Alberta looks for a way forward on carbon pricing | Ecofiscal

Alberta looks for a way forward on carbon

Albert's Climate Change Leadership Document, including carbon pricing policy - blog by Dale Beugin
Climate and Energy

We’ve written before about why Alberta should move forward with carbon pricing policy, but also take the time to get design details right. So far, so good. Having already appointed economist Dr. Andrew Leach to chair an advisory panel, last Friday the province released its Climate Leadership Discussion document, kicking-off Alberta’s consultation process as it builds toward “ambitious, effective, and achievable” new provincial climate policy.

This week, I took a closer look at that discussion document. There’s lots of good content there on policy and on Alberta’s emissions. It sets up an informed conversation about carbon policy in Alberta. But does it also give us any clues as to Alberta’s thinking so far? For me, three points stand out.

A clear case for policy action

First, the document makes the case for Alberta policy leadership pretty unambiguously. It notes the health benefits from reducing air pollutants in conjunction with greenhouse gases (and in particular, from coal-burning power plants). It comments on contributing to the global reduction of emissions, and avoiding costly climate change impacts like pine beetle infestations. And critically, it connects credible climate policy in Alberta to market access and “securing Alberta’s future as a prosperous energy economy in a global marketplace.”

In other words, Alberta isn’t a laggard that needs to be drawn kicking and screaming toward smart climate policy. Instead, it recognizes the case for smart policy in terms of its own provincial costs and benefits.

A shift toward broad coverage?

One of two fundamental design choices for carbon pricing policy is coverage, or the total share of emissions that are subject to policy. The broader the coverage, the more cost-effective the policy, since no low-cost emissions reductions are “left on the table.” The discussion document appears to embrace this principle. It notes, “Alberta’s policies must address emissions from all sources – oil and gas, electricity, transportation, buildings and houses, industry, construction, manufacturing, agriculture, forestry and waste.”

This is an important shift: Alberta’s current policy, the Specified Gas Emitters Regulation (SGER), applies only to large emitters that produce more than 100 kt CO2e, or about half of provincial GHGs.

Questions on stringency

Finally, the discussion document also begins to consider the issue of stringency (that is, the price of carbon or the level of emissions reductions to be achieved). Clearly, setting the “right” price or target is tricky. It’s not even certain what would constitute an optimal global price. So what’s the right level of ambition for Alberta?

The language here is interesting. The document notes that policies can be designed either to “generate the same emissions reductions, either in absolute, per capita, or per unit GDP terms across jurisdictions” or to “harmonize carbon policies, be they price based or equivalent regulatory requirements.” In both cases, the stringency is framed around benchmarks set by policy in other jurisdictions. That’s fine, and perhaps pragmatic. Perhaps Alberta wants to step up, but not get too far ahead of the pack.

But it also could speak to the need for coordination. Provinces, for example, could harmonize with each other. But if more stringent policy is needed across all provinces, then that benchmark may be a moving target. The language around “equivalent regulatory requirements” also evokes recent discussions around equivalency agreements, and whether provincial policies might allow provinces to be exempted from federal policy.

This question goes beyond Alberta. Ontario is about to price carbon via a cap-and-trade system, while BC is considering increasing the stringency of its carbon tax. If each province sets stringency with an eye to policy in other provinces, harmonized policy could gradually emerge. Whether it would also be sufficiently stringent to set these provinces toward deeper, long-term reductions, however, remains an open question. It might even be the question that Canada, as a federation, will have to answer sooner rather than later.

Exciting times ahead for new carbon pricing policy

So stay tuned to Alberta. The plan is for a new policy proposal in time for the UN meeting in Paris this December. That’s an ambitious timeline, to say the least. But with luck, this consultation process can help Alberta kick-start new carbon pricing policy action at home and across the other provinces as well.

1 comment

  1. Roger Gagne

    In terms of coverage, Dale, it’s worth noting that the related survey which is coupled with this discussion paper explicitly asks for our opinion in Question #11:
    “Introducing a new carbon tax that applies to everyone, including me.”

    My response to that one was Strongly Agree. I much prefer BC’s carbon tax model (simple, transparent, predictable) over the cap and trade mechanism chosen by Quebec and Ontario (complex, more bureaucracy, more opportunity for corruption ), but rather than a pure revenue-neutral model, I’d like to see 25% or so of the revenues carved away to support renewables and efficiency; God knows Alberta is sadly lagging behind in both.

    In terms of stringency, I’d like us to start with a carbon fee somewhat lower than where BC is at now, but ramp up more quickly than they did. I’d like to see an agreement where our two Provinces meet at $50 or $60 per tonne by about 2020.

    My requests may seem a bit pie-in-the-sky, but both climate impacts and international pressure continue to accelerate. From here on in, it doesn’t get easier for a long while.

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