Western Canada loves it when the federal government minds its own business. If provinces are serious about keeping the federal government out of their jurisdiction, however, they need to demonstrate that they can work together on critical files like carbon policy.
Alberta, British Columbia and Quebec have priced carbon to help them meet their GHG emission targets. Ontario will join them shortly. Once Ontario's system is in place, 86 per cent of Canadians will live in a province with a price on carbon. … The problem is that provinces have made little effort to integrate carbon pricing systems. And fragmented systems are both inefficient and expensive.
The New West Partnership (NWP) has a strong track record of eliminating internal trade barriers – this makes the West a natural place to start harmonizing carbon policy. B.C., Alberta and Saskatchewan are deeply economically integrated. In fact, more B.C. jobs and wealth are created through trade with its western neighbours than with any foreign country, including the U.S. and China.
The fact that oil sands (Alberta) and LNG (B.C.) growth are expected to produce the lion's share of new emissions also suggests that the West should lead on carbon. The most important reason for the West to take the lead is political – simply put, the West is deeply suspicious of any scheme that appears to transfer natural resources wealth to the east (remember Stéphane Dion's 'Green Shift'?). If western provinces take the lead in designing the carbon pricing system this suspicion will be neutralized.
The natural first step is for B.C., Alberta and Saskatchewan to link their carbon offset systems. This would not be too hard to achieve from a technical perspective. Each of these provinces has enacted legislation enabling mandatory emissions reductions from large industrial emitters. And all three provinces either plan to or currently provide emitters with the option of purchasing local carbon offsets to ensure regulatory compliance.
There are, however, some pretty big hurdles. Saskatchewan has indicated that it will put in place a system similar to the one in Alberta but it has yet to put the regulations in place that would make the system operational. B.C.'s carbon tax does not include provision for offsets. However, B.C. has legislated environmental standards on LNG export facilities operating within the province. If facility design does not meet the benchmark, proponents will have to purchase B.C.-based carbon offsets at market prices or contribute to a technology fund. There is also a very small existing offset market in B.C. used to offset government emissions.
With Saskatchewan in regulation limbo and B.C. waiting to see if LNG gets off the ground, it's not easy to link systems. A possible interim step would be for Alberta to open its carbon offset market to its NWP neighbours.
In some ways, this will be a hard sell in Alberta. If Alberta were to open its carbon offset market to B.C. and Saskatchewan, some wealth would transfer from Alberta to B.C. and Saskatchewan and less money would flow into Alberta's technology fund. However, a broader carbon offset market would also drive down the cost of compliance for large Alberta emitters. This would make Alberta companies more competitive at a time when low oil prices and high operating costs have made Alberta's energy sector a tough place to do business.
With Alberta redesigning its climate strategy, this is the time for B.C. and Saskatchewan to make the case.
Under Prime Minister Stephen Harper, the federal government has backed out of provincial jurisdiction; we no longer see Ottawa dictating provincial health policy with transfer payment strings attached. Rather, we see a federal government focused on the economy, trade agreements, defence, criminal law and immigration – all squarely within federal jurisdiction.
When Ottawa yields the playing field, provinces are free to chart their own course. By moving together on carbon policy, the provinces can demonstrate to the federal government that its hands-off philosophy is justified.
Trevor McLeod is the director of the Centre for Natural Resources Policy at the Canada West Foundation. Shafak Sajid is a policy analyst with the foundation.