Climate Change in Canada: The policy and politics

Matt HorneDirector, Climate Change ProgramFebruary 8, 2012

Overview• Background

• The federal government response

• The provincial government response

• Where does Canada go from here

Federal / Provincial Jurisdiction

The economics of climate change• The costs of solving the problem are

real, but manageable (2 to 3% of GDP)

• The costs of inaction are steeper (5 to 25% of GDP without accounting for social/env costs)

Canada’s Greenhouse gas emissions (millions of

tonnes CO2e)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 -

100

200

300

400

500

600

700

800

Greenhouse gas emissions (millions tonnes CO2e in 2009)

Yukon, NWT & Nunavut

Prince Edward Island

Newfoundland

New Brunswick

Manitoba

Nova Scotia

British Columbia

Saskatchewan

Quebec

Ontario

Alberta

Canada

- 100 200 300 400 500 600 700 800

Greenhouse gas emissions

(change 1990 to 2009 in millions of tonnes)

Yukon, NWT & Nunavut

Prince Edward Island

Newfoundland

New Brunswick

Manitoba

Nova Scotia

British Columbia

Saskatchewan

Quebec

Ontario

Alberta

Canada

-20 - 20 40 60 80 100 120

The federal government response: inaction

Source: Nic Rivers, University of Ottawa

Some reasons/excuses for the inaction• Disconnect between problem and

solutions

• Lack of willingness to pay

• Lack of interest/belief in the problem

• The need to harmonize with the U.S.

• Opposition from provinces and industry

Provincial leadership filling the void

1990 1995 2000 2005 2010 2015 2020 -

50,000

100,000

150,000

200,000

250,000

Quebec

Ontario

B.C.

Targets starting to be backed by

policies• B.C.’s carbon tax and ban on coal-fired

generation

• Ontario’s feed-in-tariff and coal phase-out

• Quebec cap-and-trade

Different interpretations of provincial leadership• “A race to the top will help the

country”

• “The patchwork approach is inefficient”

• “Canadians can live with strong policies”

Canadian perspectives on carbon pricing

Source: http://www.environics.ca/reference-library

Additional carbon tax polling: http://www.pembina.org/pub/2233

Where is Canada in 2012?• The positive steps we’ve seen shouldn’t

mask the scale of challenge still facing the country

• The level of national ambition is still inadequate

• The collective policy response still falls short of stated ambition

• Serious federal/provincial fault lines still exist

Details: http://www.unep.org/publications/contents/pub_details_search.asp?ID=6227

• The level of national ambition is still inadequate

• The collective policy response still falls short of stated ambition

• Serious federal/provincial fault lines still exist

For more information: http://www.pembina.org/blog/561

AB29%

ON30%

QC14%

SK7%

BC8%

NS3%

MB3%

NB3%

NL2%

AB34%

ON24%

QC12%

SK11%

BC9%

NS3%

MB3%

NB3%

NL1%

AB40%

ON24%

QC11%

SK9%

BC7%

NS3%

MB3%

NB2%

NL1%

Al-berta

Rest of Canada

1990 2009 2020 2050

An illustration of tension: Alberta’s projected emissions

Evidenced in debates about: pipeline proposals, low carbon fuel standards, a national energy strategy, a national climate policy

Where does Canada go from here?

• Will the province’s continue to advance policies?

• Will the federal government start taking serious action?

• Will tensions around oil exports increase?

• Will international pressure increase?

• Will Canadians make climate change an issue politicians can’t ignore?

Thank you

Matt Hornematth@pembina.org604.874.8558 x 223

Carbon pricing 101• Why price carbon:

• Our decisions about energy have not historically considered the resulting contribution to climate change

• The sources of the problem are widespread and not easily matched with command and control regulations

• Economic efficiency is maximized because emitters undertake the least expensive emission reductions

• Two main approaches to pricing carbon:• Carbon taxes• Cap-and-trade systems

Carbon pricing 101• Some questions to enable an apples-to-

apples comparison between approaches: • What is the price and how does it get set?

The higher the price, the stronger the incentive to reduce emissions.

• How broadly is the price applied?The broader the coverage, the more opportunities to

encourage reductions.

• What are the potential problems/loopholes?Loopholes undermine effectiveness and public support.

• How much revenue is raised and how is it used?No magic formula, but revenue is an important tool for

dealing with equity concerns and making investments in projects that reduce emissions.

Carbon pricing 101Carbon tax Cap-and-trade

Setting the price Set by government Combination of number of allowances, offsets, price floors and ceilings

Setting the coverage Up to about 80% of Canadian emissions

Direct coverage up to about 80% with remaining 20% potentially through offsets

Potential problems Gaps in coverage and different rates

Gaps in coverage, low-quality offsets, over allocation, free allocation

Determining revenue raised by government

Tax rate multiplied by emissions covered by tax

Depends on how allowances are distributed and how many offsets are allowed

Revenue uses Determined by government Determined by government

A Comparison of Canada’s two carbon pricing systems

B.C.’s Carbon Tax Alberta’s SGER

Price - $30 per tonne - $15 per tonne (maximum)

Percentage of economy covered

- 77% - 50%

Problems - Non-combustion emissions - Non-combustion emissions- Non-additional offsets- No impact on production

Revenue - $1.2 billion per year for tax cuts and low-income tax credits

- $74 million per year for GHG reduction projects

For more information: http://www.pembina.org/blog/607