Carbon pricing offers cold comfort
Business comes up short on the rebates and the policy will likely come up short on emissions reduction.
Two bits of news coincided in an ironic juxtaposition on April Fools Day: the beginning of the Trudeau government’s carbon tax levied on Saskatchewan, Manitoba, Ontario and News Brunswick; and a troubling report that Canada’s climate is warming twice as fast as the rest of the world and the warming is “effectively irreversible.”
The challenge for any government is to balance climate change action with its impact on the economic well being of the country. That brings us to the carbon pricing policy and whether or not it’s effective. The verdict? Likely not.
Economists favour carbon pricing for reducing global-warming emissions by charging those who emit carbon dioxide (CO2). They declare it to be the most efficient tactic, the outcome determined by the market rather than by regulation, and the favoured result is achieved by encouraging energy users to change their behaviour.
The Trudeau government’s tax starts at $20 per tonne of greenhouse gas emissions produced by energy use, rising to $50 by 2022. Good news for consumers though: it’s revenue neutral! They’ll get what the government suggests the tax will cost them back in tax credits. How that will encourage people to change their behaviour remains to be seen, but this deal is very different for businesses, and SMEs in the manufacturing sector should be alert.
Canadian Manufacturers & Exporters says the impact on Ontario could be substantial, noting the country already has a problem attracting investment.
The carbon plan contributes to the difficulty by adding cost and regulatory entanglements that hinder businesses’ ability to compete globally, and these entanglements make foreign investment in Canada less attractive.
The Canadian Federation of Independent Business (CFIB) sees businesses carrying 50% of the carbon price burden but they’ll get just 7% of the rebates. And there are a lot of unanswered questions about how the process will work, who gets an exemption and what documents will be required. The CFIB also dismisses the assumption that SMEs already operating under very competitive conditions can just pass the costs off to consumers.
And carbon pricing window dressing alert: a secret federal government briefing document says the price would have to go up to $100 per tonne by 2020 and between $200 and $300 per tonne by 2050 to reach Canada’s greenhouse gas emission commitment (30% below 2005 levels by 2030). The United Nations suggests Canada needs to cut emissions even more to prevent the worst climate-change impacts. Canada has already missed two emissions reduction targets and is on its way to being off its 2020 target by 20%, never mind the 2030 Paris Accord commitment.
The report from Environment and Climate Change Canada says the average temperature is 1.7 degrees C higher today than it was 70 years ago, versus an increase in the average global temperature of 0.8 degrees C.
Meanwhile, global emissions continue to climb. If the world keeps emitting at the same rate, by 2050 most parts of Canada will see increases of between 7 and 9 degrees C, with the extreme Arctic heating up by more than 11 degrees C. So far, Canada is responsible for 1.69% of CO2 emissions. More than half the world’s emissions come from China (26.83%), the US (14.36%) and the EU 28 (9.66%).
Government policy under the Harper and Trudeau regimes has been more political expediency than effective strategy. Future Canadian governments must acknowledge the top emitters will determine the impacts of climate change on Canada’s environment. The issue must be approached more realistically based on what we can and can’t control, balanced against Canada’s economic health and with the hard decisions that may follow.
This article appeared in the April 2019 print edition of PLANT.