Canada’s New Carbon Price: The Good, The Bad and The Ugly

Canadians could be forgiven for being a bit confused about how Prime Minister Justin Trudeau is doing on climate change these days.

Last week he approved one of the largest sources of carbon pollution in the country — the Pacific Northwest LNG export terminal in B.C.

The week before that his government announced it would stick with Harper-era emissions targets.

Now Trudeau has announced the creation of a pan-Canadian carbon-pricing framework, which means our country will have a carbon tax nation-wide for the first time ever.

So are we hurtling toward overshooting our climate targets or are we finally getting on track?

Let’s look first at the carbon price announcement.

The carbon price will begin at $10 in 2018 and will scale up $10 per year until 2022.

The announcement “sends a clear signal that we’re all in this together and that we need a federal approach to regulate carbon pollution,” said Amin Asadollahi, lead for climate change mitigation at the International Institute of Sustainable Development.

The timing seems right as well, with a new Nanos poll showing 77 per cent of Canadians support or somewhat support Canada pursuing a national plan to meet international climate commitments. Additionally, 62 per cent of Canadians support or somewhat support a national carbon price.

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Under the new framework, provinces will have the autonomy to choose a carbon pricing mechanism that works for them, whether carbon tax or cap and trade, and all revenues generated in province will stay in province.

Having a pan-Canadian framework for pricing carbon creates incentive for businesses, Assadollahi said, and “harmonizes the approach rather than having patchwork policies across the country.”

However, critics have already come out against the price as too weak to be useful.

I was very disappointed we were starting with $10 per tonne,” said Elizabeth May, leader of the federal Green Party, “which is so low under British Columbia’s carbon tax of $30 per tonne. It was an obvious political calculation.”

And bringing the provinces together may be harder than Trudeau bargained for.

Already Premier Rachel Notley has announced Alberta will only support the plan in exchange for pipeline access to tidewater. Saskatchewan Premier Brad Wall, who has been a vocal opponent of carbon pricing for years, used the announcement to reiterate his position, saying the announcement wasn’t worth the carbon emissions it took to fly environment ministers to Ottawa.

May told DeSmog Canada the “recalcitrance of the provinces is very disconcerting.”

May said the environment ministers of Saskatchewan, Nova Scotia and Newfoundland, who were visiting a meeting of the ministers this morning, made a statement by walking out in response to Trudeau's carbon price announcement.

Ministers of provinces storming out of meetings is just childish,” May said, especially given the flexibility of the carbon price plan to suit individual provinces and territories.

Matt Horne, senior policy analyst with the Pembina Institute, said the Prime Minister made a smart political move in considering differences among provinces in the plan.

The feds were wise not to be too prescriptive here,” Horne told DeSmog Canada.

The decision they made on the flexibility of the mechanism and revenue generated is interesting,” Horne said. “You have got to achieve this level of ambition but how you do it and how you use the revenue is up to you.”

That gives maximum space to someone like Brad Wall to make this work in Saskatchewan.”

Province by province regulations will be necessary to meaningfully reduce emissions where they start.

A recent report by Mark Jaccard, climate policy analyst and professor at Simon Fraser University, found a carbon tax of $200 per tonne would be necessary to catalyze significant climate action and a transition to renewable energy systems.

Jaccard said an overreliance on carbon pricing can mask a suite of alternative options like sector-by-sector performance standards, renewable portfolio standards, mandatory market shares and zero-emission vehicles.

Ninety per cent of the reductions in the last eight or nine years…in California are occurring because of the flexible regs, not because of that very low floor price in their cap-and-trade,” Jaccard told DeSmog Canada in a recent interview.

Whether or not this federal government will be a strong actor on climate change remains to be determined.

For Kai Nagata, communications director at the Dogwood Institute, Trudeau’s carbon price announcement should be viewed within the context of last week’s approval of the Pacific Northwest LNG export terminal.

Tweet: .@KaiNagata: '@JustinTrudeau can’t reconcile weak carbon pricing w increased carbon infrastructure' http://bit.ly/2dpn1d6 #PNWLNG #bcpoliIf you set a weak carbon pricing target, that means to hit your pollution reductions targets you have to reduce actual carbon infrastructure. Are we doing that? Not at all, in fact, quite the opposite.”

This is the dilemma,” Nagata said, “no one believes carbon pricing alone, through whatever form, is going to reduce pollution enough to get at base pollution levels.”

The only thing that would really take a bite out of Canada’s carbon pie is to stop adding fossil fuel infrastructure.”

Nagata added if Trudeau fails to put pressure on the energy sector to reduce emissions, that pressure will be placed on other less-polluting sectors and individual citizens.

It’s fundamentally unfair and it will have the effect, if they continue to approve extraction and production, of subsidizing the fossil fuel industry at the expense of the ordinary citizen.”

Alex Doukas, senior campaigner at Oil Change International, also pointed to the issue of subsidies.

Setting a strong national carbon price is potentially a very important step forward for Canadian climate action,” Doukas said. “But there’s a multi-billion-dollar elephant in the room: Canada still gives $3.3 billion in subsidies to oil and gas companies each year.”

Doukas said the Trudeau government needs to complement its carbon price with an “ambitious timeline for phasing out all of its fossil fuel subsidies.”

Otherwise, the Trudeau government’s incentives to polluters risks cancelling out the newly announced carbon price.”

So while some Canadians are celebrating the announcement of a national carbon tax as a victory, it will remain pyrrhic until Trudeau implements the types of regulation that will actually bring significant emissions reductions and starts to make the tough calls on building new fossil fuel infrastructure. Until then, we’re going to hold the applause.

Update: October 4, 2016. The provincial environment ministers walked out of a meeting of ministers in Montreal, not out of the House of Commons as was previously stated. Kai Nagata's title has been updated from energy and democracy director to communications director. 

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