COMMENT: Tax off, eh! Moving beyond a national carbon price in Canada

Published 09:29 on March 11, 2016  /  Last updated at 09:29 on March 11, 2016  /  Americas, Canada, Carbon Taxes, Contributed Content, Other Content, US

Last week, Premiers of Canada’s provinces and Prime Minister Justin Trudeau failed to agree on a national approach to carbon pricing. If you care about climate change, that was a good outcome.

By Chris McDermott, a former Canadian negotiator on the Kyoto Protocol

Last week, premiers of Canada’s provinces and Prime Minister Justin Trudeau failed to agree on a national approach to carbon pricing. If you care about climate change, that was a good outcome.

For almost a decade, the carbon pricing debate has been an unhelpful barrier to progress in Canada. Cast predominantly as a “carbon tax”, it over-politicized an already political issue and distracted attention away from a host of other policy options to reduce carbon emissions.

To its protagonists – those academic economists and think-tank wonks beholden to its textbook purity – it was a panacea to all carbon ills. To an atmosphere more concerned about emissions quantity than emissions price, it was a sideshow.

Canada’s emissions are currently 17% and 39% above what it agreed to under the Copenhagen and Paris Accords, respectively. With that challenge, it makes sense to park the debate on price and get on with closing the emissions gap.

A starting point would be to devolve and allocate Canada’s national targets to each province. This would ensure that the sum of provincial action equals the national commitments.  For sure this is a tricky task, but Europe in its burden sharing arrangement and the US in its Clean Power Plan provide some precedent and methodologies to do so. Provinces could then be given complete discretion to meet those targets as they see fit – carbon pricing or not. Compliance enforcement could range from federal legal and financial remedies to the “name and shame” approach used by the UNFCCC.

Moreover, a renewed focus on emissions targets would prompt needed discussions in two areas.

The first is technology deployment.   Much like the giddy clean tech investors of a decade ago, the Trudeau government is enamored by early stage technologies. But subsidizing R&D for Mr. Fusion in a DeLorean won’t reduce carbon emissions in the near term and, as many of those same investors discovered, may be nothing more than a noble way to lose money. Canada remains one of the only large emitters in the world without a federal support mechanism for technology deployment. So there’s a significant opportunity for Canada to adopt policies and incentives to promote the uptake of commercialized technologies like wind, solar, energy efficiency, and electric vehicles, similar to what the US and other countries have done.

Second is the 55 million-tonne moose in the room: the Alberta oil sands.  That Alberta has a carbon tax in place should not mask the reality that oil sands remain more carbon intensive than conventional crude.  Until this changes, gripes about “dirty oil”, related market access constraints, and concerns that the oil sands undermine Canada’s climate change objectives are legitimate.  So Canada should give serious consideration to an emissions standard that puts oil sands’ carbon intensity on par with conventional crude while providing flexibility for producers to meet that standard through carbon offsetting.

Canada was released last week from the shackles of a decade-old carbon pricing debate and is finally free to have pointed conversations about what really matters to the atmosphere. Let’s just hope they leave the national carbon pricing manual on the shelf.

Chris McDermott is a former Canadian negotiator on the Kyoto Protocol and private investment manager. He lives in Ottawa and New York.