Carbon regulations may be better route than tax for heavy emitters, SFU professor says

Much of the debate over climate policy in Canada centres on the carbon tax: hate it, embrace it; scrap it, increase it. But Simon Fraser University professor Mark Jaccard – who has worked on the economics of climate change for decades and helped to design British Columbia’s carbon tax – says that focus is misplaced, and could even hinder practical progress in reducing greenhouse gas emissions. He discusses his upcoming book, A Citizen’s Guide to Climate Success, and how flexible regulations, such as placing legal limits on the emissions of heavy emitters, are a better route than a carbon tax.

A lot of discussion about reducing emissions talks about pricing carbon emissions through an entire economy. But you say we need to focus on reducing the carbon footprints of the electricity and transportation sectors. Why does that make sense?

The growth in greenhouse gas emissions is really in the developing world, and that growth is more than 50 per cent in either the generation of electricity or transportation. And you don’t need to bring new technology to them. You need adoption of the technologies we already have. In those two sectors, the cost is modest and the benefits to people in the developing world, if they were to not just burn oil and coal for electricity and transportation, then they’re part of the solution, which has an economic benefit to them, which is to delay and reduce climate-change impacts, which will impact them the worst.

Economists, yourself included, say a carbon tax is the most efficient way to reduce greenhouse gas emissions. But you also say that carbon pricing is not essential. How do you reconcile those two thoughts?

The most economically efficient outcome is essential – we don’t really require that of any other public policy. Here in Canada, the EcoFiscal Commission existed for five years and its sole raison d’être was that we should only use fiscal solutions to environmental problems. So for them, it was only taxation policy, not regulation. [They believe] that all regulations are way more expensive.

But when you run those out with the same models that the EcoFiscal Commission uses, you find it’s only slightly more expensive to use flexible regulations instead of the carbon price. My position is, let’s be sure we tell politicians that. That’s all. Don’t tell them, do A, or do B, but give them useful information to make a decision.

But to tell people that carbon pricing is essential is to paint a bull’s eye on what I call climate-sincere politicians.

Would the current federal government qualify as climate-sincere in your view?

Absolutely.

In the Canadian context, what would flexible regulations look like?

Alberta started it in 2005. Instead of being a cap on all emissions, or a carbon tax on all emissions, it was a performance standard. And that was, how much CO2 per tonne of steel, per barrel of oil, per gallon of gasoline from a refinery. Here’s where it is, where it needs to be next year, five years from now. And if you achieve that, you don’t pay anything. If you don’t comply with a performance standard, then you’re fined for the amount by which you miss your compliance.

If there’s a small economic downside to flexible regulations, what’s the countervailing upside? Are they a little easier to sell to the general public?

Most countries in Scandinavia have a carbon tax that’s substantial. But a lot of what they did was regulations. And a lot of subsidies. I’m not a fan of subsidies, but I’m just saying it was a mix of these things. Research shows that for the same amount of reduction, there’s less political pushback.

What role should carbon tariffs, or a carbon tax levied on imports, have as Canada and other developed countries push to reduce emissions?

Huge. Global negotiations are like a sideshow. But the premise is all wrong. Economist Bill Nordhaus, who got the Nobel Prize, talks about how can we set up subgroups of the willing, of countries, even if it’s only a few of them, to start putting carbon tariffs on. And that may create eventually a tipping point for other countries to say, “Oh, we’re net winners if we join this club and put those tariffs on."

Are those kind of levies compatible with agreements like the U.S.-Mexico-Canada Agreement and World Trade Organization?

First of all, it will take forever to decide if they’re compatible. That’s the good news. All sorts of things have become compatible over time. It’s the norm that that should be the case. And I can promise you that eventually tariffs will be compatible with global trade agreements. So, let’s get on it.

This interview has been edited and condensed.