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NDP Leader Thomas Mulcair waved a red flag in front of Conservative MPs this week, reconfirming his party's support for a cap-and-trade climate plan that the Tories have derided in Greek chorus fashion as a "$20-billion tax on everything."
While climate policy is hardly a top-of-mind issue for voters, the three major anglophone parties have now staked out their ground. For Stephen Harper's Conservatives, that's do as little as possible. For Justin Trudeau's Liberals, say as little as possible. And for Mr. Mulcair's NDP, promise as much as possible.
Mr. Mulcair's major energy speech this week came a month after a Calgary visit from Mr. Trudeau, who endorsed the controversial Keystone XL project and made a promise to pursue a national energy strategy that "puts a price on carbon pollution."
There's plenty of confusion around the phrase "carbon pricing" – and all three parties are employing the vagueness to their advantage.
Among climate policy wonks, the term "price on carbon" can mean one of three things: a direct tax like the one adopted by British Columbia, a cap-and-trade scheme like the one promised by Mr. Mulcair, or regulations that force major industrial polluters to reduce their emissions at some cost to the companies. Mr. Trudeau chose not to elaborate on which would be his preferred option, no doubt reluctant to give the Conservatives a target to shoot at.
But the main bout is now between the Conservatives, who – ever so slowly – are pursuing a regulatory approach, and New Democrats, with their support for cap and trade.
As the Conservatives have been widely criticized for foot-dragging on climate policy, they look to turn the tables on the NDP by citing the party's 2011 election plank that proposed a cap-and-trade system. Under such a system, which is already in place in Europe and is being rolled out in California, governments set limits on large industrial emitters, who can then buy and sell credits so the most efficient companies accomplish the greatest emission reductions.
The NDP costed its cap-and-trade proposal over four years with revenues rising to $7.4-billion a year, or a total of $21.5-billion. Hence, the Conservative refrain – repeated Friday in the Commons by Toronto-area backbencher Corneliu Chisu – of a "$20-billion carbon tax."
Under that plan – which could well be revisited ahead of the 2015 election – the New Democrats would refund $1-billion annually to offset higher energy costs and funnel the rest into various environmental initiatives, including a subsidy for homeowners and business to spend on energy-saving technology. Mr. Mulcair could reduce the cost of the cap-and-trade plan by allocating a certain percentage of the carbon permits to companies, rather than forcing them to buy permits for every tonne of CO2 emitted.
As with a direct carbon tax, government can decide how much it wants to offset higher energy costs by offering to lower other taxes, and how much revenue it wants to raise and spend.
NDP energy critic Peter Julian defended the cap-and-trade approach, which has been used in Europe and among northeastern U.S. power utilities. It is also being rolled out by California and Quebec, which held its first auction for carbon permits this week.
Mr. Julian noted the Conservatives had also proposed a cap-and-trade plan in 2007, though the Harper government never spelled out how much revenue – if any – it would raise from the scheme. And he said doing nothing or delaying action will also exact a cost, both in terms of damage from severe weather and from the higher cost of belated mitigation measures, as the now-defunct National Roundtable on the Economy and Environment (NRTEE) spelled out in its reports.
At the same time, the Conservations' regulatory plans are not cost-free. In a cost-benefit analysis done as part of the regulatory process, Environment Canada concluded the government's coal-power rules would cost industry $8.2-billion, and presumably those costs will get passed on to electricity consumers. (It said the benefits would amount to $9.2-billion, mainly due to avoided social costs of carbon dioxide emissions.) Fuel standard regulations imposed by the government for 2011 to 2016 model years carried a cost of $4.2-billion.
The long-awaited oil and gas regulations will surely add a cost burden to industry.
Indeed, many environmental economists prefer either a carbon tax or cap and trade to the more cumbersome regulatory route. "The regulatory route is, in fact, the most expensive way to go," said former NRTEE president David McLaughlin. Going the regulatory route also makes it easier to hide from voters, and it's the furthest thing from the dreaded description of "carbon tax."
Shawn McCarthy covers energy in the Ottawa bureau.