Six Places
Where Carbon Pricing is Working
Climate change will be an important part of the national conversation this fall. One part of Canada’s strategy to deal with climate change has been to put a price on carbon.
What’s a price on carbon? Glad you asked. It’s a charge on fossil fuels, the main drivers of climate change.
The charge is based on how much carbon pollution (a.k.a. the most widespread greenhouse gas) the fuel produces when it is burned. For example, a litre of diesel produces more carbon pollution than a litre of gasoline, so the carbon price is higher on a litre of diesel. This creates an incentive to conserve energy, or look for alternative sources.
More to the point: carbon pricing works. It has for a long time.
Here are six places where carbon pricing has worked:
1. British Columbia
We don’t have to go far for our first example. British Columbia adopted a carbon tax in 2008 and hasn’t looked back. Its economy has grown at one of the fastest rates in Canada (the carbon tax didn’t cause this, but it sure doesn’t seem to have hurt the economy).
How it worked
B.C.’s carbon tax reduced the use of gasoline and natural gas by seven per cent per person. There’s even evidence that it spurred people to buy more fuel-efficient cars.
Key fact
B.C. used the revenues to cut income taxes and, more recently, to fund a broader range of programs, including green technology investments. It has some of the lowest income tax rates in Canada.
2. Northeastern United States
In 2009, 10 states, including New York and Massachusetts, worked together to put a price on carbon. They used the other type of carbon pricing: cap-and-trade. Their system is known as RGGI (Regional Greenhouse Gas Initiative), or "Reggie."
How it worked
Electricity producers started burning way less coal and started using more natural gas and renewable energy, which reduced greenhouse gas emissions.
Key fact
“Reggie” improved public health. Less coal meant less soot, and these states avoided more than US$5 billion worth of asthma attacks, hospital visits, chronic illnesses and premature deaths.
3. Sweden
Sweden has had a carbon tax since 1991. It started at €25 per tonne of greenhouse gases and is now €120 per tonne, the highest carbon tax in the world. Since implementing carbon pricing, Sweden’s economy has grown well above the European average.
How it worked
Businesses and homes started using less coal, gas and oil for heating, and started using biofuels instead. Sweden has reduced its greenhouse gas emissions by 25 per cent since 1995. Its carbon tax was a key contributor.
Key fact
Sweden wants to be carbon neutral by 2045 and will use pricing to help get there.
4. United Kingdom
The United Kingdom has had a bipartisan consensus on climate change for a long time. They introduced a carbon price in 2001 and gradually ramped it up over time.
How it worked
The carbon price completely transformed how the U.K. generates and uses electricity. Its emissions haven’t been this low since 1890, and studies point to carbon pricing as a key contributor.
Key fact
The U.K. got serious about carbon pricing in 2013. In 2012, the U.K. got 36 per cent of its electricity from coal. In 2018, it got six per cent of its electricity from coal.
5. Tokyo
Tokyo was the first city to put a price on pollution back in 2010. About 1,300 of its largest buildings pay a price on carbon.
How it worked
Building operators started massive upgrades and retrofits. The most common initiatives were the installation of high-efficiency furnaces and lights.
Key fact
Over 70 per cent of buildings met their 2020 targets by 2013.
6. European Union
Fighting climate change isn’t controversial in the EU. It has had a price on carbon for 15 years, fostered international co-operation and emphasized the need for collective action. The system applies to most of Europe’s large industrial facilities (manufacturing, power, etc.).
How it worked
It took a while to get working, but the EU’s system is finally humming along. It led to a direct increase in the number of low-carbon patents and innovations, and it’s slowly changing how the EU produces electricity.
Key fact
The EU’s carbon market is the largest in the world, but it will fall to No. 2 when China launches its carbon market in 2020.
Bonus: The United States (again)
Pricing has worked on pollutants other than carbon. Just ask acid rain. Oh wait, you can’t. We got rid of it by putting a price on it. In 1990, two conservative politicians, former prime minister Brian Mulroney and former U.S. president George H.W. Bush, agreed to address sulfur dioxide pollution, the main cause of acid rain. The U.S. did this by putting a price on sulfur dioxide.
How it worked
Power plants, the main source of sulfur dioxide emissions, responded quickly. They rerouted rail cars so they could burn coal with less sulfur content, and they invested in pollution scrubbers that pulled out sulfur before it left their smokestacks.
Key fact
By 2004, sulfur dioxide emissions had fallen by 36 per cent, even as coal-fired power grew by 25 per cent
The Bottom Line
Pollution pricing works. It’s working around the world. It’s working here in Canada.
As long as we take the time to do it properly, carbon pricing can be a key part of the solution to climate change. And at a time when cost-of-living concerns are high, how we get there matters. Let’s lay the right foundation.
