Cli­mate at the Cross­roads

Policy - - Contents - David McLaugh­lin

Canada’s cli­mate change ef­forts have reached a cross­roads. Mount­ing op­po­si­tion from some prov­inces to the Trudeau gov­ern­ment’s car­bon pric­ing pol­icy has se­ri­ously dented any guar­an­tees that the Pan-Cana­dian Frame­work on Clean Growth and Cli­mate Change will en­dure. The fed­eral gov­ern­ment is fac­ing an un­com­fort­able but un­avoid­able choice. Does it im­pose car­bon pric­ing on re­cal­ci­trant prov­inces in an elec­tion year or not? Act­ing risks a car­bon tax back­lash by vot­ers. Not act­ing risks alien­at­ing the fed­eral Lib­er­als’ own vot­ing base on a key pol­icy is­sue.

It be­gan and ended with two new cab­i­nets and two new words: cli­mate change.

They were added to the ti­tle of Prime Min­is­ter Justin Trudeau’s first Min­is­ter of the En­vi­ron­ment and Cli­mate Change in 2015; and taken away from the new ti­tle for On­tario Premier Doug Ford’s first Min­is­ter of the En­vi­ron­ment, Con­ser­va­tion and Parks in 2018.

Those two cabi­net changes mark the high- and low-wa­ter marks of cli­mate change progress in Canada. With the first, the Trudeau gov­ern­ment set about cre­at­ing the Pan-Ca-

na­dian Frame­work on Clean Growth and Cli­mate Change (PCF) in De­cem­ber, 2016. With the sec­ond, the Ford Pro­gres­sive Con­ser­va­tive gov­ern­ment re­pealed its cap-and-trade sys­tem and com­menced a le­gal chal­lenge to Ot­tawa’s plan to re­quire prov­inces to im­ple­ment car­bon pric­ing regimes by 2019.

In just over two years, Canada has swung from a seem­ing in­evitabil­ity on cli­mate ac­tion with car­bon pric­ing to a pitched po­lit­i­cal bat­tle be­tween Lib­er­als and Con­ser­va­tives, some prov­inces and Ot­tawa, chal­leng­ing the very no­tion of car­bon and cli­mate ac­tion at all. Cli­mate pol­icy has reached a cross­roads in Canada. Next year’s fed­eral elec­tion looks now as the de­cid­ing event.

De­spite the fed­eral Lib­eral gov­ern­ment’s avowed com­mit­ment to global and Cana­dian cli­mate ac­tion un­der the slo­gan “Canada is Back”, the ter­rain for what be­came the PCF was tilled by “the two Stephens”: Harper and Dion. The 2008 fed­eral elec­tion put paid to the no­tion of a car­bon tax to re­duce emis­sions. Then Lib­eral leader Stéphane Dion pro­moted his Green Shift car­bon tax. Prime Min­is­ter Stephen Harper cas­ti­gated it as a “tax on every­thing”, win­ning an in­creased mi­nor­ity gov­ern­ment.

If Harper ef­fec­tively poi­soned the po­lit­i­cal well on us­ing a car­bon tax, he be­queathed a poi­soned chal­ice to both his own party and the Trudeau gov­ern­ment: his Paris 2030 tar­gets.

From that mo­ment on, fed­eral Con­ser­va­tives be­came un­al­ter­ably op­posed to for­mal car­bon pric­ing as a tool to re­duce emis­sions, de­spite their own, soon-to-be-dis­carded cap-and-trade plan known as Turn­ing the Cor­ner. A slow, sec­tor-by-sec­tor reg­u­la­tory ap­proach was adopted in­stead. But the high-emit­ting oil and gas sec­tor was con­sis­tently left out and Canada’s emis­sions rose un­til the 2008-09 re­ces­sion caused them to drop, be­fore ris­ing again.

But if Harper ef­fec­tively poi­soned the po­lit­i­cal well on us­ing a car­bon tax, he be­queathed a poi­soned chal­ice to both his own party and the Trudeau gov­ern­ment: his Paris 2030 tar­gets. By set­ting yet an­other am­bi­tious GHG re­duc­tion tar­get of 30 per cent be­low 2005 lev­els by 2030, he just as ef­fec­tively boxed-in fu­ture gov­ern­ment ac­tion. Think­ing this tar­get would be po­lit­i­cally bul­let-proof from their Con­ser­va­tive op­po­nents, the Lib­er­als adopted it with alacrity in 2015. An­drew Scheer, the new Con­ser­va­tive party leader, then drank from it ear­lier this year with a pub­lic com­mit­ment to reach the Paris tar­get but with­out a car­bon tax.

Yet, this tar­get is prov­ing just as re­sis­tant to ac­tual achieve­ment as ev­ery other Cana­dian cli­mate tar­get from Ky­oto on­wards. Now own­ing it, the Lib­er­als are crit­i­cized for in­sti­tut­ing a mod­est car­bon tax to help achieve it (it is ei­ther too much or not enough, say the same crit­ics). Mean­while, the Con­ser­va­tive po­si­tion will be ex­tremely dif­fi­cult, if not out­right im­pos­si­ble, to ac­com­plish with a reg­u­la­tory ap­proach alone.

The ba­sis, then, for sound cli­mate pub­lic pol­icy in this pre-elec­tion year is in­creas­ingly look­ing like a re-run of the 2008 cam­paign.

The Trudeau gov­ern­ment’s ini­tia­tive to knit to­gether a panCana­dian cli­mate ap­proach was based on the re­al­ism of fed­er­al­ism and the state of cli­mate play when he took of­fice. Un­der the

Harper gov­ern­ment, prov­inces had been the lead­ers in cli­mate ac­tion, from Bri­tish Columbia leg­is­lat­ing the coun­try’s first-ever car­bon tax to On­tario clos­ing down its coal-fired elec­tric­ity plants to Que­bec bring­ing in cap-and-trade. Any na­tional pol­icy had to re­al­is­ti­cally ac­count .1Here’s a thought ex­per­i­ment: if the Lib­er­als took of­fice to­day de­ter­mined to bring in a na­tional cli­mate pol­icy, would they bring in their cur­rent PCF plan? The an­swer is very likely “no”. With dim­ming provin­cial sup­port for cli­mate ac­tion, it would be up to the fed­eral gov­ern­ment to im­pose a uni­form car­bon price and the el­e­ments of a pan-Cana­dian cli­mate plan. In less than two years, Canada has moved from a provin­cially-led, fed­er­ally-back­stopped cli­mate pol­icy to one that looks more and more ‘fed­er­al­lyled, provin­cially-back­stopped’.

In that vein, the Ford gov­ern­ment’s with­drawal from the cli­mate sphere can be seen as ei­ther a brake or an ac­cel­er­a­tor to a truly pan-Cana­dian cli­mate pol­icy for the coun­try. Car­bon pric­ing op­po­nents are fram­ing it as un­stop­pable mo­men­tum to end­ing the “Trudeau car­bon tax”—the brake. Seen an­other way, it ac­tu­ally cre­ates an op­por­tu­nity for the fed­eral gov­ern­ment to re-cast its pan-Cana­dian cli­mate pol­icy and bring about the car­bon price uni­for­mity and cer­tainty sought in the PCF—an ac­cel­er­a­tor. The tool to do so: rev­enue re­cy­cling to peo­ple.

There is to­day a win­dow to im­ple­ment a truly na­tional PCF that fits more di­rectly into a fed­er­ally-man­dated car­bon and cli­mate pol­icy. One that does not fo­cus on price strin­gency to achieve en­vi­ron­men­tal out­comes. Here are the el­e­ments that could make it up:

First, leave Que­bec alone to im­ple­ment its cap-and-trade sys­tem with Cal­i­for­nia un­der the Western Cli­mate Ini­tia­tive. There is no move­ment cur­rently in Que­bec to with­draw from car­bon pric­ing or cli­mate ac­tion. As this is an international agree­ment, Ot­tawa should not sun­der it.

Sec­ond, bring in a na­tional car­bon tax floor of $25 or $30 per tonne (or 5-7 cents per litre of gaso­line) for all other prov­inces at once. In­stead of just do­ing this for two prov­inces now and pre­sum­ably Al­berta later, ap­ply it to all of them. Prov­inces could have a higher price if they so de­sired, but they could not have a lower price. This is higher than the cur­rent $20 per tonne price set for 2019 but not un­duly so. A higher price would also in­cent more emis­sions re­duc­tions at the out­set.

(A $30 per tonne “car­bon price col­lar” was in fact rec­om­mended by the now-de­funct Na­tional Round Ta­ble on the En­vi­ron­ment and the Econ­omy in 2010 as a com­pet­i­tive­ness mea­sure to al­low Canada to move on cli­mate ac­tion with­out get­ting too far ahead of the U.S.)

Third, keep that price flat un­til the 2022 re­view. Busi­ness is wor­ried about es­ca­lat­ing car­bon prices and a “lay­er­ing” of reg­u­la­tions on top of it, and this would give a pause to busi­nesses’ ben­e­fit while NAFTA is set­tled with the United States.

Fourth, re­cy­cle all of the car­bon tax rev­enue di­rectly back to res­i­dents in each ju­ris­dic­tion in the form of div­i­dend or re­bate cheques. Bet­ter still, do it for in­di­vid­u­als, not house­holds, to max­i­mize the size and vis­i­bil­ity of the div­i­dend. For those prov­inces with rev­enue re­cy­cling sys­tems al­ready in place, they could have the choice of re­tain­ing their cur­rent sys­tem or with­draw­ing in favour of the fed­eral gov­ern­ment’s div­i­dend cheques, which would ac­tu­ally be worth $200-$300 for each per­son. A four-per­son house­hold could wind

The Ford gov­ern­ment’s with­drawal from the cli­mate sphere can be seen as ei­ther a brake or an ac­cel­er­a­tor to a truly pan-Cana­dian cli­mate pol­icy for the coun­try.

up re­ceiv­ing re­bates to­talling more than a thou­sand dol­lars.

Fifth, bring in out­put-based car­bon pric­ing for large emit­ters as cur­rently be­ing im­ple­mented in Al­berta, and planned for Saskatchewan and Man­i­toba. This sys­tem of in­dus­trial per­for­mance stan­dards re­duces the cost of car­bon pric­ing for emit­ters by re­turn­ing a por­tion of their pay­ments in the form of a sub­sidy. This pre­vents car­bon leak­age and re­duced pro­duc­tion for trade-ex­posed sec­tors. The re­cent ad­just­ments by the fed­eral gov­ern­ment to its pro­posed out­put-based sys­tem ac­tu­ally eased the cost bur­den even fur­ther on in­dus­try; smart recog­ni­tion that in­dus­try needs more tran­si­tion sup­port to im­ple­ment car­bon pric­ing, even if the pol­i­tics of do­ing so has left the Trudeau gov­ern­ment open to largely spe­cious charges of back-tracking on its car­bon pol­icy.

At one bold stroke, the fed­eral gov­ern­ment would take the pol­icy re­spon­si­bil­ity to go with the po­lit­i­cal re­spon­si­bil­ity it has for all prac­ti­cal pur­poses al­ready as­sumed for its car­bon and cli­mate ap­proach. The ef­fect of hun­dreds of dol­lars in re­bate cheques go­ing into peo­ples’ pock­ets is the best, and frankly, only way at this junc­ture to ease car­bon pric­ing into place for all Cana­di­ans.

The fed­eral gov­ern­ment’s le­gal au­thor­ity to tax and dis­trib­ute is widely agreed. By hav­ing an equal car­bon floor price across the coun­try, all ju­ris­dic­tions are be­ing treated the same. A uni­form car­bon price for the coun­try takes root. Since the ef­fect of the le­gal chal­lenge from Saskatchewan and On­tario is to cur­tail fed-

eral ac­tion pe­riod on cli­mate, it can be seen as a nec­es­sary but lim­ited as­ser­tion of fed­eral au­thor­ity in this im­por­tant field.

The ef­fect of this would be to im­pose a car­bon price on the fol­low­ing prov­inces: Al­berta (if there is a change in gov­ern­ment), Saskatchewan, On­tario, New Brunswick, PEI, and New­found­land and Labrador. The floor car­bon price is mod­est enough not to cre­ate sig­nif­i­cant eco­nomic dif­fer­en­tials be­tween prov­inces. The flat rate en­sures the po­lit­i­cal im­pact is equally mod­est as con­sumers and busi­nesses are not hit with ris­ing fuel bills each year. And, it re­quires gov­ern­ments to look at more po­lit­i­cally­ac­cept­able non-pric­ing mea­sures to close the Paris gap.

Ot­tawa has lost con­trol of the cli­mate nar­ra­tive in the coun­try. 2018 is not 2015 or 2016 in terms of its po­lit­i­cal au­thor­ity and will­ing­ness of prov­inces to col­lab­o­rate on cli­mate. Only a bold move will suf­fice to sal­vage it. But to bite the bul­let on cli­mate, it must wa­ter its wine too.

Ot­tawa has lost con­trol of the cli­mate nar­ra­tive in the coun­try. 2018 is not 2015 or 2016 in terms of its po­lit­i­cal au­thor­ity and will­ing­ness of prov­inces to col­lab­o­rate on cli­mate. Only a bold move will suf­fice to sal­vage it. But to bite the bul­let on cli­mate, it must wa­ter its wine too. A re­vised na­tional car­bon floor price with full rev­enue re­cy­cling cheques back to in­di­vid­u­als does just that.

It still fea­tures key el­e­ments of the cur­rent PCF: car­bon pric­ing, out­put­based in­dus­trial pric­ing, rev­enues kept in each ju­ris­dic­tion, a 2022 re­view, and provin­cial flex­i­bil­ity to do more.

Next year—an elec­tion year—is likely to de­ter­mine whether Canada will act as one on cli­mate or re­an­i­mate the frag­mented ap­proach of the re­cent past. If elec­tions mat­ter, this next one prom­ises to be con­se­quen­tial.

David McLaugh­lin is Di­rec­tor of Cli­mate Change, Canada at the International In­sti­tute for Sus­tain­able De­vel­op­ment. He is the for­mer Pres­i­dent and CEO of the Na­tional Round Ta­ble on the En­vi­ron­ment and the Econ­omy. He has been a deputy min­is­ter in the New Brunswick gov­ern­ment and is a for­mer Con­ser­va­tive chief of staff to the prime min­is­ter of Canada, premier of New Brunswick, and fed­eral fi­nance min­is­ter.

Wikipedia photo

The Tuk­toy­ak­tuk Win­ter Road, an ice road in the North­west Ter­ri­to­ries, whose op­er­a­tions could be ef­fected by win­ter warm­ing.

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