OTTAWA. November 18, 2015 — Less than 5 per cent of Canada’s economy is likely to experience significant competitive pressures from differences in jurisdictional carbon prices, according to a new paper released today by Canada’s Ecofiscal Commission in advance of the Paris climate talks.
“For 95 per cent of the Canadian economy, business competitiveness would be largely unaffected,” says commission chair Chris Ragan, an associate professor of economics at McGill University and former Special Advisor to the Governor of the Bank of Canada.
Nevertheless, while the scope is small, those industries that do face competitive challenges need targeted, transparent, and temporary support measures to ensure policy is effective from both an economic and environmental perspective, he adds.
“The few vulnerable sectors are responsible for roughly 40 per cent of Canada’s overall greenhouse gas emissions,” says Ragan. “If they shrink or relocate their activities as a consequence of paying a higher carbon price, our provinces risk economic loss with no overall environmental gain, so we must address these concerns effectively.”
The paper, titled Provincial Carbon Pricing and Competitiveness Pressures, will be followed by a more comprehensive study the Commission is scheduled to release in the first quarter of next year, and is designed to help provinces move ahead with carbon pricing policies.
“We know carbon pricing is an effective way to reduce greenhouse-gas emissions. Still, we are a long way from a global price on carbon, which means different prices in different jurisdictions.” Provinces can move forward with confidence, Ragan says, understanding that the scope of the competitiveness challenge is small and can be addressed with smart policy.
“We know that uneven carbon prices raise concerns about competitiveness,” says Ragan. “Our paper sheds light on how governments and industries can objectively determine which industries will face genuine competitiveness pressures and how policy design can address those concerns head-on. ”
These are important questions for provinces like Alberta and Ontario, which are currently designing new climate policies, and are relevant to provinces reviewing and considering additional or new policies. The short, data-driven paper maps the carbon competitiveness “landscape” across Canada and specifically in Alberta, Ontario, British Columbia and Nova Scotia.
About Canada’s Ecofiscal Commission
Established in November 2014, Canada’s Ecofiscal Commission is a unique effort to advance fiscal policy reform for the benefit of Canada’s economy and environment. The commission comprises a dozen prominent economists from across Canada’s regions and 18 advisors including former political leaders and leaders from the business sector.
Over the next four years, the commission will publish and promote discussion of research and recommendations grounded in Canada’s unique and regionally diverse economic and policy context. It will focus on issues most relevant to Canadians and policy-makers including those affecting fresh water, air quality, environmental disasters, greenhouse gas emissions, transportation and road congestion.
The Commission termed these ecofiscal policies — a new word to facilitate a new conversation about solutions guided by both economic and environmental objectives. The Commission is funded by several Canadian family foundations and Canadian corporations.
For more information about the Commission and to view its reports visit: www.ecofiscal.ca
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