Why es­ti­mate on im­pact of car­bon tax fell so much

Calgary Herald - - CANADA - Maura For­rest

When the fed­eral gov­ern­ment an­nounced Tues­day that a car­bon tax will be ap­plied next year to four prov­inces that don’t have their own, it also re­vealed some­thing else: its es­ti­mate of how much car­bon pric­ing will cut emis­sions has dropped dra­mat­i­cally.

Ot­tawa now ex­pects that car­bon prices across all prov­inces and ter­ri­to­ries will re­duce green­house-gas emis­sions by 50 to 60 mega­tonnes in 2022, down from an April 2018 es­ti­mate of 80 to 90 mega­tonnes.

The rea­son its es­ti­mate has dropped so dra­mat­i­cally has a lot to do with On­tario — and a lot to do with emis­sions re­duc­tions in Cal­i­for­nia that Canada can no longer count as its own.

Se­nior gov­ern­ment of­fi­cials ex­plained dur­ing a back­ground brief­ing Tues­day that On­tario Premier Doug Ford’s de­ci­sion to scrap the prov­ince’s cap-and-trade sys­tem soon af­ter his elec­tion last sum­mer ac­counts for most of the dif­fer­ence be­tween the April es­ti­mate and the re­vised cal­cu­la­tion.

Un­der the for­mer Wynne gov­ern­ment, On­tario’s cap-and-trade pro­gram was linked to mar­kets in Que­bec and Cal­i­for­nia in Jan­uary 2018, mean­ing On­tario busi­nesses could pur­chase car­bon cred­its from Cal­i­for­nia com­pa­nies that had re­duced their own emis­sions. Those emis­sion cuts in Cal­i­for­nia could then be counted to­ward On­tario’s tar­get.

In fact, On­tario busi­nesses de­pended heav­ily on car­bon cred­its from Cal­i­for­nia to meet the prov­ince’s strin­gent emis­sions cap. A 2016 re­port from the prov­ince’s au­di­tor gen­eral cal­cu­lated that 80 per cent of the emis­sions re­duc­tions re­quired to meet On­tario’s 2020 tar­get would ac­tu­ally take place out­side the prov­ince — in Que­bec and Cal­i­for­nia. The re­port raised con­cerns that “funds may be leav­ing the On­tario econ­omy for no pur­pose other than to help the gov­ern­ment claim it has met a tar­get.”

On Tues­day, fed­eral of­fi­cials said On­tario had es­ti­mated it would cut emis­sions by 48 mega­tonnes by 2030, thanks to the cap-and­trade sys­tem. With Ford’s de­ci­sion to scrap the pro­gram, how­ever, Ot­tawa can no longer count those Cal­i­for­nia re­duc­tions as part of its to­tal es­ti­mate — hence the 30-mega­tonne drop be­tween April and now. The fed­eral car­bon tax, ap­plied to On­tario, won’t come close to mak­ing up the dif­fer­ence.

Dale Beu­gin, ex­ec­u­tive di­rec­tor of Canada’s Ecofis­cal Com­mis­sion, said it’s le­git­i­mate to count Cal­i­for­nia emis­sions cuts in Canada if they’re part of an in­ter­na­tional car­bon mar­ket. “That’s the point of per­mit trade be­tween ju­ris­dic­tions,” he said. “You do it where it’s cheap, rather than where it’s ex­pen­sive. And the mar­ket’s work­ing the way it’s sup­posed to.”

He said On­tario’s emis­sions tar­gets were am­bi­tious enough that, if the cap-and-trade pro­gram hadn’t been linked to Cal­i­for­nia’s, the car­bon price in On­tario would have been much higher than is re­quired to meet the fed­eral stan­dard. “It was a deep cap re­quir­ing re­ally deep emis­sions re­duc­tions,” he said. “They were re­ly­ing on lots of im­ported per­mits from Cal­i­for­nia and Que­bec to meet that cap.”

Beu­gin said Canada should still look to in­ter­na­tional car­bon mar­kets to meet its own 2030 tar­gets, even though On­tario’s sys­tem is now off the ta­ble and the fed­eral plan doesn’t in­clude plans for ca­pand-trade. “We need to crank up our pol­icy to get where we have com­mit­ted to go­ing,” he said. “And in­ter­na­tional per­mit trade is and should be one of the tools that they’re look­ing at.”

Que­bec’s cap-and-trade pro­gram is still linked to Cal­i­for­nia’s, but it’s un­clear how much that con­trib­utes to Canada’s over­all emis­sions re­duc­tion es­ti­mates.

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