There is one key message to take away from the various reports produced by Canada’s Ecofiscal Commission - carbon pricing must be the centerpiece of any action to fight reduce greenhouse gas emissions. The reason its many economists say is because it’s the most efficient and most cost-effective way to do it. Others say a well designed regulation can do exactly the same thing.
Take a low carbon fuel standard (LCFS) as an example, Mark Jaccard, an economist and professor in the School of Resource and Environmental Management at Simon Fraser University, said during a June 8 Ecofiscal Commission webinar. His research suggests that a well designed and flexible LCFS, what he described as “the next best flexible regulation,” can achieve deep reductions much like a carbon tax can and “have almost identical economic efficiency performance.”
The webinar focused to a large degree on complementary policies that could operate along side a carbon price but conversation did get into carbon taxes and whether they are the be-all and end-all for climate policy. (More information is HERE.)
Jaccard argued that it’s not carbon pricing that is reducing the biggest chunk of greenhouse gas emissions, but rather regulations. Policymakers in Canada just like those in California are relying on regulations to reduce most of the emissions while carbon pricing is playing a marginal role.
“The carbon price is at marginal levels, it’s slated to stay there at least in the time frame we’re talking about and the heavy lifting is going to be done by regulations which the government has now been rolling out on methane, coal phaseout, clean fuels, zero-emission vehicles and so on. And it seems that the political reasons the government is doing this are obvious to all but the Ecofiscal Commission,” he said.
Ken Green, senior director of the Centre for Natural Resource Studies at the Fraser Institute, spoke about the ineffectiveness of carbon pricing in some of his comments.
Pointing to previous research done by the Institute, he said it’s less than useful to talk about carbon taxes when governments aren’t committing to full revenue neutrality. For example, British Columbia still diverts about 12% of its carbon tax revenue to “boutique tax credits for rural communities, childrens’ groups, theatre groups and entertainment groups,” he said.
More on the previous Fraser Institute research is in the following Canadian Green Tech article, Current carbon pricing methodologies in Canada undermine economic efficiency: Fraser Institute.
A big issue for Green is governments that adopt some form of carbon pricing don’t tend to eliminate other taxes. So for a carbon pricing mechanism to work cost-effectively and efficiency, that means other taxes have to be taken off the books.
“Barring that I don’t support pricing because we’ve seen zero evidence, in fact we’ve seen 100% counter evidence that governments in Canada will implement anything like a textbook, economically benign carbon tax. I don’t think therefore the benefits of going this route exceeds the costs which is the first test of public policy,” he said.
One also needs to consider the cost of rolling back regulations, according to Erin Flanagan, program director of federal policy at the Pembina Institute.
“When I think about what an ideal solution looks I think we need to build on the best policies that we have in place. We need to strive for cost-effective opportunities and we need to make sure that we’re doing what we can to have a system that is coherent across borders and with the international context. But we can’t just assume that all of the existing policies that are in place will be rolled back because I just don’t think that that’s something many of our governments will consider,” she said.
And so the conversation continues on the most appropriate policies needed to address climate change.