Economy would benefit from a carbon price

Benefits of going green will manifest in many ways, says Brett Dolter

The federal government has asked every province to put a price on carbon dioxide emissions by 2018. Saskatchewan Minister of Environment Dustin Duncan on Monday released Saskatchewan’s climate change plan and, as the government previously noted, it does not include a carbon price.

But now that the Saskatchewan plan is released, we can ask, does it achieve what a carbon price would achieve? Here are 10 things a carbon price does well:

1. Guides investment — Climate change is an investment problem, not an environmental problem. To stop climate change, we need to invest in technologies and products that do not pollute. Carbon pricing makes dirty technologies more expensive and guides our investment choices.

2. Provides information — When you go shopping, how do you know whether the apples you are buying were grown in a greenhouse heated by diesel fuel, or in a wellinsulated greenhouse heated by clean electricity? With a carbon price in place, the apples grown in a diesel-heated greenhouse would be more expensive. You don’t have to care about the environment to reduce pollution, you just have to be a smart shopper and pick the products that cost less.

3. Creates an incentive for continuous improvement — Federal regulations require coal plants to release only 420 tonnes of CO2 per gigawatt-hour (GWh) electricity produced. Once the regulation is achieved, there is no incentive for companies like SaskPower to go further and get pollution levels down to 300 t/GWh, or 0 tonnes/ GWh. With a carbon price, there is always an incentive to find ways to reduce pollution.

4. Ratchets up effort — The Canadian carbon price will be $10/tonne starting in 2018 and will increase by $10/ tonne each year until 2022. Ratcheting up carbon prices over time means investments in low-cost “low-hanging fruit” will be made first, providing more “bang for our buck” in terms of emissions reductions per dollar. 5. Limits “rebound effects” — One way to reduce pollution is to purchase a vehicle that is more fuel efficient. If you trade your Ford F-150 for a Ford Fiesta, you can drive the same distance for half the gas. A rebound effect happens when people use the money they saved on fuel to drive twice as far, bringing pollution levels right back to where they started. A carbon price increases fuel prices and discourages this rebound effect. 6. Maximizes freedom — For every $10/tonne that the Canadian carbon price increases, gasoline costs will increase by 2.2 cents/litre. This will mean an extra 11 cents/litre at the pump when carbon prices reach $50/ tonne in 2022. If you want, you can still choose to drive a Ford F-150 truck in 2022. You will, however, pay for the damage your tailpipe exhaust is causing.

7. Provides certainty — A clear carbon pricing schedule provides businesses and households with certainty. We can then make pollution-reducing investments today, knowing that they will earn a positive rate of return into the future. 8. Keeps government out of investment decisions — What kind of boiler should Mosaic install to provide steam for their potash mining operations? With a carbon price the government does not need to know. Mosaic will work to minimize their costs and will account for the cost of pollution in their decisions. When government prices carbon, companies make their own decisions on how to best respond.

9. Creates new markets — When it is costly to pollute, there are business opportunities for products that conserve energy, increase energy efficiency, and generate clean energy. Green technology entrepreneurs are hungry for the new markets that carbon pricing will create.

10. Provides revenues that can offset impacts — The money collected from pricing carbon can be used to lower personal and corporate income taxes, cut the PST, and provide rebates to help lowincome households pay for higher fuel bills. Ask yourself, would you be willing to pay an extra 11 cents/litre at the gas station in exchange for a break on your income taxes?

Without a carbon price, does the government of Saskatchewan climate change plan achieve these outcomes? Brett Dolter, PhD is a research fellow in the Faculty of Arts at the University of Regina.