Canada’s a Global Ambassador for Carbon Pricing. So What?

Trudeau - Canada - Carbon pricing - Carbon Pricing Leadership Council
Climate and Energy

An interesting thing happened at the Paris Climate Summit this week. Six-heads of state joined together with the World Bank and the IMF to officially launch the Carbon Pricing Leadership Coalition and sound a global call for pricing carbon. Here’s the kicker: Canada was one of those six.

Just to put that in perspective: this time two-years ago, in Warsaw, Canada was starring on a very different stage as the recipient of a “lifetime unachievement award” on climate action. No matter how much (or little) stock you put in such symbolic pronouncements, there is no denying that our Canadian leaders are making deliberate efforts to rub out that stain. Becoming a global ambassador for carbon pricing is an important public step in a new direction. But is it more than symbolic? What does it mean for Canada to help advance carbon pricing on a global scale? And what’s in it for us? Let’s go beyond the photo op and get to the so what.

What Is the Carbon Pricing Leadership Coalition Anyway?

Momentum for the Leadership Coalition, spearheaded by the World Bank, started after last year’s U.N. Climate Summit in New York. Twelve national governments, five subnational governments (including Quebec, Ontario, British Columbia, and Alberta) and over 60 businesses have now joined forces under its banner to accelerate the use of carbon pricing throughout the world.

How do they intend to do this? By collecting and disseminating evidence on good policy design, sharing lessons on implementation, building the economic and business cases for moving pricing forward, and by bringing national, subnational, and business leaders together around this growing body of knowledge and experience. The aim is to demonstrate the possible and the practical in terms of both carbon pricing policies and their timelines for broader international adoption.

On Monday, leaders from France, Chile, Ethiopia, Germany and Mexico sat beside Prime Minister Trudeau at a Heads of State Media Event on Carbon Pricing to officially launch this effort. The World Bank simultaneously announced a $500 million fund to assist developing countries in implementing carbon-pricing tools.

In his speech, Prime Minister Trudeau acknowledged that Canada’s federal position on climate action has been, in his words, “perhaps less enthusiastic than some.” Nevertheless, he explained, Canadian leadership on carbon pricing has been notable, even world-leading. And it has been driven entirely, the Prime Minister emphasized, by Canada’s provinces.

Canada’s Value: What’s In It for The World?

Canadians watching the live feed of this event at home may have felt pride in seeing our Prime Minister on this stage standing up for Canada and simultaneously signalling a more active—a more enthusiastic—role for our nation in solving what is arguably the greatest challenge of our time. But those of us in the peanut gallery might also (fairly) ask: How much influence can Canada really bring to a global carbon pricing movement? Is this about looking good or doing good?

As a body, the Carbon Pricing Leadership Coalition has zero authority. That almost goes without saying. Its influence will stem from the gravitas of its members as much as it does from the quality of the information it gathers and its effectiveness at disseminating it. Should world powers like the US and China join this coalition – well that would send a pulse across an expansive global spider web of economies, investors and corporations.

Canada is not that guy.

Furthermore, Canada currently has no federal or, for that matter, national carbon pricing solution to offer up as an example to anyone. We are quite firmly of the “in progress” camp, the role of our Federal government in carbon pricing—for now—is just a question mark.

But maybe that’s exactly the point and precisely the value Canada brings to a global effort to advance carbon pricing.

We are a federation of provinces with vastly different economies and vastly different energy mixes. Our provinces have unique priorities, socio-economic landscapes, and cultural /political realities. And yet, we now have four (now five! maybe six?) different provinces advancing some form of carbon pricing.

We’re not coming to the table with one fully baked solution. Rather, we’re coming with multiple examples of how carbon pricing can work in dramatically different environments, including—now with Alberta’s commitment—in an emissions-intensive, resource-based economy. Canada represents, in some ways, a microcosm of the variety of challenges and opportunities international governments could face when considering how to move forward on carbon pricing. There may be even greater value in giving the world a window into how Canada manages to coordinate our diverse carbon pricing policies over time.

So, as a real-time policy innovation lab, Canada may have much to offer the Leadership Coalition and the world. But, good publicity aside, what’s in it for us?

Canada’s Opportunity: What’s In It For Us?

Much has been said, including by Ecofiscal, about the economic imperative of pricing carbon in Canada as a means to trigger necessary low-carbon innovation, shield our economies from shocks down the road, and improve short-term and long-term market access for our resources. None of that really requires joining an international effort to advance carbon pricing globally. Perhaps the optics and the platform is useful, but arguably not required as long as we are moving forward sound and credible policy at home.

So why should Canada put any effort into advancing carbon pricing outside our borders? Well the first and most obvious answer is that climate change is a global problem that requires a global solution. Canadians will continue to bear the costs of climate change until and unless the world’s nations act in concert to reduce GHGs. And thought-leaders increasingly agree that pricing carbon is fundamental to that solution.

But there’s another reason too. And it’s one of the same reasons that Quebec cares whether Ontario prices carbon. And Ontario cares whether Alberta prices carbon. And on and on. It’s about competitiveness. A more level carbon price playing field both nationally and internationally is better for businesses, especially those that are trade exposed and carbon intense. As more of our trade partners price carbon, and as more of those prices align, the less competitiveness becomes a concern for Canadian firms.

As our recent research demonstrates, the scope of that concern is actually fairly small across Canada’s economy as a whole. But its much more significant in places like Alberta and Saskatchewan, and not something we can afford to dismiss. Targeted, temporary and transparent support measures can help address competitiveness in the short-term. A global price on carbon would solve it for the long-term.

Let’s Be Clear: This Won’t Be Fast and it Won’t Be Easy.

We’re still a week away from the conclusion of COP21 and the details of its resulting international agreement are anyone’s guess. But we can fairly bet that a global price on carbon isn’t in the cards. Even the Leadership Coalition is careful to position itself as a resource for other nations who wish to move forward on carbon pricing as opposed to an advocate for a global price. The fact is: governments will act on carbon pricing when it becomes clear to them that it is in their own best interest to do so. Canada’s governments are just now starting to converge around that idea, and we can still expect uneven national policy for some time into the future. The international path will only be more staggered and more complex.

Canada’s contribution to the Leadership Coalition isn’t likely to change that path, but it may very well help illuminate it in a meaningful way by sharing our rich, diverse and home-grown policy lessons. So let’s get on with learning them. By doing so, we will  have real substance to offer, as well as the motivation to offer it. This is, in the best sense, what it means to bring Canadian leadership to an international challenge. And, hey, if we also happen to look good doing it, all the better. But let’s endeavour for it to mean more than that.

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