Lament Not for Canadian Climate Progress
A couple weeks ago, UBC professor George Hoberg took a thoughtful look at our recent Ecofiscal report in his blog. Professor Hoberg raised some important issues about the risks of a fragmented, provincial approach to carbon pricing in Canada. And you know what? We agree with him in some ways. But there’s also nuance in our analysis and recommendations that are worth exploring a little further.
First, on effectiveness: George suggests that federal leadership is needed to force compliance with targets. But provincial and federal governments are not on track to achieving their 2020 targets. There’s no reason to believe that policy stringency will necessarily be more aligned with targets at one level of government relative to another. Instead, better to focus on getting more stringent policy in place across as large a share of Canadian emissions as possible. And that’s why we make the case that it’s in each provincial government’s interests to move forward with smart carbon pricing policy.
Second, on cost-effectiveness: it’s true that differential carbon prices in different provinces won’t minimize costs for the country as a whole. But crucially, the lost benefits of full harmonization 1) are small, particularly in the short term as policies ramp up stringency; 2) are likely to be less than the costs of delaying policy action as we explain in detail in the report; 3) are a short-term issue, given that we also recommend the coordination of provincial policies over time.
Third, on pragmatism: one of the key barriers to a centralized approach to carbon pricing is the perceived risk of revenue redistribution. We think it’s fair to suggest that this perception has been a key barrier to Canadian policy action. With GHG emissions unevenly distributed between provinces, centralized policy raises the spectre of revenue raised in one province being recycled in another. Yes, it’s possible that federal policy design would recycle revenue back to the province in which it was raised. But provincial implementation ensures that it would be. It also allows for provinces to customize policy design according to their own economic contexts and recycle according to their priorities.
Fourth, on policy dynamics through time: in the longer term, we quite agree that coordination becomes increasingly important to avoid a patchwork of increasingly disparate policies. And we acknowledge that different possible mechanisms for coordination could be imagined, including—but not limited to—federal involvement, perhaps via a minimum standard for stringency. But in the meantime, let’s not make perfect—but challenging—national policy the enemy of good steps in the right direction.
So yes, provincial leadership on carbon pricing would not be as neat as a text-book version of a single, national policy. But it would be far more practical. The urgency of this issue—to ensure market access internationally, to contribute to global GHG reductions, to gradually transition to a low-carbon economy, rather than playing catch-up later—means that a way forward is better than standing still. And provincial action is as Canadian a way forward as a toque in January.