Carbon prices victims of federal politics

Canada’ new carbon price is adept federal politics. It leaves the provinces with a series of tricky decisions. The policy is insufficient to meet our (meagre) pledge toward the Paris Agreement. It is also incremental, providing time the provinces and territories to get used to the idea and decide which instrument – tax or cap and trade – will work best for them. It dips Canada’s toes in chilly October waters long enough to accept the feeling.

What’s left to be seen is if Canadians will be angry with the federal government for creating the minimum price, or with the provinces for not giving them their money back. The carbon price takes effect in 2018. By that time, the provinces will have their policies in place, including whether or not the price will be revenue neutral. Provinces could follow BC’s lead and return the proceeds of a tax to their citizens.

Alternatively, Canadians could blame their governments for taxing them in the first place. Cap and trade applies to industries only. Companies buy and sell carbon credits, and in so doing set the price of carbon through the laws of supply and demand. Unlike a tax, the government does not see the revenue. There is nothing to return to citizens. While consumers may see some increased costs, something that is not guaranteed or the experience in other jurisdictions with cap and trade systems, they will not see a return from the carbon price in their wallets.

These decisions are only really difficult for politicians. Many companies are already on board, and indeed well ahead of Canada’s elected officials. Over 140 companies – including oil companies, airlines, banks and mining companies, joined the Carbon Pricing Leadership Coalition calling for a carbon price. Shell and other oil companies already have an internal ‘shadow’ price to anticipate and manage risk from future regulatory action. When an oil company says a carbon tax is a good idea, you know you’ve fallen behind.

All these discussions of prices are on one side of the ledger. Canadians will reap cost savings in the health system. We could save up to US$250 billion per year in health costs, more than offsetting the costs of mitigation, according to the WHO. We’ll have cleaner air, predictable precipitation and weather patterns, and fewer natural disasters. This is only good news to Canada’s economy and citizens.

A carbon price is one part of a climate policy. Renewable energy needs an even playing field, which could man increasing investment to leverage the sector’s already impressive job creation record. Or, it could mean reducing the $3.3 billion in fossil fuel subsidies Canada currently doles out. We’re already paying these companies to pollute. All this meagre carbon price does is get a little of our money back.


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