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Posted in: Energy Policy | Climate Change / Renewables

May 12, 2017

CAMPUT 2017: Decarbonizing Canada’s Energy Future – Pricing Carbon

On May 8, 2017, the 2017 CAMPUT panel “Decarbonizing Canada’s Energy Future – Pricing Carbon” addressed the federal and provincial patchwork of carbon pricing in Canada and its impact on citizens’ pocketbooks and the economy. Panel moderator Joseph Doucet (Dean, School of Business, University of Alberta) highlighted the key issue in the move toward decarbonization – pricing has a role, but what is the right price?

Panelist Jack Mintz (President’s Fellow, School of Public Policy, University of Calgary) highlighted the need to consider both explicit carbon pricing (i.e. carbon taxes and cap and trade) as well as implicit pricing arising from subsidies, additional taxes and exemptions for certain sectors. With implicit pricing factored in, the non-uniform nature of Canadian various carbon pricing regimes emerges. Dr. Mintz argued that the effective cost of carbon should be clearly communicated to the public, noting that when governments hide the true price of a policy, eventually it becomes known and there are political consequences.

Panelist Nancy Olewiler (School of Public Policy, Simon Fraser University) discussed the need when developing carbon pricing policies to address concerns around trade and competitiveness, particularly for emissions-intensive trade exposed industries. As well, Dr. Olewiler pointed to the challenges of implementing the federal government’s national minimum carbon price given the different carbon pricing policies across Canada. Under the program, provinces are able to enact any carbon pricing policy that they chose so long as the carbon is priced at or above the national minimum. Dr. Olewiler pointed out that it will not be easy to measure and compare the different provincial programs, particularly given that the federal government’s plan does not prescribe sector coverage. How do you compare a province with only 70% of its emitters subject to carbon pricing against a province with more than 80% of its emitters subject to carbon pricing? How are allowances given freely under cap and trade to compare to a province using a carbon tax? Should provinces get credit for early action such as Ontario’s elimination of coal-fired generation plants? What if linkages to California’s cap and trade program keep carbon pricing in Ontario and Quebec under the federal minimum? Canada’s patchwork of carbon pricing raises many challenges for the imposition of the national minimum carbon price.

Finally, panelist Merran Smith (Executive Director, Clean Energy Canada) noted that the carbon policy patchwork is not an ideal situation, but is a political reality. Ms. Smith noted three factors that will lead to more coherence across the country. First, success in one jurisdiction around carbon pricing will breed success in the other jurisdictions and bring momentum to the process. Second, regulators can work on building regulatory infrastructure to facilitate integration between the different provincial programs. For example, regulators can work to ensure offset credits are recognized across jurisdictions and that emissions and compliance reporting is consistent. Finally, businesses operating across multiple jurisdictions will likely be a key driver towards cohesion. It will be inefficient for a company to be subject to a different carbon pricing obligation in every province in which it operates. As the federal government develops its national carbon pricing program and more provinces enact their programs, businesses will likely push for measures to make compliance as consistent as possible.

The panel concluded with questions from CAMPUT attendees relating to protections for low-income consumers, comparisons to the European Union trading system and the impact of carbon pricing on the oil and gas sector.