Last week, the leaders of the G7 group of countries, including Canada, signed on to a statement calling for the "decarbonization of the global economy over the course of this century." As part of this, the seven leading industrialized nations – including Canada – agreed with the Intergovernmental Panel on Climate Change's finding that, to keep the global average temperature increase to just 2 degrees Celsius, greenhouse gas emissions must be reduced by the "upper end" of a range of 40 to 70 per cent by 2050, compared with 2010 levels.
Yes, all of the above is buried within an umpteen-page communiqué, worded in wary diplomatese, that mostly deals with issues from Ebola to anti-microbial resistance to encouraging female entrepreneurship. And when it comes to greenhouse gas reductions, nobody has explicitly committed to anything. It is, in a sense, just words. But the accumulation of words around climate change, year after year, is bending inexorably toward action. The next major test will be the Climate Change Conference at the end of this year in Paris, where a new global treaty on reducing global carbon will be on the table. Even if the Paris talks fail – and as things now stand, they might – the issue is not going away. It may be this century's greatest challenge. And the pressure to do something is only growing.
If you don't believe in global warming, you can stop reading right now. We won't try to persuade you. Like the G7, we take the conclusions of climate science – that warming is happening, and that it is driven by man-made carbon emissions – as a given. The scientific consensus means that political action to address it is inevitable. Something big is going to have to be done, eventually, and many small steps are already being taken. That means the most pressing question isn't whether to cut back on emissions. The really tough question is: How?
Solving the 21st century's most important issue means turning to the teachings of another science, namely economics.
The fact of global warming has become a challenge for conservatives, above all the federal Conservative Party. The Harper government generally tries to avoid talking about the issue, let alone acting. But the challenge is entirely of its own making. Global warming should be an opportunity, politically and ideologically, for any serious conservative party. If they wanted to do something about climate change, what would conservatives do? Easy: They'd turn to the free market. It's about the economy, stupid.
That's why the grand old man of the Canadian conservative movement, Reform Party founder Preston Manning, last year came out in favour of carbon taxes. It was stunning, and for many conservatives it sounded like heresy. It wasn't.
The Conservative Party, more than any other, likes to think of itself as committed to free markets. Guess what economics says is the most efficient way to lower the consumption of anything? Raise the price of it – and let the market, millions of people and businesses, each individually figure out how to save money by reducing their use of this newly expensive thing, while also stimulating researchers and entrepreneurs into developing alternatives.
The idea of cutting carbon output by 70 per cent, and eventually more, may seem impossible. But if we put a price on pollution and harness the power of markets, it can be done, possibly even without harming the economy. If they wanted to, the Conservatives could lead on this issue.
In fact, the national leader on the file is British Columbia, whose Liberal government is a distinctly centre-right party. In 2008, B.C. brought in a carbon tax on fossil fuels. Its design is brilliantly simple. Put a price on fuels relative to the amount of carbon in them – for example, gasoline gets hit with a tax of 6.67 cents a litre. Make the tax clear and transparent, so that nearly five million individual British Columbians – a.k.a. the free market – can figure out for themselves how to most efficiently lower their carbon costs. And make the tax revenue-neutral, so that every dollar raised means a dollar less in income and other taxes. Raise taxes on the things we want less of and lower them on the things we want more of.
It so far appears to have been remarkably successful. Between 2008 and 2012, per capita consumption of fuels subject to the carbon tax was down 19 per cent in B.C., while rising 1.5 per cent per capita in the rest of Canada. The B.C. economy at the same time slightly outperformed the rest of the country.
B.C. raised $1.2-billion last year through its carbon tax. Some of the money was arguably misused – nearly $300-million went to subsidizing film and TV productions in the province – but most of it was returned to taxpayers in the form of lower personal and business income taxes. As a result, B.C. has the lowest provincial income-tax rates for anyone earning less than $122,000. If and when B.C. wants to lower emissions further, it can raise the carbon tax higher, and cut other taxes even more.
The fact that industry leaders, such as Suncor Energy Inc. CEO Steve Williams, are calling for a price to be put on carbon is a sign this issue is at a tipping point. It is also a reminder that there are many ways to get to a low-carbon future. It can be done efficiently, using markets and prices, or it can be done with government planners helpfully calling all the shots, delivering not cost-effective environmentalism, but costly and ineffective industrial policies designed to support politically favoured industries.
Two provinces on the verge of introducing new carbon-reduction strategies, Alberta and Ontario, run the risk of choosing the second approach. More on this next week.