Reality check: all carbon policies carry a price, despite Harper-Mulcair hot air
Policies to curtail amount of greenhouse gases come with considerable benefits, too
OTTAWA—Any measure to reduce carbon emissions has a price—regardless of what Stephen Harper or Tom Mulcair has to say.
Whether it be a cap-and-trade system, a full-fledged carbon tax or the federal government’s sector-by-sector regulations, each policy to curtail the amount of greenhouse gases sent into the atmosphere comes with a hefty price tag—as well as considerable benefits.
The differences between the policies are many, however.
Who pays the price? How transparent is the price on carbon? And how effective is the policy in reducing emissions in time to meet international commitments?
These questions are barely being discussed in the deafening Conservative attack on NDP climate policies that kicked off this week’s new session of Parliament.
“What my concern is is that there is no way to have a rational debate about sound policy against climate change in Canada. Without carbon pricing, you cannot succeed,” a frustrated Liberal MP Stephane Dion said.
“It’s not the only answer, but it’s part of the answer.”
The Conservatives are accusing the NDP of trying to spring a nasty “tax on everything” on the public, through its carbon-pricing proposal to set up a cap-and-trade system.
“Canadians and people across the globe know we have a government smart enough to reject dumb ideas like a $20-billion carbon tax,” Harper told the House of Commons on Monday.
A cap-and-trade system is not the same as a carbon tax.
Both policies would reduce carbon emissions and would come with a cost that industry and consumers would have to pay in one way or another.
But they function in very different ways.
With a cap-and-trade system, the country’s main emitters would pay the government to buy permits to emit greenhouse gases, and then trade them so that the companies that can cut emissions most efficiently is effectively paid by other companies to do so.
It’s the policy favoured by the NDP, and it used to be the leading option for the federal Conservatives as well.
Alberta has already adopted a version of cap-and-trade, as has Quebec.
Ontario and Manitoba have committed to moving in that direction.
Analysis done by American officials has shown that a cap-and-trade system in the United States reduced the cost of reducing emissions by about 50 per cent, compared to a traditional regulatory approach, says University of Ottawa professor Stewart Elgie, chair of the Sustainable Prosperity think tank.
A carbon tax is even cheaper, if the British Columbia experience is a guide, Elgie said.
There, the provincial government has been able to use revenue from its carbon tax to lower income tax, more than making up for the higher cost of gasoline that consumers feel at the pumps, he said.
Plus, a carbon tax can be implemented quickly, without the government having to go industry by industry to examine who is emitting what, and how, and then decide how to limit the emissions.
“They’re different systems. One limits emissions, the other puts a price on carbon. They both can work. They’re both more effective than conventional … regulation,” Elgie said.
“The idea that either a tax or a trading system would hurt the economy is dead wrong. The evidence is all to the contrary. Just look at B.C. and Alberta, look at six European countries that have done this. In fact it’s the absence of a carbon price that can hurt the economy.”
Indeed, federal documentation shows there is no free lunch.
The federal policy of regulating emitters sector by sector—”command and control,” as business likes to call the approach—also carries hidden costs.
Buried deep in federal regulations to restrict emissions in the coal-fired electricity sector, officials explain that the costs of those new rules is about $16-billion in today’s terms.
About half of the cost is due to increased consumption of natural gas that will be the side-effect of cracking down on coal.
The coal regs come with benefits too, which federal officials estimate will more than offset the costs by a margin of $7-billion.
That’s because of the savings on health care, power generation and dealing with climate change.
Similarly, the cost associated with regulations on emissions for heavy vehicles is about $800-million, by far offset by benefits worth $5-billion.
And passenger vehicle rules are expected to cost Canada $4.2-billion, offset by benefits of $13.4-billion.
So even though the Conservatives are not even close to finishing regulating emitters—they still have to do oil and gas, and several other major sectors—the costs are already well above the $20-billion Harper accuses Mulcair’s plan of costing.
The benefits are also substantial, just as they would be with a carbon tax or a cap-and-trade scheme, experts say.
But sector-by-sector regulations require heavy-handed government control and lead to uncertainty and unpredictable politicking, businesses frequently complain.
Plus, numerous experts including the federal environment auditor and the now-defunct National Roundtable on Environment and the Economy say that the policies will not be in place soon enough for Canada to reach its international commitments to cut emissions by 2020.
Elgie argued that delaying a clear price on carbon is also costing Canadians dearly.
He points to B.C. forests decimated by pine beetles, and the loss of a way of life in the North.
Regardless of what is said at the federal level, a price on carbon is steadily becoming a reality in Canada—through provincial policy, and through international market pressure, says Josh Laughren, director of climate and energy at the Canadian branch of the World Wildlife Fund.
Carbon pricing “is not a dirty word anywhere except in the Ottawa bubble,” he said in a recent interview.
With most of the big provinces already having adopted or moving towards emissions-control schemes, it’s only a matter of time before a pan-Canadian arrangement becomes a necessity, he added.
“Price on carbon is coming. It’s here, to some extent.”