The Carbon Price Is Right

Carbon pricing: the climate change strategy for free market fans

News | by Gregory Beatty

“It is easy to see,” replied Don Quixote, “that thou art not used to this business of adventures; those are giants; and if thou art afraid, away with thee out of this and betake thyself to prayer while I engage them in fierce and unequal combat.” —Cervantes, Don Quixote

Conservatives love to talk about the benefits of free markets. Let the laws of supply and demand work their magic, they say, and you’ll maximize economic efficiency — and, by extension, human well-being!

As conservatives are well aware, pricing is at the heart of free markets. For individuals and businesses, prices are a powerful guide to decision-making. That’s how free markets work.

And yet… when it comes to putting a price on carbon to combat climate change, conservatives are totally opposed. The Saskatchewan Party, the Jason Kenney-led UCP in Alberta, and new Ontario P.C. leader Doug Ford are prime examples.

How can this be?

Well, it’s because there’s a lot more than economics in play.

To begin with, the carbon price — which starts $10 a tonne and rises to $50 in 2022 — is being enacted by a Justin Trudeau-led federal government. Conservative politicians despise Justin Trudeau. Does anyone honestly believe that a Stephen Harper carbon price policy would draw this kind of fire?

There’s also the anti-tax angle. Unless they’re the ones needing a bail-out, modern conservatives tend to be skeptical about the whole “taxes are the price we pay for civilization” idea. Besides, it’s much easier to call carbon pricing a cash grab even though the Liberals have promised it will be revenue neutral.

Oh and there’s climate change itself, which most conservatives, deep inside, don’t really believe in.

For Saskatchewan, the deadline to join the first stage of the Pan-Canadian Framework on Clean Growth and Climate Change (which was agreed to at a First Ministers meeting in March 2016) has already passed. The provinces and territories have a target of a 30 per cent reduction in emissions from 2005 levels by 2030, and Ottawa’s Low Carbon Economy Fund has been established to spark the innovation they’ll need to hit it.

Had Saskatchewan signed on, it — we — would’ve received $62 million.

Now, we might get nothing.

Our government has also vowed to embark on an (inevitably Don Quixote-like) legal battle to have Ottawa’s pricing plan declared unconstitutional [see sidebar]. Premier Scott Moe can play the title role with environment minister Dustin Duncan as his burro-riding enabler.

Not surprisingly, the government’s pig-headedness isn’t going over well with Saskatchewan’s environmental movement.

“It’s very much in Saskatchewan’s interest to develop its own pricing plan because that gives us control over how the revenue will be used,” says Ann Coxworth of the Saskatchewan Environmental Society.

“My understanding is that the federal government has said if they impose their plan, they will distribute the revenue back to every Saskatchewan resident,” Coxworth says. “I think it might be better to have some flexibility in how the revenue is used. We could use some of it, for instance, to support industries that are particularly impacted by carbon pricing.”

Last November, the Johnson Shoyama Graduate School of Public Policy released a report on the projected impact of various climate change strategies in Saskatchewan. Agriculture, power generation, the oil and gas industry and rail transportation were all assessed.

While the impacts were significant, carbon pricing should generate $2.5 billion in annual revenue for Saskatchewan.

A lot of cash — and as Coxworth says, some of it could be used to help impacted industries.

“Funds could also be invested in clean energy alternatives, energy conservation, and all those good things,” she adds. “Or we could reduce the sales tax which would provide a general economic benefit. So there are lots of ways we might want to consider using the revenue rather than just sending everyone a cheque.”

Sue You In September

The deadline to submit a carbon price plan is Sept. 1. So far, Saskatchewan’s only move has been to release a policy document. December’s so-called “Prairie Resilience” plan did lower the threshold on what’s considered a “heavy emitter”, which will bring more industries under government regulation. And that won support from the environmental movement, says Coxworth.

But in other respects, the plan is… inadequate.

“There is a strong focus on adaptation rather than reducing emissions,” she says. “While that’s obviously important, unless we actually do our share in reducing emissions we’re not contributing to solving what is a global problem.”

The government argues provincial taxpayers have already paid through the nose for a carbon sequestration facility at Boundary Dam to reduce emissions from coal we burn to generate electricity.

Okay, the government probably wouldn’t use the phrase “pay through the nose”. But the much-troubled facility cost $1.6 billion to build, which according Coxworth, translates into a carbon price of $60 a tonne! So that’s what essentially happened.

Last November, SaskPower indicated it likely wouldn’t pursue any more carbon capture projects. The government continues to have high hopes for the technology but with the cost and efficiency of green tech improving all the time, those hopes don’t seem very realistic.

But that’s all water under the bridge, as the saying goes. The question now is: what should the government do moving forward?

For the Saskatchewan Environmental Society, the answer is clear.

“The ideal would be a combination of carbon pricing and flexible regulation,” says Coxworth. “They are already talking about flexible regulation with major industrial emitters. If we could combine that with a carbon price system, we could end up with a decent climate plan.”


Sidebar

Tilting At Turbines

The Sask. Party isn’t going to win its dumb carbon price lawsuit

Saskatchewan is Canada’s lone carbon price holdout. B.C. has had one since 2008, Ontario and Quebec are involved in a cap and trade system with California, Alberta has a $20 a tonne price which is scheduled to rise to $30 in 2018, and Manitoba recently proposed a $25 a tonne price. That’s higher than the federal minimum, although the province has said it won’t rise beyond that — which is contrary to the federal plan, which tops out at $50 a tonne in 2022.

Once the Sept. 1 deadline passes, Ottawa is committed to “imposing” a carbon price on Saskatchewan. The Moe government has vowed to fight the move in court.

Its odds of winning, though, appear long.

The case boils down to an interpretation of how federal and provincial powers divide-up under the constitution. When the original BNA Act was drafted in 1867, the question of who had jurisdiction over the environment, not surprisingly, wasn’t addressed.

If Saskatchewan launches legal action, the government’s primary argument would be that because a carbon price impacts on areas of provincial responsibility under s. 92 such as natural resources, interprovincial trade and consumer transactions, it would be unconstitutional.

Another argument flagged in the Johnson Shoyama report relates to s. 125, which prohibits taxation of “Lands and Property” held by Canada and the provinces. Since SaskPower and SaskEnergy are provincial Crowns, any move to apply a carbon price to them would be unconstitutional.

The question has yet to be litigated, but Manitoba got a legal opinion last October that said Ottawa’s counter-arguments are stronger.

One has to do with the idea that carbon emissions, like other kinds of pollution, don’t respect provincial boundaries. Thus Ottawa, under s. 91’s Peace, Order and Good Government clause, has the authority to rein in Saskatchewan’s maverick behaviour.

Canada is also a signatory to the 2016 Paris Climate Accord, and under s. 132 the federal government has jurisdiction over international treaties. So that’s another “lance” Ottawa has in its legal arsenal.

On March 22, NDP leader Ryan Meili characterized the proposed legal action as a “costly and pointless crusade” in question period. He’s right.

A huge tantrum might score the Saskatchewan Party points with its core supporters. But from a legal, financial and moral perspective, it’s a bankrupt strategy.