Fulfilling our Collective Responsibility

CPJ advocates for a price on carbon emissions

This is the second in a three-part series highlighting CPJ’s recommendations for the 2014 federal budget as contained in Fulfilling our Collective Responsibility, our annual brief to the House of Commons’ Finance Committee. This week: how the federal budget can use market mechanisms to attain the government’s promised goal of reducing greenhouse gas emissions.

Two events from this past summer should give pause to every Canadian interested in preserving a viable future for our families.

The first was the announcement in May that the amount of carbon dioxide in the atmosphere has exceeded 400 parts per million for the first time in more than three million years of Earth history. The National Geographic tells us that the last time the concentration of Earth's main greenhouse gas (GHG) reached this mark, horses and camels lived in the high Arctic. Seas were at least 30 feet higher—a level that today would inundate major cities around the world.

The second announcement came from the International Energy Agency (IEA) in mid-August.  Echoing earlier statements of climate scientists and environmentalists, the energy industry-friendly IEA concluded, “The world is not on track to meet the target agreed by governments to limit the long-term rise in the average global temperature to two degrees Celsius.”

Canada not meeting our ecological commitments – further action needed

Ottawa has yet to put into place the necessary policy levers that will allow us to meet our international GHG reduction commitments. In Copenhagen in 2009, Canada committed to reduce our emissions 17 per cent from our 2005 level by the year 2020. (Most scientists now see the reduction targets agreed to in Copenhagen as far too meek if the world hopes to limit the rise to two degrees Celsius.) One year ago, Environment Canada reported a massive emissions gap from our promised goal: leaving Canada only half-way to our 2020 target. Further, the federal government has delayed emissions regulations for the oil and gas sector. Former Minister of the Environment, Peter Kent, first promised such regulations by the end of 2012. Another promise, to introduce the proposed limits this summer, has also gone unfulfilled. Clearly, more determined and effective action is urgently required.

CPJ believes that the federal government should introduce a carbon tax, harmonizing this step with the provinces, especially those who have already shown leadership in the introduction of their own carbon levies. We further recommend that the tax be set at $30 per tonne of GHG emissions, increasing government revenues by about $15 billion per year.

Would a carbon tax work?

Currently, price structures in the Canadian economy create environmental problems because they do not price all of the inputs necessary for production. Companies that pollute air, land or water are not always responsible for the total clean-up of these “by-products” of manufacturing or extraction processes, and not yet responsible for the GHGs they produce. One solution is to simply align incentives (prices) with environmental goals. After all, if a production process pollutes, and society needs to clean that up, why not reflect the true cost of the product in the price? Further, we already tax what are judged to be “bad” behaviours without banning them altogether (imposing taxes on cigarettes, for example.) So why not carry this logic forward to GHG emissions? Similarly, governments already incentivize “good behaviours” (encouraging saving by offering RRSP deductions, for example.) Again, if emissions were taxed, those who reduce harmful emissions would benefit from lower costs. Such measures are not-at-all-radical ways to allow the market to send consumers price signals that would result in choices that are better for society.

Just this August, The Economist magazine reported that British Columbia’s carbon tax, instituted in 2008, has been “a roaring success” in terms of lowering emissions in that province, while those in the rest of Canada increased. Also, B.C.’s carbon tax, which is most evident in seven cents of the $1.46 per litre price of gas in Vancouver, has not seemed to harm B.C.’s economic performance. This research would seem to contradict the claims of the current federal government, that a carbon tax would destroy Canada’s economy.

A carbon tax could achieve broader societal goals

Depending on how we would use the increased revenues that pricing carbon would provide, Canada could also achieve other societal goals – such as reducing income inequality. Half of the income from such a tax could be rebated to families, beginning at $300 per year and $150 per child, and clawed back for higher family income levels. This could protect low-income groups, who have fewer options to adjust their behavior without affecting basic needs. (For example, higher-income persons can better afford investments in home energy efficiencies or can decide to travel less by plane.) But substantial revenues should also be made available by governments for investments in new, green technologies – thus creating alternatives to the high emissions economy while providing a welcome stimulus and job creation in the struggling industrial sector.

Opposition to placing a price on carbon increasingly leaves Canada as an outlier on the international stage. Attempting to increase our energy exports to the US, while remaining one of the highest per capita emitters on the planet, has helped create opposition to proposed pipelines and sullied our nation’s reputation. Canada remains the only nation to have ratified the Kyoto Accord, and then pulled out of this commitment. Somewhat contradictorily, nonetheless, it was reported this August that briefing notes from the Privy Council Office and the Ministry of the Environment actually advocated for Canada “putting a price on carbon for developing countries” as part of our international climate negotiations strategy. Why then, if Ottawa advocates carbon pricing for others, will we not take the same step ourselves?

It seems that behind the scenes advocating for a price on carbon to reduce GHG emissions is on the federal government’s mind. CPJ believes this policy should also be in the next federal budget.

Joe Gunn serves as Executive Director at CPJ.

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