Economic think tank urges Canada’s provinces to take lead in pricing carbon

Published 20:11 on April 7, 2015  /  Last updated at 16:29 on November 2, 2015  /  Americas, Canada  /  No Comments

Below are the four recommendations along with key takeaways from a report released on Tuesday by Canadian economic think tank the Ecofiscal Commission.

Below are the four recommendations along with key takeaways from a report released on Tuesday by Canadian economic think tank the Ecofiscal Commission.

Recommendations:

1. Provincial governments should move forward by implementing carbon-pricing policies as the central element of their climate change strategy.

2. Provincial carbon-pricing policies – existing and new – should increase in stringency over time to avoid unnecessary shocks to the economy.

3. Provincial carbon pricing should be designed to broaden coverage, to the extent practically possible, to create incentives for emission cuts throughout the economy.

4. Provinces should customize details of policy design based on their unique economic contexts and priorities; they should also plan for longer-term co-ordination.

Key takeaways:

– Provinces have the jurisdictional authority and policy momentum to lead the way in implementing carbon pricing policies, and the longer they are delayed the more it will cost Canadian consumers.

– Provinces have unique economic structures, emissions profiles, and political contexts, to which carbon pricing policies can be customised. Provinces can also can ensure that revenue from allowance sales remains with them, avoiding any challenges from a centralised system involving the federal government.

– Coordination of these carbon pricing policies may be desirable down the road, and different paths to that coordination, including a role for the federal government, are possible. However, it makes sense for the provinces to lead initially.

– Early implementation allows more time for the programmes to become more strict and the carbon price to rise, giving industry more clarity plus additional time to prepare while avoiding unnecessary shocks to the economy.

– The initiatives should be broad in coverage, as this will create more incentives to explore all available low-cost abatement opportunities. “The most cost-effective policy would impose a uniform price on all GHG emissions, irrespective of their source. Specific sectoral exemptions not only introduce inequities, but also raise the overall cost of the policy.”

– Provinces should also consider earmarking allowance sale revenues for example to cutting business or household income taxes (as in British Columbia) or investing in new carbon-cutting technology (as in Quebec and Alberta). Some of the funds could also be directed towards important infrastructure projects, used to help industries from foreign competition, or diverted to aiding vulnerable, low-income families.

Read the full Ecofiscal Commission report here, or the executive summary here.

BACKGROUND:

Quebec has a carbon market that is linked to California’s.

British Columbia has a carbon tax, while Alberta charges some of its emitters and uses the revenue to fund a cleantech innovation fund.

Ontario – Canada’s most populous province – is set to launch a cap-and-trade scheme and link it the California-Quebec market, local media reported last week, while Nova Scotia and New Brunswick are also reportedly considering introducing carbon pricing initiatives.

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