Carbon prices must rise to meet Canada's 2030 greenhouse-gas targets

Theglobeandmail.com
March 31, 2017
By Shawn McCarthy

National carbon prices would have to rise to $150 a tonne if Canada is going to meet its 2030 GHG targets - and the figure rises to $220 without access to cheaper emissions credits from outside the country, two leading environmental economists say in a report to be released Friday.

In assessing Canada’s climate-change policies, the economists says there will have to be a substantial strengthening in the stringency of the carbon pricing and regulations to which Ottawa and most provincial governments agreed last December.

The balkanized nature of provincial climate plans will drive up Canada’s overall cost of emission reductions, says the report from David Sawyer and Chris Bataille, whose work was funded by four environmental organizations. Still, the December agreement puts in place a host of measures that will, when implemented, fundamentally change the picture for Canada’s greenhouse-gas emissions and make the 2030 targets achievable, it says.

“We’ve now got the knobs and dials in place from coast to coast,” Mr. Sawyer said in an interview. “Mostly everybody is doing stuff and the laggards are now moving. We can now play with those levers to achieve deeper ambition, but we have some challenges.”

The previous Conservative government committed Canada to reduce GHGs by 30 per cent below 2005 levels by 2030, a target the Liberals have adopted.

Saskatchewan Premier Brad Wall and Manitoba’s Brian Pallister refused to sign December’s pan-Canadian climate deal. Mr. Wall, in particular, has been a vocal opponent of carbon taxes, saying it will undermine the competitiveness of his province’s energy-dependent economy.

That opposition has been echoed by conservative politicians across the country and by some business leaders, with fears being heightened by U.S. President Donald Trump’s vow to reverse American climate policies.

An Environment Canada briefing document prepared in late 2015 said Canada would have to have a $300 carbon price by 2050 to achieve deep GHG reductions, assuming it relied only on a tax and did not adopt other regulations or purchase international credits.

Mr. Sawyer and Mr. Bataille suggested large industrial emitters should be allowed to buy and sell emission allowances across provincial boundaries in order to reduce the overall costs of achieving the national target. That approach has been flatly rejected in energy-dependent jurisdictions like Alberta, where to adopt it would cause capital to leave the province in search of cheaper emission-reduction opportunities elsewhere.

A fully national system could lower the the anticipated 2030 carbon price from $150 to $100 per tonne, while reducing overall costs by some $23-billion, Mr. Sawyer and Mr. Bataille said.

Similarly, Canadian governments - federal, Ontario and Quebec - expect to reduce their costs by buying international emission credits. Without that international trade, the carbon price required to meet the 2030 target would climb to $220 a tonne, the economists said.

Prime Minster Justin Trudeau has promised his government will pass legislation establishing a national carbon pricing plan that would require provinces to adopt their own system - either a tax or cap-and-trade program - or have Ottawa impose a levy and return the revenue to the provincial government.

Under the pan-Canadian agreement reached in December, the carbon price will be introduced at $10 a tonne in 2018 and rise to $50 by 2022. Provinces like Ontario and Quebec that opt for a cap-and-trade program can have lower prices, but must meet federal emission-reduction standards.