Canada’s Ecofiscal Commission, chaired by economist Chris Ragan and made up of eminent mainstream economists and several business representatives, is championing carbon pricing and other fiscal measures to deal with climate change. This is all to the good.
Its approach, however, is altogether too friendly to business-as-usual policies.
In its first report, the Commission endorsed the recycling of revenues from carbon and similar taxes to corporate and personal income tax cuts. The key problem with such an approach is that it would undercut proposals to recycle at least some such revenues to major public investments such as rapid transit and new clean energy technologies which would speed the pace of needed environmental transition. Most serious attempts to develop an effective policy framework to deal with climate change stress the need for a combination of carbon pricing, public investment, and regulation, rather than exclusive reliance on the former.
In their second major report released today, the Commission says that the provinces should take the lead when it comes to putting a price on carbon, either through a carbon tax or a cap and trade system. While the call for putting a significant price on carbon to discourage pollution is again welcome, it is far from clear why the path forward should mainly begin in the provinces.
To be sure, the federal government has not been an effective leader to date, failing to live up to our international commitments to reduce greenhouse gas emissions, and even failing to implement promised regulations on emissions from the heavily polluting oil and gas sector. Prime Minister Harper has categorically dismissed the idea of a carbon tax as “crazy.”
But the run-up to a federal election and this year’s last-chance international climate change negotiations in Paris surely offer an opportunity to the opposition parties to push for a better national approach.
It is true to a certain degree that the provinces have stepped into the policy vacuum left by Prime Minister Harper, but only to a small degree. No one can pretend that modest provincial actions are sufficient to meet Canada’s promised emissions reductions agreed to in Kyoto and Copenhagen, even if the Commission recommends increased stringency in carbon pricing over time.
While BC now levies a carbon tax of $30 per tonne and Quebec has implemented a cap and trade system based on a price of $15 per tonne, the impacts have been modest. And Alberta and Saskatchewan, which together account for almost one half of national greenhouse gas emissions, have done essentially nothing.
Alberta not only fails to effectively limit fast-growing emissions by the tar sands, levying only a partial and token charge, it is also content to generate most provincial power from highly polluting coal.
While it is sensible in the current political context that provinces not wait for federal leadership, this does not mean those pushing for climate action should lessen our pressure on the federal government to lead. At a minimum, the federal government should be requiring all of the provinces to take some modest first steps to reduce emissions through carbon pricing along the lines set by BC and Quebec, perhaps soon to be followed by Ontario.
The Commission is right to point out that the emissions profiles of the provinces are very different, and that we would be wise to avoid levying carbon taxes in such a way as to set the stage for large transfers of fiscal resources between provinces. But it would be quite possible, as the report notes, to set a national minimum price on carbon that gives the provinces access to most of the revenue to fund their own climate change priorities.
The Commission’s report further notes that it would be “desirable” for the federal government to co-ordinate future provincial carbon pricing policies to ensure that businesses operate on a more or less level playing field. It could have added that there is a need for federal leadership in developing clean technologies and renewable energy generation and conservation programs, all of which have to be funded.
The clear failure of the Harper government to deal with climate change is no reason to give up on federal leadership writ large.
Andrew Jackson is a Senior Policy Advisor to the Broadbent Institute and Adjunct Research Professor in the Institute of Political Economy at Carleton University.