The Politics of Carbon Pricing

Like they did in 2008, in the 2011 general election campaign, Jack Layton and the New Democrats put an election platform before Canadians that included commitments to reduce greenhouse gas emissions by, among other things, doing the following:

We will put a price on carbon through a cap-and-trade system, which will establish hard emissions limits for Canada’s biggest polluters to ensure companies pay their environmental bills and to create an incentive for emissions reductions;

In its costing statement for its election campaign commitments, the NDP said the federal government would receive the following revenues as a result of its cap-and-trade system:

  • FY2012: $3.6 B
  • FY2013: $4.3 B
  • FY2014: $6.2 B
  • FY2015: $7.4 B
Based on that, the Conservatives have gone on the attack warning that that the New Democrats advocate a “carbon tax” — the cap-and-trade system — that would leach $21.5 billion out of the economy.
Now just to put that in perspective, one percentage point of GST is worth about $7.5 billion a year. So at it’s low end (FY 2012), this is a hit to the economy that amounts to about  one-half of one per cent of a GST hit and at its top end, is worth about one per cent of a GST hit.
Nonetheless, Andrew Saxton, the Conservative MP for North Vancouver, had this to say in the House of Commons today:
Mr. Speaker, gas prices across the country are surging, yet the leader of the opposition has been travelling around the country to promote a tax on carbon. Hard-working Canadians across the country will suffer if the NDP bring forward a job-killing carbon tax that will increase the price on everything. Families will see the price of gas, groceries and electricity increase and become even more of a burden.
Wow. What could the NDP be thinking?
Well, perhaps they were thinking exactly what Prime Minister Stephen Harper and his cabinet were thinking for the three or four years prior to the 2011 election: Here is the 2008 Conservative Party of Canada Policy Declaration:

We support a domestic cap-and-trade system that will allow firms to generate credits by reducing smog-causing pollutants.

In the 2008 election campaign, the Conservatives put this into their election platform:

Developing a Cap and Trade System to Cut Pollution and Greenhouse Gas Emissions

A re-elected Conservative Government led by Stephen Harper will implement our Turning the Corner action plan to reduce Canada’s greenhouse gas emissions in absolute terms by 20 per cent over 2006 levels by 2020. We will work with the provinces and territories and our NAFTA trading partners in the United States and Mexico, at both the national and state levels, to develop and implement a North America-wide cap and trade system for greenhouse gases and air pollution, with implementation to occur between 2012 and 2015.

If the NDP’s cap-and-trade plan in 2011 was, to quote Saxton, “a job-killing carbon tax”, wasn’t his own party’s cap-and-trade plan in 2008 a “job-killing carbon tax” too?

Well, according to Harper’s environment minister in 2009, Jim Prentice,  the Conservative cap-and-trade plan or  “offset program” was going to be a world-beater.

The offset system will be a key part of that overall commitment. It is intended to generate real reductions in greenhouse gas emissions by providing Canadian firms and individuals with the opportunity to reduce or remove emissions from activities and sectors that will not be covered by our planned greenhouse gas regulations.

It does so by establishing a price for carbon in Canada – something that has never been done before in this country. And as business leaders, I don’t need to tell you what happens when you put a price on something that used to be free. Suddenly, your CFO becomes very interested in carbon!

The offset system is a key component of the market-based approach to combating climate change that I outlined at the World Business Summit on Climate Change in Copenhagen just a few weeks ago.

But by 2011, the Conservatives had excised any mention of any kind of carbon pricing scheme and promised (and continue to promise) to reduce greenhouse gas emissions by regulation. Regulations have a cost, too, but though I and other reporters on have asked several times what they costs will be, have not provided any indications that consumers or businesses will pay a cost for their regulations.

Industry groups and academics, though, are nearly unanimous: If you’re objective is cutting greenhouse gas emissions by x per cent, then a carbon tax is the cheapest, most efficient way to accomplish that goal. The least efficient and most costly is regulation, the Conservative’s chosen method.

Indeed, a research network called Sustainable Prosperity, based out of the University of Ottawa, studied Canadian Business Preference on Carbon Pricing. This group’s research matched my anecdotal evidence watching any number of industry groups appear before MPs at different House of Commons committees over the years. Those industry groups are nearly unanimous in saying: Don’t regulate. Price carbon.

Now, industry groups do disagree on how best to price carbon though cap-and-trade — the approach favoured by the NDP in 2011 and by the Conservatives up until 2011 — is the preferred approach by most industry groups. The Canadian Vehicle Manufacturers’ Association (that would be Ford, Chrysler and GM), the Canadian Chemical Producers Association, the Railway Association of Canada, the Aluminum Association of Canada all favour cap-and-trade. The Canadian Association of Petroleum Producers — that’d be your oil sands heavies — prefer a modified carbon tax. And then there’s those big industrial emitters of greenhouse gases that want and support a price on carbon but don’t care if it’s a carbon tax or a cap-and-trade system. The Mining Association of Canada, the Canadian Steel Producers Association, the Canadian Gas Association, the Canadian Petroleum Products Institute (representing most refiners in Canada), the Canadian Council of Chief Executives, the Forest Products Association of Canada, and the Cement Association of Canada just want the government to bring in a price on carbon and they don’t much care if it’s a carbon tax or cap-and-trade.

They’ll all be disappointed by the approach of current Environment Minister Peter Kent who is doing it all by inefficient regulation.

And, finally, here’s NDP leader Thomas Mulcair speaking to reporters after Question Period today summing up the politics and the policy on this issue:

The NDP’s top priority is the economy. The Conservatives’ top priority is making things up about the NDP. We’re going to talk to Canadian journalists because we have faith in your ability to do two simple things: go and get the Conservative program from 2008, read that they were proposing cap and trade when the Liberals were proposing a carbon tax, the whole public debate and realize that the NDP came down four square in favor of cap and trade. We were against the carbon tax for two reasons. One, it’s a regressive tax generally speaking. It can be used by the way as an adjunct by the provinces, two of them do it. Two, if the goal is to produce a reduction in greenhouse gases, the only way to guarantee that result is with a cap and trade system.

The bottom line, it seems to me: The Conservative Party as a whole and the Harper cabinet during at least two occasions endorsed and approved the notion of “cap-and-trade” as the approach to reduce greenhouse gas emissions. The NDP was advocating “cap-and-trade” at the same time the Conservatives were and continues to do so. In this, the NDP and Conservatives were united against the Liberal idea of a straight-up carbon tax. (Laval University economist Stephen Gordon argues there’s not a whole lot of difference between a carbon tax and cap-and-trade)

Now though — despite the fact that the Conservative advocated the very same policy as the NDP for most of the last half-decade — the Conservatives are attacking the NDP for holding the same policy position the Conservatives used to hold. As Maclean’s writer Aaron Wherry wonders at his blog: “Maybe the Conservatives think you’re stupid.”






8 thoughts on “The Politics of Carbon Pricing”

  1. @Craig : True but here’s the bottom line: The NDP plan and the Liberal “green shift” all put an explicit price on carbon. But the current regulatory approach of the Conservatives would also add costs to industry and industry would surely pass those costs on to carbon consumers. So every approach would make carbon more expensive. It’s just a difference of how much. And as every industry group in Canada have been pleading — the Conservative approach to regulate would be most expensive. The majority prefer cap-and-trade carbon pricing — which is precisely what Conservatives proposed until 2011.

  2. This cap and trade and greenhouse gas all ties into the UN,S agenda 21, so called global warming which is a total hoax, READthe UN seeks diplomatic immunity on climate change fund, Why would they seek immunity, weather manipulation is going on all over the world, See Obama signs bill for Chemtrails, weather manipualation to stop global warming, all is a big SCAM to charge us for the air we breathe, while filling it with aluminum and God knows what else, and now they want to stop us from smoking outside, How about our Government, get realistic and stop the chemtrailing , stop the flouride, stop the GMO food, maybe Canadians we be a lot healthier, but big Pharma does not want that, no they drug our children legally, hook them and then offer methadone, wow they win again, THIS COUNTRY OUR BEAUTIFUL CANADA IS TO BE RULED BY THE UN, AND THIER AGENDA 21….the real issues are being hidden, not spoke of…WE NEED TO GET OUT OF THE UN, AND GET REAL POLITICIANS IN WHO WORK FOR ONLY US, NOT THOSE WHO WORK FOR CORPORATIONS AND UNDER THE HAND OF THE UNITED NATIONS!!!!!!!!

  3. From the Conservatives’ 2008 election platform:
    “We will work with the provinces and territories and our NAFTA trading partners in the United States and Mexico, at both the national and state levels, to develop and implement a North America-wide cap and trade system for greenhouse gases and air pollution, with implementation to occur between 2012 and 2015.”

    Has the US government implemented its promised cap & trade system? Has Mexico? The latter country passed legislation on a cap & trade system last April, but will the new president elected in July implement that legislation?

    The Conservative government was willing to participate in a cap & trade system IF the other two North American countries were also part of it.

    Look, the point is and has always been that PM Harper has never accepted that Canada would go it alone, implementing punishing measures in our country that would supposedly magically reduce GHG emissions while other countries continued to emit GHGs. Harper agreed to a cap & trade system (reluctantly, IMO) in order “to harmonize Canada’s climate change policies with the U.S. because the two economies were so closely linked” as Allan Woods wrote in an article titled “Tories take cap-and-trade system ‘off the table’: Kent” shortly after last year’s election.

    As for which party was proposing what at what time … which system would have prevailed had the attempted 2008 coalition succeeded? Would the NDP have abandoned their cap & trade proposal and adopted the Liberals’ Green Shift instead, in order to sit in cabinet? If that had happened, would the media have derisively referred to it as a “flip-flop”, a change of direction, or ignored it completely, as they so often do with the left side of the political spectrum?

    P.S. You should read some of your colleague’s (Lorrie Goldstein) work on the benefits of a cap & trade system.

  4. More taxes on every product we buy.We already cannot compete with China or India on wages.And they still use fossil fuels with no taxes.We will soon have green country with no jobs sounds interesting.

  5. If you want to change behavior – make us stop burning so much carbon, for example – then the simplest and most effective tool is to make it, the behavior, cost more. But: it will only work if you make the real “user,” not the producer, pay – you and I need to pay every time we turn on a car engine or switch on our big screen TVs. Cap and trade, in all its guises is overly bureaucratic; a simple, HST like, carbon tax will work if, and only if it hits you and me in our wallets and we “see” that hit every time we buy gas or pay our hydro bill.

    If we need more revenue then a “green” carbon tax is a good idea – make it big enough to equal 1 HST point; if we want to change behavior then a carbon tax is also a good idea. If all we want to do is to add bureaucrats to already bloated governments then cap and trade is the way to go.

  6. Whatever happened to real science? Policy based on junk science is absurd. The truth will win, eventually. The biggest hoax ever portrayed in human history is man-made global warming/climate change. Climate changes all the time. Pseudo-science is confusing weather for climate. Naming CO2 as a powerful greenhouse gas is ridiculous. CO2 is plant food and the more CO2, the better off we are to grow food. Anyone got a problem with that? Perhaps the likes of Al Gore and David Suzuki (et al foundation scammers) or maybe Maurice Strong (of one world government fame) should be asked that question. Riddle me this, why is it always the west that needs to conform to UN policy when the east is allowed to polute like crazy? Oh yeah, we “owe” them catch-up time because we’ve been industrialized for a longer period of time. Huh? It all boils down to control. The UN (needs disbanding) desires to control (one world government) through superceding of national legislation and overriding it via environmental issues. Brilliant but bloody ridiculous. There is no magic wonderfuel. We need oil and gas and coal, for now. The money spent on ramping up the energy sector in North America would go a long way into R & D for alternate fuels. Perhaps dilithium crystals ?

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