Federal-provincial peace, on the matter of pricing industrial greenhouse gas emissions, may have just come at considerable cost to Canada’s climate ambitions.
Prime Minister Justin Trudeau’s Liberals clearly believed there was little choice but to agree, as was announced on Monday, to accept the pricing structures proposed by the governments of Ontario and New Brunswick. That much was clear from nose-holding letters from Environment Minister Jonathan Wilkinson to his provincial counterparts in those two provinces – among the last in Canada where such deals hadn’t already been reached, and where a federal price on large industrial emitters has been collected instead – calling their plans “significantly weaker than the federal backstop.”
The Liberals were worried that, because the provincial models arguably meet federal criteria for avoiding Ottawa imposing its own price, rejecting them could hurt their government in a Supreme Court case about the constitutionality of the federal carbon-pricing framework – both the industrial price and the more widely known one charged to fuel consumers – that begins this week.
Even if the alternative could have been worse, these deals – particularly the one with Ontario – represent another unhelpful twist along Canada’s tortuous path toward a cleaner economy.
It’s not just that the relative laxness of the provincial regulations will likely mean more modest reduction of industrial emissions in the next few years than would have been the case under the federal system, though that’s certainly cause for concern. While the models approved on Monday ostensibly tax industrial emissions in excess of proscribed targets at roughly the same rate as under the federal system, the provincial targets are set in such a way that far fewer emitters will have to pay them.
The problem is also that this latest compromise, and some of the messaging that comes with it in Mr. Wilkinson’s letter and other federal channels, adds to the instability that impedes the economic upside that carbon pricing is supposed to have.
More than just punishing large emitters, market-based regulatory regimes like these are supposed to help encourage and attract investment in clean technology, by rewarding low-emissions companies through credit-trading and other mechanisms. But that only works if there is enough regulatory certainty for businesses and investors to bank on actually getting the rewards they’ve been promised.
That sort of predictability has especially been lacking in Ontario, where anyone with a vested interest in industrial pricing has spent the past few years being jerked around.
First, starting in 2017, there was the ambitious cap-and-trade system introduced by Kathleen Wynne’s provincial Liberal government. Then that was hurriedly scrapped by Doug Ford’s Progressive Conservatives after they won office in 2018. Then the federal pricing system was imposed in absence of a provincial one. Now the system belatedly put forward by Mr. Ford’s Tories is supposed to replace the federal one, probably sometime in 2021, after the details – some of which weren’t worked out prior to this week’s announcement – are finalized.
After Monday’s announcement, a senior federal official (speaking on a not-for-attribution basis because the official was not authorized to speak on the government’s behalf) said the Liberals intend to let these new provincial systems stand for 2022, at least. But that doesn’t exactly qualify as a long-term outlook on which to hang investment decisions. And the official indicated that, as Mr. Wilkinson’s letter implied by mentioning coming consultation on a “post-2022 benchmark,” Ottawa could soon settle on new standards and intervene again if provinces are unwilling to meet them.
So if Mr. Trudeau’s and Mr. Ford’s governments remain in place long enough, they could still be headed for a fight with an uncertain outcome. Or maybe they’ll be replaced by new governments that want to start over again with their own preferred systems.
Or, if they recognize that this peace is too fragile to be of much value, Mr. Wilkinson and his provincial counterparts could start working now on industrial-pricing paths forward with which they could all live – ideally ones that could also get enough cross-partisan acceptance, at both levels, that they won’t soon be abandoned whoever is in power.
It seems a faint hope, based on how things have gone these past few years. But whether they care about the climate or the economy or both, governments need to recognize that each of these stops and starts only sets us further back.
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