Let’s all negotiate a price on carbon

Featuring Alberta, Ontario, the oil industry and the NDP

While Alberta Premier Alison Redford says her province won’t increase its price on carbon unless there is a quid pro quo from the United States, the oil industry has, according to documents obtained by Greenpeace, privately told the Alberta and federal governments that a 40% reduction on emissions per barrel and $40 levy per tonne are too much to bear. Peter Kent, it was previously reported, had proposed a 30/30 plan. The Canadian Association of Petroleum Producers apparently pushed for a 20/20 plan.

Now the Mowat Centre releases a report on how Ontario should handle the expansion of pipelines eastward, concluding that a federal price on carbon would account for the environmental problems involved in developing the oil sands.

Ontario’s position on new pipeline projects should be grounded in reality. Canadians use oil and gas in every province in the country. It flows into and across our provinces by pipeline, by tanker, and by rail. The widespread use of fossil fuels in Canada–as well as their transport across provincial and international borders–is not going to stop any time soon. Any Ontario position must recognize that, right now, oil and gas flow through pipelines across our province and that the overwhelming majority of Ontarians accept this. In fact, a recent poll confirmed that a majority of Ontarians support Alberta’s oil sector and proposed pipeline projects.

On the other hand, new oil pipeline infrastructure is only needed if expansion of production in the oil sands is envisioned. Such expansion would significantly increase emissions that contribute to climate change. Some provinces and sectors are doing their share to help Canada achieve its GHG reduction targets, but this progress is being negated by the growth of the oil sands (see Figures 1 and 2). The most realistic and reasonable way for many Canadians to support pipelines and the expansion of oil sands production that would go with them is for this expansion to take place within the context of a federal price on carbon.

A price on carbon would allow for the expansion of the oil sands and pipelines within a context where the damage done to the environment and the climate is priced-in and mitigated. In the end, the expansion of pipelines within the context of a real federal price on carbon is in the interests of Ontario and Canada–and the hydrocarbon-producing provinces as well. Proceeds from a price on carbon could be used to support the transformation of the Canadian energy sector through investments in new research, development and clean technology.

Meanwhile, Christopher Ragan argues that the NDP should implement cap-and-trade in tandem with corporate tax cuts.

Implementing such a cap-and-trade system will obviously increase the costs of using coal, oil and natural gas. Indeed, this is the policy’s central objective – by increasing the costs of “dirty” fuels, the policy provides an incentive to switch toward “cleaner” fuels. But in a modern, energy-intensive economy like ours, increasing the cost of energy will almost certainly reduce the rate of economic growth, which means slowing the ascent of Canadians’ living standards.

If the New Democrats genuinely care about reducing greenhouse gas emissions but equally care about protecting Canadians’ living standards, they should advocate a two-part policy package. The first part is their favoured cap-and-trade system, but one that raises revenue by selling the permits to the highest bidders. The second part would give back this revenue by reducing the most growth-retarding tax in Ottawa’s cupboard – the corporate income tax. The combination would offer Canadians a way to protect the environment and their living standards at the same time.

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