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Serious consideration of carbon pricing is warranted in every province

carbon pricing Nova Scotia
Jun 10, 2015
Climate and Energy

On Friday, Canada’s Ecofiscal Commission and the Atlantic Provinces Economic Council  co-hosted a panel discussion in Halifax, Nova Scotia. The Subject: The Business of Carbon Pricing in Atlantic Canada. The following blog highlights some of Chris Ragan’s remarks and the Q&A that followed the panel discussion, which featured David Wheeler, President of Cape Breton University, Elizabeth Beale, President & CEO of the Atlantic Provinces Economic Council, and Martin W. Janowitz, Vice President of Sustainable Development at Stantec. You can also read a summary of the event put together by APEC.

Thank you so much Elizabeth. She’s actually not allowed to retire from the Ecofiscal Commission (did you see that in the small print when you signed up?). Elizabeth brings a tremendous amount of value to the Commission. Not only because she is a very wise and thoughtful economist. But also because she brings to the table an essential perspective. She reminds us that there are provinces in Canada beyond Ontario, Alberta, Quebec and British Columbia. She reminds us that not everything that matters takes place in a big city. And she ensures we do not make the mistake of lumping all Atlantic provinces together, assuming they share the same contexts and challenges.

Every province is unique

Actually, this realization was the very underpinning of our most recent report on carbon pricing. Every province is unique. Every province has a different economic structure, a different energy mix, a different set of priorities—and those differences are critical to getting policy right. So a thoughtful discussion about carbon pricing in Nova Scotia should sound different than one in Alberta and Ontario and Quebec and Newfoundland. Wednesday we were in Toronto with a crowd of 250 business people talking about the competitiveness challenges under a cap-and-trade system, which Ontario is about to institute. And the focus was on industries like steel and auto manufacturers and how you create a transition for emissions intensive trade exposed industries. Two weeks ago we were in Calgary speaking to a room of people – many of whom represented the oil and gas industry. And of course they have a brand new government, they have the financial challenges associated with low oil prices. And yet there was tremendous, almost eerie, support in that room for moving forward with a broad-based carbon price. Because industry knows its needed. These discussions are happening everywhere. It’s time for them to happen here because serious consideration of carbon pricing is warranted in this province. At a high level, the issue of reducing GHG emissions in Nova Scotia is very similar to the need elsewhere. But as is usually the case across Canadian provinces, the important details in Nova Scotia have their own flavour.

Creating the space for that consideration will take, in Preston Manning’s words, a middle-way conversation, free from polarization. So how do we get there?

Carbon pricing discussion in Nova Scotia

I think there are three central ideas that can help shape such a discussion:

One: carbon pricing is an increasingly common policy decision being made by nations and jurisdictions across Canada and the world.

This includes new players like China, Mexico, South Korea, Chile, and—as you know–Ontario. In a few short months, when Ontario’s policy is finalized, three-quarters of Canadians will live in a province that prices carbon. Globally, the 40 national and 20 subnational jurisdictions pricing carbon today account for nearly a quarter of the world’s emissions.

This is not a “new fangled thing” or a passing fad backed by a bunch of wacky tree-huggers. (Unless, of course, you consider the World Bank, the IMF, and the World Economic Forum a bunch of wacky tree-huggers). It is a policy trend that is here to stay.

Why does this matter? It signals, quite strongly, where the future of Canada’s economy and our global economy are headed. Low-carbon solutions—whether that’s technologies, business practices, new efficiencies—will become increasingly valuable and desirable in the decades ahead. Firms that can operate on the lower end of the carbon intensity curve will likely out-compete those that cannot, in every sector. Those best positioned to reap the benefits of a lower-carbon economy, are those who are already thinking and planning for it today. Would a carbon pricing policy in Nova Scotia help spur that thinking and that critical innovation? It’s a question worth asking.

Two: There are different ways to price carbon effectively.

Nova Scotia need not feel constrained in its policy exploration but rather can draw from the wealth of examples across Canada.

British Columbia has its carbon tax. Alberta: its Specified Gas Emitters Regulation (which is up for renewal or replacement imminently). Quebec’s cap-and-trade system—soon to be joined by Ontario—links with California’s. These systems are designed differently to meet the different needs and priorities of each province. There is the obvious, and most discussed question—what instrument to use: a tax, a cap-and-trade system, some sort of hybrid of the two?

But equally, if not more important, are the details of policy design. Who will be covered under the system? We know that the wider we cast the net, the more cost-effective emissions reductions will be. At what price do we start, and how quickly does it get ramped up over time?

And finally, how should government use the revenue raised by the policy? Should it be used to reduce business and personal income taxes, as was done in BC? Should it be applied to fund climate change programs or public transit—as Quebec is doing? Should it be used to support clean technology innovation in high-emitting industries, as in Alberta?

There is not a single “right” answer to these questions for all provinces — but there is likely an answer that best suits Nova Scotia’s economic situation and priorities.

Three: let’s consider carbon pricing in the broader context of achieving Nova Scotia’s objectives – both environmental and economic.

It is broadly agreed that Nova Scotia is in need of fiscal renewal. Last year’s report by Laurel Broten outlined a number of approaches for the province to explore in addressing these challenges. A carbon price was one of them. Why does this make so much sense in Nova Scotia?

Governments obviously require revenue to finance their various programs. But how they generate that revenue matters – and it matters a lot. Right now, Nova Scotia has among the highest personal and business income tax rates in the country. High income taxes on businesses and households, as most economists will tell you, are a drag on the economy.

A new fiscal structure, with a carbon price at its core, can help create a more competitive and more innovative economic landscape. It could play a central role in stimulating an economic revival in Nova Scotia. How would this work?

Let’s not forget that one of the primary benefits of carbon pricing—as well as other market-based “ecofiscal” policies—is the opportunity it provides to re-design our fiscal structures so that they help discourage activities that are harmful both to our environment and economy, while encouraging the activities we want, such as job creation, investment, and innovation.

Panel Discussion

While the principles at work are pretty clear, the details are not obvious, and they need to be thought about pretty clearly. I don’t expect us to walk away from this morning’s discussion with all of the answers to these questions. But what I hope, is that we will walk away wanting to discuss them more. This is a very live and very critical conversation—across the globe, across Canada. Nova Scotia has much to contribute to it. So, let’s get started.

It is my pleasure to welcome our panel members to the stage. Joining Elizabeth we have:

  • Dr. David Wheeler, President of Cape Breton University
  • Marty Janowitz, Vice President of Sustainable Development at Stantec and Chair of the Nova Scotia Roundtable on the Environment and Sustainable Prosperity

PANEL Q& A

What significant opportunities could Nova Scotia (independently or together with other Atlantic provs) harness through a carbon pricing policy? How could they do it?

What challenges would Nova Scotia need to plan for or avoid in developing carbon pricing policies? What advice would you offer?

How can we move this conversation forward in Nova Scotia and across the region? What do you recommend as a next step?

Audience Q&A

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