Maintaining momentum: only additional emission reductions, please - Canada's Ecofiscal Commission

Maintaining momentum: only additional emission reductions, please

Pulp and paper mill with smoke, demonstrating Carbon pricing; Pan-Canadian Framework; stringency
Climate and Energy

Today, the federal government sent letters to its provincial counterparts laying out a timeline for implementing pan-Canadian carbon pricing. It lays out timing for federal legislation, for the provinces to demonstrate that their provincial policies are consistent with the federal standard, and for the federal backstop to kick in if they aren’t. Clearly laying out the path is useful. But I want to explore one additional piece of the federal-provincial carbon pricing puzzle addressed here.

It’s all about additional emissions reductions

The “supplementary guidance” document released as part of the press release notes:

Carbon pricing systems should be designed to achieve incremental GHG emissions reductions in the 2018 to 2022 period through a clear price signal flowing from the level at which caps are set or an explicit carbon price, meaning fewer emissions than would have occurred without the pricing system in place.

In other words, provincial carbon pricing must be sufficiently stringent to drive additional emissions reductions. Emissions reductions driven by previously implemented non-pricing policies won’t justify weaker carbon pricing. If provincial plans don’t meet the standard for stringency defined under the Pan-Canadian Framework, the federal government will impose its own backstop carbon pricing policy.

That could affect some provinces’ carbon pricing plans

To avoid the federal policy—in whole or in part—some provinces may have to revisit the details of their designs. Nova Scotia, for example, has suggested that their cap-and-trade system might not lead to significant increases in the price that consumers pay for fossil fuels, perhaps as a result of previous emissions reductions from a renewable electricity standard. New Brunswick has proposed simply repurposing its existing gasoline tax as a carbon tax. Those policies might not meet the federal standard.

Ensuring good design is critical

As Ecofiscal has consistently argued, carbon pricing can reduce GHG emissions at lowest cost… as long as it is designed well. To achieve our 2030 emissions targets, stronger policy is required that drives additional emissions reductions above and beyond the progress we have already made. And to lower costs for the country overall in achieving those targets, it makes sense to harmonize provincial carbon pricing policies as best we can.

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