The Great Canadian Carbon Pricing Saga, Below2C

Source: YouTube Standard Licence, Published April 3, 2017

Carbon Pricing Saga

The great Canadian carbon pricing saga started in the fall of 2016 when Prime Minister Trudeau delivered a surprise speech on pricing carbon pollution in the House of Commons. Trudeau’s announcement established minimum standards for jurisdictions choosing to implement their own carbon pricing system – either a carbon tax or a cap-and-trade mechanism.

This first action on the climate was followed in December of 2016 with the signing of The Pan-Canadian Framework on Clean Growth and Climate Change[1] by all but two jurisdictions (provinces and territories). The central component of the Framework is the commitment to pricing carbon pollution across the country by 2018. Carbon pricing will start at $10 per tonne in 2018 increasing to $50 per tonne in 2022. Jurisdictions which have not implemented their own carbon pricing by the end of 2018 will have one imposed by the federal government.

A few days ago, Minister of the Environment and Climate Change, Catherine Mckenna, released the last piece of the carbon puzzle, a “technical paper[2] on the “federal carbon pricing backstop.” The backstop system will only apply to provinces and territories which do not have their own carbon tax or cap-and-trade system before the end of 2018.

Carbon Pricing Backstop

The federal carbon pollution pricing backstop will be composed of two key elements:

  • A carbon levy applied to fossil fuels; and
  • An output-based pricing system for industrial facilities that emit above a certain threshold, with an opt-in capability for smaller facilities with emissions below the threshold.

The backstop will apply in a province or territory that does not have a pricing system that aligns with the benchmark. The carbon levy will come into effect in 2018. The output-based pricing system will not come into effect before January 1, 2019. (Source: Technical paper: federal carbon pricing backstop).

Clare Demerse is with Clean Energy Canada. She manages policy engagement on federal and national issues, focusing on renewable energy, climate policy and sustainable transportation. [The most recent] “announcement describes the third option,” says Demerse. It targets provinces/jurisdictions which will not have carbon pricing by 2018. “The most obvious home for that third option is Saskatchewan, where Premier Brad Wall has consistently refused to consider pricing carbon on his own,” points out Demerse.

Five Elements of Backstop – the Third Option

The Great Canadian Carbon Pricing Saga, Below2CClean Energy Canada identifies five elements of what it calls the third option:

1. As has been widely reported, Ottawa’s proposal adopts two signature elements from Alberta’s approach: an economy-wide levy on carbon pollution and a specific approach to heavy industry called output-based allocation.

The “levy” starts at $10 per tonne in 2018 and increases to $50 per tonne by 2022—at which point it will add about 12 cents to the cost of a litre of gasoline.

Heavy industry players will get credits that exempt them from that levy on some of their emissions. The number of credits they receive will be scaled to how much they produce of a given commodity or good—cement, coal power, bitumen and so on.

2. If you think of Saskatchewan as the likely first “taker” of this system, the Alberta link makes a lot of sense. There’s no question that a made-in-Alberta approach will also fit Saskatchewan’s economy very well.

3. Ottawa’s paper doesn’t settle one very big question: how the government will use the revenues the carbon price will generate. Invariably, discussions about the best use of carbon pricing revenues are hotly contested and very political.

4. The timing of Ottawa’s heavy industry proposal is smart—and getting the details right really matters.

5. For the first time, Ottawa is considering a price on carbon pollution from all aviation inside Canada. Domestic aviation—flights within Canada—accounted for 7 million tonnes in 2015.

For more details on the 5 elements, you can read the full article, Five things to know about Ottawa’s carbon pricing plan.

It Could Have Been So Simple

Much has been said about Catherine McKenna’s announcement but in fact it’s simply the last missing piece of Canada’s rather timid approach on the climate. I’ve been a fierce critic of the federal government and Justin Trudeau’s climate policies. This latest announcement just adds to Trudeau’s confusing climate action charade which started during the Paris Agreement talks in December 2015.

The Citizens’ Climate Lobby of Canada applauds the Trudeau government’s national price on carbon pollution calling it “an important first step towards reconciling Canada’s international commitments for the urgent need for all nations to reduce greenhouse gas (GHG) emissions.” But it also labels the current targets as woefully inadequate.

Canada is poised to fall shamefully short of its 2030 Paris targets. Our current emissions trajectory is trending in the wrong direction. We are attempting to reduce pollution while still approving fossil-fuel infrastructure projects that do exactly the opposite — pipeline approvals, LNG in British Columbia, Tar Sands expansion — thus making any policy announcements by this government meaningless.

Andrew Coyne of the National Post writes that “Like much else this government touches, the carbon tax started out as a simple idea that has grown steadily more complex.” He makes the case that a uniform national carbon tax would have been much simpler and more effective. But instead, the technical paper “adds some new wrinkles,” says Coyne. “But this is Canada, where there are practical obstacles to doing anything.”

The federal “backstop” tax would include special exceptions for heavy industry, known as output-based allocations, following the Alberta model. Large emitters — those over 50 kilotonnes a year — would effectively only be taxed on a portion of their emissions.

It’s odd to be sparing heavy emitters from a tax whose whole point is to deter emissions.

And so the bewildering climate dance of Justin Trudeau’s Liberals continues. Is it not time for this government to align its climate actions with its climate rhetoric? Or will it choose to perpetuate its facade of climate action until at least 2019, the year of the next election?

References:
[1] The Pan-Canadian Framework on Clean Growth and Climate Change
[2] Technical Paper: federal carbon pricing backstop

8 COMMENTS

  1. Unfortunately, Canada is not the only country that will fall far short of its 2030 targets.

    I see a distinct dragging of feet across the globe. There is something pathetic and woeful about our commitment to a future that heralds a cleaner, healthier, happier and more biodiverse world for our children and Grandchildren.

    This apathy is not just inherent in our attitude to climate (ultimately humanity’s biggest challenge), but to our attitude to waste, pollution, animal welfare, and even to humanity itself.
    Something is very very wrong with society, if it puts ‘economic spin’ onto all things that we do.

    If one was to look at this mess as an outsider, one would be convinced that nothing will stop our own hell bent self destruction. Are the forces in the world becoming so evil, that we can no longer have empathy, compassion and care about the future? I am beginning to wonder!

    • I started projecting the near future vis-a-vis climate change years ago in Eco History Exam 2052, suggesting a series of crises would prevail. I stick with that speculation–we have a damaged planet, climate change events happening all around, and people jumping on carbon spewing jets to their dream vacation spots. Somewhere between the chaotic world of the film Elysium (shift 2154 to 2054) and a super smart shift in youthful attitude to a new cultural model, negative emissions to retrieve our Holocene climate, somewhere in between, the human species will play out it’s destiny.

      https://www.smashwords.com/books/view/678164

      • Indeed Les. Our species is playing out its destiny right now. It’s really messy – change always is. And frankly we have dug such a huge hole for ourselves, it’s hard to conceive how we can ever survive. I wish I could be around in 100 years. And then maybe not.

      • Les, You and Guy McPherson are likely people who actually see beyond the borders of individual climate predictions… You both have some empathy with the vulnerability we now face with the run-away abrupt effects of the ‘heat engine’ that we have created in modern civilisation. I don’t know the outcome in your linked book (but I will read it). Guy McPherson predicts civilisation collapse and extinction of humans in 10 years. It is the most dire prediction that I have heard to date.

        I am waiting today with trepidation to hear whether president Trump will support the Paris Accord or not. If he walks away, he signs the death sentence of many people. I hope he realises the gravity of his decision, but I rather doubt it.

        I shall keep trying to do the right thing for our climate where I can, but without a 100% commitment from everyone on the planet, I think we are living in very dangerous times that will deliver a very different world to the one that we want. I am sad, angry, and unhappy, but without resolution soon, it is likely to turn into resignation.😞

    • Colette,

      A few years ago, climate change was not even in the common dialogue but now it has shifted. There are hundreds of small, and not so small, events/projects/announcements every week showing how humanity is evolving in the direction we need. But perhaps this is just a tiny piece of the gigantic puzzle we need to resolve. I think we can solve this thing. The alternative is giving in to despair and I refuse to do that. I believe you feel the same.

      • I do Rolly, but honestly I am starting to waiver. My enthusiasm is running out of steam. I feel like my tiny voice is yelling itself hoarse into the violent winds of holocaust bearing down on us. I
        learned this week that the Svalbard seed bank is threatened by permafrost thaw, methane is leaking into the atmosphere at a tremendous rate and the oceans have warmed 70% more than we thought. There are ocean feedback loops in operation now that we have no chance to control and apparently geothermal engineering to control climate is not going to work. We now appear to be only tinkering at the edges of something that has quickly turned into a monster!😧
        I l.

  2. By the way, your website doesn’t work very well on my android phone (all I use these days), perhaps something to do with Firefox browser, but I can barely type a reply here.

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