There is more than one smart way to slash greenhouse gas emissions.
The most efficient route remains a carbon tax, as strongly advocated by economists, this space and, until last week, the federal Liberals. With the escalating cost and calamity of global warming, the goal of carbon pricing is to change behaviour. It depends on persuasive power: the certainty of the tax steadily rising. That’s the textbook. Carbon taxes in reality – as economists acknowledge – are unpopular, especially if people pay them directly.
The federal Liberals had staked the core of their climate policies on what was best over what was popular. They introduced a carbon tax, doubled down with planned increases to 2030, when the tax would be almost 40 cents a litre on gasoline, and successfully defended the policy in court. This summer, the Liberals tightened the tax, when they ended a broad de facto exemption for Atlantic Canada.
But last week electoral reality intervened. The Liberals carved out a fresh exemption, mostly for Atlantic Canada, by scrapping the tax on home heating oil for three years. They swear there’ll be no more exemptions, amid many calls for more exemptions. Opposition Leader Pierre Poilievre, far ahead in the polls, promises to axe the consumer carbon tax if elected. So while the carbon tax lives on for now, it has been neutered – since no one can count on the certainty of the tax steadily rising.
One immediate problem is the Liberals have undermined their climate credibility. It risks public skepticism of other important policies. If one fuel in one part of the country gets a pass, then what of regional concessions for the proposed clean electricity regulations?
That’s bad news. Because it is flexible regulations, like the rules for clean power, that are a large part of Canada moving toward its climate goals, regardless of carbon taxation.
The climate goal, to be clear, isn’t to have a carbon tax. It’s to reduce emissions, as fast as possible, and at a reasonable cost. Economic theory argues a carbon tax is the cheapest way to cut emissions. But flexible regulations offer similar promise, generate much less opposition and look likely to prove more politically durable. The bottom line is Canada’s fight against climate change is not lost.
First, there are two carbon taxes: one on fuels such as gasoline or home heating oil, and one on industry. While the tax on fuels is unpopular, the one on industry garners little attention and has political backing, Alberta included. If the fuels tax were to vanish, it would increase the need to up the levy on industry, as this space supports.
Second, even if economists idealize a carbon tax, they recognize the value of regulations. Such rules are already doing a lot of heavy lifting. Climate-energy economist Mark Jaccard has long argued this point. He cites his home province of British Columbia. It was the first place in Canada with an economywide carbon tax but rules to discourage coal and natural gas power have made a much larger difference on emissions, without loud detractors.
Canada has an array of flexible regulations, from cleaner fuel standards (which the Conservatives oppose) and electric vehicle mandates, to methane rules in the oil business and the proposed clean power framework. A carbon tax on its own was never going to save the day.
Regulations are not always onerously expensive. Reducing methane in oil and gas costs much less than the current carbon tax and helped cut industry emissions by 4 per cent from a peak in 2015. Mr. Jaccard has estimated the cost of Ontario getting off coal power at about $115 a tonne. (The carbon tax is set to reach $170 in 2030.) The end of coal power in Ontario is Canada’s single biggest climate success and is the main reason the province’s emissions are down almost 30 per cent from their peak.
The Liberals’ carbon tax retreat last week was not some savvy pivot to flexible regulations. But the sudden shift does highlight there are other roads to reduced emissions.
The urgency is clear. Canada is the worst performer among G7 countries since 1990. Emissions are up 16 per cent. Even if the oil sands are excluded, Canada would still be a laggard.
What those numbers show is Canada needs to take major action on climate, regardless of specific policies. The Liberals undermined consumer carbon pricing. The Conservatives want to kill it. The climate doesn’t care. The best climate measures are the ones that are effective – and durable.