Provinces should lead on reducing carbon, say economists
Canada’s Ecofiscal Commission advocates for every province to establish a carbon pricing regime.

YorkRegion.com
April 7, 2015
Sadiya Ansari

After years of federal inaction on carbon pricing, a group of economists is urging provinces to move forward on their own.

In a report to be released Tuesday, Canada’s Ecofiscal Commission advocates for every province to establish a carbon pricing regime that is stringent, has broad coverage and plans for long-term national co-ordination.

A federal policy would be fraught with difficulties, said chair of the commission Chris Ragan, who is also an associate professor of economics at McGill University. Ragan points to the challenge in designing an approach that would work for economically diverse regions and the political problems intrinsic to having the federal government collecting all revenues from such a regime.

“Provincial action sidesteps those difficulties instantly,” said Ragan. “You design the system to your own political realities. You keep the revenues and choose how those revenues will be recycled.”

The commission formed last year to drive home that consideration for the environment is crucial to economic prosperity in Canada, with advisers from across the political spectrum, from Preston Manning to Jean Charest.

Encouraging provincial action echoes comments made by federal Liberal leader Justin Trudeau earlier this year, who said the provinces are already taking the lead and the federal government’s role should be to support and co-ordinate their efforts.

Ragan says the commission is agnostic as to whether action comes in the form of a carbon tax or cap-and-trade system. A carbon tax puts a price on every tonne of greenhouse gas (GHG) emissions while a cap-and-trade system limits emissions and allows companies to sell or trade unused portions to other companies exceeding their cap.

Some provinces have already moved forward with carbon pricing, for example British Columbia has a revenue neutral carbon tax and Quebec has a cap-and-trade system.

Ragan adds that immediate action is needed not for “abstract gains.”

“There are tangible costs Canadians are paying today,” he said.

Costs as a result of climate change such as damaged infrastructure and threatened food security have also been recognized by Ontario’s government in a discussion paper released in February. Glen Murray, Ontario’s minister of the environment, committed to a carbon pricing policy when it was released and the government is currently consulting the public about what that policy should look like.

How to price carbon is only half the equation, Ragan says.

“The underappreciated part is the second part of an ecofiscal policy: What do you do with the revenues?”

David Paterson, vice-president of corporate and environmental affairs at GM Canada, says the company would like to see Ontario invest revenue from a carbon pricing policy toward helping consumers and industry invest in new technology that would contribute to reduced emissions.

Infrastructure for electric cars, such as more charging stations at workplaces and along the highway, is high on Paterson’s list, especially since a provincial report shows transportation is the greatest contributor to GHGs in Ontario.

While Paterson agrees with the underlying logic of provinces taking action, he cautions against an unco-ordinated approach.

“We really do want jurisdictions try to harmonize and align the approaches we have,” said Paterson.

And for a global company like GM, that alignment matters beyond borders.

“Our competition isn’t with other Canadian provinces, our competition is with U.S. states,”he said.