Our climate is changing and the impacts on our economy and wellbeing are large and growing more so every day. Strong policy measures to reduce greenhouse gas emissions are needed by all countries say world leaders, the International Energy Agency, United Nations, World Bank, thousands of scientists, and Canada’s Ecofiscal Commission.

Climate change not only threatens our prosperity, it also inhibits the ability of poor countries from ever hoping to achieve the quality of life we have here in Canada. The window to act is closing. And the risks of not acting are significant: sea level rise, extreme weather events, changing water supply for agriculture, hydropower, and community needs, ocean acidification, loss of agricultural and forest lands, species eradication, new disease vectors, and threats to human health. Canada is already experiencing climate change impacts including the loss of forests to the mountain pine beetle, declining snowpack and receding glaciers, and flooding in regions all across the country.

Changing Canada’s direction on climate change

There is an old saying: if you do not change direction, you will end up where you’re headed. It is clear that the world needs to change direction. Overwhelmingly, Canadians want to be a part of that change, and we can. A critical step is joining the many countries and sub-nationals across the globe that have instituted a price on carbon.

Urgent action to price carbon is good environmental policy, but it is also good economics. Here’s why: the longer we wait to take action, the higher the costs to businesses and households.

These are the risks that we can and should avoid:

• Shocking the economy: The world is moving toward decarbonisation and Canada will eventually move with it. The question is whether we’ll start that transition now or rush to catch up later. Acting quickly in a crisis mode to make large reductions in emissions will undoubtedly shock our economy. Acting now by pricing carbon allows time for an adjustment to a low-carbon economy using the most efficient, cost-saving approaches. For example, increasing energy efficiency alone can lower costs of doing business or running a household. These are net gains, and pricing carbon encourages a faster phase out of carbon-guzzling activities. The Commission’s recommendation to price carbon with broad coverage and increase the price over time makes for a smoother and lower cost adjustment than a large change needed quickly.

• Stranding assets: Investment decisions taken today will determine Canada’s emission profile in 2020 and beyond. If we wait to price carbon these investments may be uneconomic when a carbon price eventually comes on stream. Retiring carbon-intensive capital assets before their physical obsolescence is economic waste. Jobs will be lost that could be sustained if we accelerate our investment and innovation in low-carbon technologies.

• Falling behind: In the absence of our own comparable carbon policies, we risk having other jurisdictions impose their GHG policies on us in the form of tariffs and other trade restrictions. Pricing carbon is the most transparent way to prove that we are not subsidizing our carbon-intensive industries. Countries and regions around the world including China, the EU, Korea, Mexico, California, BC, Quebec, and Ontario are pricing carbon and those prices will keep rising. Canadian industry will not be in a position to compete worldwide if it hasn’t started now to reduce its carbon emissions. A competitive economy is one that anticipates and embraces inevitable change, not one that drags its feet and lags behind.

Why is pricing carbon so urgent? Our economy and wellbeing cannot afford to wait.

About the Author

Nancy Olewiler is a Professor at Simon Fraser University in the School of Public Policy, and a former Member of the Technical Committee on Business Taxation, as well as a Commissioner of Canada’s Ecofiscal Commission.