Could Justin Trudeau use health care to get a carbon deal?

theglobeandmail.com
By Campbell Clark
Sept. 25, 2016

Justin Trudeau faces tough talks with provincial premiers to hammer out a national climate-change plan. But he also has a critical tool to get a deal: cash.

At first blush, the meeting with premiers seems to be shaping up as a clash. The federal government wants provinces to put a price on carbon, either through a carbon tax or a cap-and-trade system. And if they don’t, Environment Minister Catherine McKenna has warned, Ottawa will slap a federal carbon tax on them. Four provinces have a carbon price now, but some premiers are wary, and Saskatchewan’s Brad Wall sounds implacably opposed.

Then again, the premiers want something, too: money. Most provinces have high debt, and fear aging populations will mean rising costs in social programs and health care. They’re clamouring for Ottawa to provide bigger-than-planned increases in health transfers.

In other words, the premiers can probably be bought off. Put that way, of course, it sounds cynical. But it’s been a formula for federal-provincial dealmaking for decades.

The federal Liberals are already promising $2.9-billion over five years for climate-change measures, including $2-billion in the next two years to start a Low Carbon Economy Fund for projects chosen with the provinces.

But money for other things could also be used to grease the wheels. The provinces want bigger streams of health-care money, but so far the federal Liberals aren’t promising much. On Sunday, Health Minister Jane Philpott said she’s working on the assumption there won’t be much change, aside from a $3-billion federal injection for home care.

What if the Prime Minister linked a climate deal to a health deal? That could be politically explosive. But McGill economist Chris Ragan thinks it’s a good idea.

One reason is that Mr. Ragan thinks the federal government will end transferring more money to the provinces anyway. Although the growth in provincial health spending has actually slowed in recent years, there are forecasts that it will grow by 3 per cent of GDP – by 2040. Mr. Ragan figures Ottawa will eventually give in, and might one day pay a third, that would be about $30-billion in 2027. The feds might as well admit it now and get a climate-change deal out of it, he argues. In other words, mix talks on health and climate together.

“The more things you choose to put on the table, of course it becomes more complicated, but it also becomes a lot easier,” Mr. Ragan said. “Because one of the things you bring to the table is a bunch of money.”

There are a few problems. One is that Mr. Trudeau’s government already wants something else from the provinces, a deal on home care. Ottawa is offering $3-billion and wants provinces to agree to meet targets for home-care services.

Another is that Ottawa might not be ready to concede that it’s going to have to transfer more to provinces. The recent years of slower growth in provincial health-care costs is an argument that the provinces don’t really need the extra money. But that doesn’t mean it will stay that way: many economists believe those costs will rise sharply again in the near future.

Then there is politics. Health transfers are to help the sick. Linking it to something else is likely to be seen as crass. But in the end, health-care transfers are dollars, and no one can really identify which dollar is spent on what. Mr. Ragan suggests they could be spent both on health and a climate deal.

Mr. Ragan is also chair of the Ecofiscal Commission, an organization of economists studying climate policy, which argues pricing carbon is the most efficient way of reducing greenhouse-gas emissions, because it will cost the economy less. The Ecofiscal Commission’s models indicate that as long as the revenues are pumped back into the economy in the right ways, the costs of carbon pricing will be modest. In other words, if you are going to reduce emissions, a carbon price is the least costly way.

In fact, the premiers, including Mr. Wall, agreed last spring to work on carbon-pricing options. Ms. McKenna is now brandishing a federal carbon tax as a stick to demand they seal a deal. But money is the traditional carrot. Mr. Trudeau might find it too politically dangerous to link health transfers to a climate deal. But it would allow him to offer what it usually takes to make a deal: money.