regina on Friday April 1, 2016. (Michael Bell/CP)

It has always looked like an uphill battle for Saskatchewan Premier Brad Wall and Nova Scotia Premier Stephen McNeil, as they argue that their provinces’ targeted approaches to curbing greenhouse gas emissions should be counted as carbon pricing in federal-provincial talks on climate change policy.

Wall contends that Saskatchewan’s program to encourage the oil sector to store carbon dioxide underground is a sort of carbon pricing, while McNeil says much the same about Nova Scotia’s cap on emissions from generating electricity. But the federal Liberal government is pushing for a far broader concept of what qualifies—either direct taxes on CO2 emissions or so-called cap-and-trade systems.

An interim report by a key committee of federal and provincial officials, obtained by Maclean’s and dated June 2016, shows how little traction the position championed by Wall and McNeil has had behind the scenes. The report, produced by what’s called the Working Group on Carbon Pricing Mechanisms, relegates Saskatchewan’s carbon capture and storage project and Nova Scotia’s cap on emissions from generating electricity to second-tier status as “measures with implicit carbon pricing.”

It puts far greater emphasis squarely on a top-tier cluster of “mechanisms that can be used explicitly to apply a broad-based price to carbon.” The report lists just three approaches that fit the bill: carbon taxes (like the one B.C. has had since 2008), cap-and-trade systems (the mechanism adopted by Quebec and Ontario), and performance standard systems (like Alberta’s for major industrial emitters).

The interim report’s thrust shows that the working group is not all that interested in policies aimed at particular sectors. Instead, the group is looking at price signals broad enough to influence the whole energy marketplace. “Carbon pricing systems encourage emissions reductions from those for whom it is easiest and cheapest to reduce emissions,” it says.

On a closely related key political issue, the report suggests Canadian carbon pricing cannot be allowed to vary much among the provinces, or the mechanism won’t work nearly as well as it should. “In the absence of a comparable carbon price across Canada, some low-cost emission reduction opportunities may be missed,” it warns.

The working group flags the obvious worry that job-creating companies would flee provinces with high carbon prices, and relocate in those with lower ones or none at all. “In other words,” says the report, “lack of carbon pricing in some jurisdictions would actually impact other jurisdictions’ emissions reductions, creating the same competitiveness concerns inside Canada that exist internationally.”

On that worry about Canada putting its industries at a disadvantage, compared to competing countries that don’t similarly price carbon, the working group says its final report “will contain more detailed information on competitiveness issues.” The interim report only sketches policies that might address those fears, such as somehow offsetting the impact of carbon pricing for certain sectors, or imposing “carbon tariffs” on some imported goods.

Carbon pricing, which is seen by many economists as the most efficient way to reduce the emissions from fossil fuel burning that are the main cause of climate change, was at the top of the agenda when Prime Minister Justin Trudeau met with the premiers last spring in Vancouver. They set up the working group to report back on options, along with three more working groups to grapple with other major climate-change policy areas.

The working groups’ final reports are expected to be made public around the time of what’s shaping up as a landmark meeting of the federal and provincial environment ministers, set for Oct. 3 in Montreal. Earlier this month, federal Environment Minister Catherine McKenna told CTV’s Question Period that Ottawa is ready to impose a carbon price if provinces can’t come to agreement, although McKenna added, “We’re trying to go forward in a way that we’re working with everyone.”

An official in Saskatchewan’s environment ministry declined to comment directly on the working group’s interim report. “Saskatchewan wishes to respect the confidentiality of those discussions until there is greater clarity on final proposed approaches,” the official said in an email. He added pointedly, however, that the working group’s mandate, when it was established by the Prime Minister and premiers last spring, included “taking into consideration existing and planned provincial and territorial systems.”

Although setting a price on carbon is dominating discussion in the lead-up to the Montreal ministerial meeting, independent experts debate how much a carbon price alone can actually contribute to Canada hitting its international emissions-reduction commitments.

At the United Nations climate summit in Paris last fall, Trudeau reaffirmed the previous Conservative government’s pledge to cut Canada’s emissions 30 per cent in a mere 14 years. Accomplishing that with a carbon tax alone, according to a recent report from researchers at Simon Fraser University’s School of Resource and Environmental Management, would require Canada to set a $30 price per tonne of CO2, and then raise it every year until it hits $200 by 2030.

They say experience in other jurisdictions—notably their home turf of British Columbia, which has a $30 per tonne carbon tax now—shows that politicians in power would pay too heavy price for trying to make a carbon price do that much of the heavy lifting on reducing emissions. So Mark Jaccard, one of the authors of the report, urges policy-makers to start looking more closely at regulatory mechanisms, such as requiring more zero-emissions cars and trucks.

But the debate on the right mix of carbon pricing and emissions regulations won’t be settled anytime soon. The more immediate question is whether or not McKenna and her provincial counterparts can come to a basic understanding on a national carbon price. A deadlock among them on Oct. 3 might leave the matter to be settled when Trudeau and the premiers hold another first ministers’ meeting, as they are expected to later this fall.