Striving for equivalency across the Alberta, British Columbia, Ontario and Québec carbon pricing systems: the Pan-Canadian carbon pricing benchmark (original) (raw)
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Carbon Pricing in Canadian Provinces: from Early Experiments to Adoption (1995-2014) (full version)
This dissertation studies the emergence of carbon pricing mechanisms at the sub-federal level in Canada to answer two questions. First, why have some Canadian provinces adopted carbon pricing instruments, either a cap-and-trade or a carbon tax, while others have not? And, second, of the provinces that have adopted carbon pricing, how can we explain differences in the design of their carbon pricing instruments? In order to answer these questions, the dissertation has investigated the process of adoption of climate change policy in Canada’s ten provinces through four distinct stages: 1) the diffusion of the ideas supporting carbon pricing, 2) climate policy capacity building, 3) the public debate following the proposition of carbon pricing by the governing party, and 4) the design of the carbon pricing instrument. After reviewing the climate policy-making processes in the provinces, the dissertation’s answer to the first question is that carbon pricing instruments have been adopted in provinces in which the government has shown early on an acceptance of both the scientific paradigm of anthropogenic climate change and the policy paradigm of liberal environmentalism—the latter promoting market-based climate policy. These provinces are also the ones in which the premier has shown a personal commitment to the issue of climate change, which has contributed to focusing resources on the issue and to building climate policy capacity ahead of other provinces. Among provinces that have adopted carbon-pricing, climate policy is framed as providing important economic benefits through the creation of carbon markets and fostering investments in the renewable energy industry and other green technologies. The answer to the second question is that provinces, although to varying degrees, have designed carbon pricing instruments in order to take into consideration the particularities of their economic context and the policy preferences of their main industrial emitters. While some provinces, such as Quebec in imposing a cap-and-trade system, have been willing to go well beyond what their industries have been ready to accept, at least initially, others have adopted carbon pricing instruments designed to match closely the policy preferences of their most important GHG emitting industry.
2015
This dissertation studies the emergence of carbon pricing mechanisms at the sub-federal level in Canada in order to answer two questions. First, why have some Canadian provinces adopted carbon pricing instruments, either a cap-and-trade or a carbon tax, while others have not? And, second, of the provinces that have adopted carbon pricing, how can we explain differences in the design of their carbon pricing instruments? In order to answer these questions, the dissertation has investigated the process of adoption of climate change policy in Canada’s ten provinces through four distinct stages: 1) the diffusion of the ideas supporting carbon pricing, 2) climate policy capacity building, 3) the public debate following the proposition of carbon pricing by the governing party, and 4) the design of the carbon pricing instrument. After reviewing the climate change policy-making processes that have taken place in the provinces, the dissertation’s answer to the first question is that carbon pricing instruments to reduce greenhouse gas (GHG) emissions have been adopted in provinces in which the government has shown early on an acceptance of both the scientific paradigm of anthropogenic climate change (ACC) and the policy paradigm of liberal environmentalism (LE)—the latter promoting market-based climate policy. These provinces are also the ones in which the premier has shown a personal commitment to the issue of climate change: a commitment which has contributed to focusing resources on the issue and to building climate policy capacity ahead of other provinces. Among provinces that have adopted carbon-pricing, climate policy is framed as providing important economic benefits through the creation of carbon markets and fostering investments in the renewable energy industry and other green technologies. In order to adopt carbon pricing instruments, both the diffusion of ACC and liberal environmentalism, along with the building early on of climate policy capacity, are necessary conditions. The dissertation’s answer to the second question is that provinces, although to varying degrees, have designed their carbon pricing instruments in order to take into consideration the particularities of their economic context and the policy preferences of their main industrial emitters. While some provinces, such as Quebec in imposing a cap-and-trade system, have been willing to go well beyond what their industries have been ready to accept, at least initially, others have adopted carbon pricing instruments designed to match closely the policy preferences of their most important GHG emitting industry. Tracing provincial climate change policy-making process through the two stages of the public debate of carbon pricing proposal and their adoption shows the political contingency of carbon pricing mechanisms being adopted. Carbon pricing instruments are adopted in different contexts—but in all cases they are adopted when political conditions facilitate their adoption. Facilitating political contexts are 1) majority governments headed by premiers committed to carbon pricing instruments; and 2) governments enjoying an interparty consensus around the desirability of carbon pricing, which led to a low electoral salience of the issue of carbon pricing. As an example of the first, carbon pricing was adopted and maintained in British Columbia’s polarized bipartisan system and despite the electoral controversy surrounding the carbon tax during the 2008 election. As an example of the second, minority governments that enjoy interparty consensus around the desirability of carbon pricing—for example, Quebec—can adopt carbon pricing instruments during minority government periods. The absence of either condition makes carbon pricing instruments unlikely. In the Canadian context, three provinces have multiparty systems prone to minority governments: Quebec, Ontario, and Nova Scotia. Both Quebec and Ontario pledged to implement a WCI-inspired cap-and-trade system and experienced minority governments in recent years. However, carbon pricing was not an electoral issue in Quebec, given the consensus that existed on the implementation of cap-and-trade among the main political parties. In the case of Ontario, such interparty consensus does not exist and carbon pricing became an electoral issue in the 2011 election. Along with other taxation and energy issues, part of the Conservative campaign narrative against the Liberal government. The example of British Columbia shows, however, that provincial governments can persist in the adoption and implementation of carbon pricing despite public controversy, as long as they maintain a majority government, which is the usual outcome of the BC polarized party system. Alberta, before the most recent provincial election, was in a similar situation and the issue of carbon pricing was not salient. However, in Ontario the Liberals only secured a minority government in the 2011 election, a more likely outcome under the Ontario multiparty system, and the decision was taken not to proceed with the implementation of the cap-and-trade system in the aftermath of the 2011 election. The Quebec PQ minority government was in a similar position after the 2012 election. However, thanks to the interparty consensus on carbon pricing and low issue salience, the Quebec government decided to move forward on the cap-and-trade system. A comparison among the cases of Quebec, British Columbia, Alberta and Ontario shows the importance of the political context in the adoption of carbon pricing instruments, insofar as adoption which appears to be much more vulnerable in provinces with a fragmented multiparty system. It allow us to predict that now that the Ontario Liberals have secured a majority, they will be able to proceed with the full adoption of a cap-and-trade system, as per Ontario premier Kathleen Wynne’s stated intentions. Moreover, if the interparty consensus in Quebec is compromised and another minority government elected it could jeopardized current carbon pricing policy. Considering now the final stage of the climate policy-making process—the design of the carbon pricing instrument—the presence of the oil and gas sector emerges as a major factor that shapes the development of carbon pricing in provinces in which this sector plays a significant role in the provincial economy. Oil and gas producing provinces that have adopted carbon pricing instruments have designed their carbon pricing instruments so as not to constrain the profit-making capacity of the oil and gas sector. Alberta’s intensity-based emissions trading and British Columbia’s carbon tax do not restrict the growth of industrial GHG emissions and, to date, have allowed the oil and gas sectors to continue to grow. In British Columbia and Manitoba, the growth of the oil and gas sector appears to have prevented these two provinces from fully adopting the cap-and-trade system designed through the Western Climate Initiative (WCI). By contrast, Quebec has resisted the development of shale gas and proceeded with the adoption and implementation of its cap-and-trade system in the framework of the WCI. This dissertation has also investigated how party ideology and public opinion affect governing parties’ incentives to adopt carbon pricing instruments. It finds that public opinion majority support does not explain the adoption of carbon pricing. Carbon pricing instruments have been implemented in provinces with high (Quebec) but also low (Alberta) levels of support for these policies. Furthermore, carbon pricing instruments have not always been adopted in provinces with relatively high level of public support (such as Ontario). Finally, there is no clear relationship between the governing party’s ideology and carbon pricing. Carbon pricing instruments have been supported by right-wing, centrist and left-wing provincial political parties, while the BC NDP and the Ontario and federal conservative parties have opposed it.
The Greenhouse Gas Emissions Coverage of Carbon Pricing Instruments for Canadian Provinces
The School of Public Policy Publications, 2019
The Government of Canada first announced its intention to implement a nation-wide carbon price in October 2016. After two years of announcements, retractions, discussions and debate, the rollout of carbon pricing in each province was finalized in October 2018: the federal government announced its assessment of proposed and implemented provincial carbon pricing plans. We now can compare the coverage, stringency and efficacy of provincial climate policies, and to consider how they measure up with each other and with the federal government’s standards. This paper focuses primarily on provincial systems’ emissions coverage: the share of emissions subject to a carbon price. The federal government has set a pricing benchmark, the minimum level of emissions coverage that provincial pricing policies are required to meet. The federal backstop — consisting of a carbon tax and output-based pricing system (OBPS) for large emitters — is imposed on provinces whose policies don’t measure up to the federal benchmark. We examine how the coverage of implemented, announced and former provincial pricing policies measure up to the benchmark and backstop. Using reported emissions data for each province from 2015, we provide an estimate of emissions coverage in each province from the policies in effect in 2019.
Obstacles to Carbon Pricing in Canadian Provinces
Report prepared for Sustainable Prosperity, 2014
Key messages: • Market-based instruments (MBIs), either under the form of emissions trading or carbon taxation, have been increasingly popular in OECD countries and, in Canada, at the sub-national level. • Québec, Alberta, British Columbia and, to a lesser extent Manitoba, have all successfully adopted and implemented carbon pricing policies, while Ontario and Saskatchewan have proposed to adopt MBIs though implementation has not yet proceeded. • The implementation of MBIs began in 2007, after the Harper government decided not to implement any such instrument at the federal level, allowing provinces to experiment without creating redundant carbon pricing schemes. • Three important types of obstacles to the adoption and implementation of MBIs are identified amongst Canadian provinces: administrative obstacles associated with a lack of environmental and climate change policy capacity, political obstacles associated with the provincial party system and salience of MBIs during elections, and finally economic obstacles, especially the policy preferences of main provincial industries. • MBIs remain popular amongst Canadians and different strategies can be adopted to overcome obstacles to their implementation. Policy capacity can be secured rapidly through inter-jurisdictional cooperation and/or by using central agencies such as the ministry of finance or specialized regulatory bodies rather than environment ministries. In provinces where resistance to market-based approaches is more significant, a narrow-based carbon tax or limited form of emissions trading (such as credit-based emissions trading) can be implemented as a first step toward a more comprehensive and effective market instruments. These instruments can also be used to augment financial resources to increase climate change policy capacity or funding for new technologies that might, in the long run, help reduce compliance costs associated with more stringent MBIs.
Overview of Quebec & California’s Carbon Market: 2015 update
EIC Climate Change Technology Conference 2015, 2015
This paper provides a concise overview of the emissions trading system that has been launched in California and Quebec. Though very much the product of state and provincial legislation, the cap-and-trade systems of California and Quebec operate under guidelines of the Western Climate Initiative (WCI), a voluntary subnational intergovernmental organization initiated in 2007. The paper provides information on emission trends in California and Quebec, summarizes key design elements of the cap-and-trade system as well as the expected benefits of trading between the two jurisdictions as well as a summary of complementary policies. Successful implementation of a linked cap-and-trade system in California and Québec could also provide a blueprint for an eventual federal or even continental carbon pricing mechanism. Keywords: cap-and-trade, California, Quebec, Western Climate Initiative.
IMF Working Papers
The pan-Canadian approach to carbon pricing, announced in October 2016, ensures that carbon pricing applies throughout Canada in 2018, with increasing stringency over time to reduce emissions. Canadian provinces and territories have the flexibility to either implement an explicit price-based system-with a minimum price of CAN 10pertonneofcarbondioxideequivalentin2018,increasingtoCAN10 per tonne of carbon dioxide equivalent in 2018, increasing to CAN 10pertonneofcarbondioxideequivalentin2018,increasingtoCAN50 per tonne by 2022-or an equivalently scaled emissions trading system. This paper discusses the rationale for, and design of, the price floor requirement; its (provincial-level) environmental, fiscal, and economic welfare impacts; monitoring issues; and (national-level) incidence. The general conclusion is that the welfare costs and implementation issues are manageable, and pricing provides significant new revenues. A challenge is that the floor price by itself appears well short of what will be needed by 2030 for Canada's Paris Agreement pledge.
THE CASE FOR A CARBON TAX IN ALBERTA
In 2007, Alberta demonstrated that it could be a leader in the effort to reduce greenhouse gas emissions by becoming the first North American jurisdiction to put a price on carbon. Given that the province had long been criticized for its central role in the carbon-based economy, Alberta's move was important for its symbolism. Unfortunately, the emissions policy itself has delivered more in symbolism than it has in actually achieving meaningful reductions in greenhouse gas emissions. The Specified Gas Emitters Regulation (SGER), as the carbon-pricing system is formally called, has only helped Alberta achieve a three per cent reduction in total emissions, relative to what they would have been without the SGER. And emissions keep growing steadily, up by nearly 11 per cent between 2007 and 2014, with the SGER only slowing that growth by a marginal one percentage point. Alberta's carbon-pricing policy simply fails to combat emissions growth; the province needs a new one. Lack of progress in reducing emissions appears to be partly attributable to the fact that many large emitters find it more economical to allow their emissions to rise beyond the provincially mandated threshold, and instead are purchasing amnesty at a lower cost through carbon offsets or by paying the levies that the SGER imposes on excess emissions. But it is also partly attributable to the fact that the SGER only applies to large emitters who annually produce 100,000 tonnes of CO2-equivalent all at one site: mainly oil sands operations and facilities that generate heat and electricity. This excludes operations that emit well over that threshold, but across diffuse locations. The transportation sector, which is typically spread out in just such a way, is the third-largest sector for emissions in Alberta. Its emissions are also growing faster than those of the mining and oil and gas sector, even as emissions in the electricity and heat generation sector are actually declining. And if we combine the emissions from the transportation sector with those of the manufacturing and industrial sector, which can also be characterized by scattered operations, they substantially exceed those of the electricity and heat generation sector. Indeed, over 58 per cent of Alberta emissions come from places other than oil and gas and mining. There will surely be those who prefer strengthening SGER to a carbon tax; this is not likely to make enough of a difference for Alberta to meet its carbon-reduction goal of 218 Mt by 2020. The government would make far more progress by implementing a broad carbon tax, similar to the one in British Columbia, which applies to all emitters and consumers. The cost to the economy would not be steep: For a 20pertonnetax,thecostwouldbe0.9percentofgrossoutput(or1.7percentat20 per tonne tax, the cost would be 0.9 per cent of gross output (or 1.7 per cent at 20pertonnetax,thecostwouldbe0.9percentofgrossoutput(or1.7percentat40 a tonne). And the cost to households would be less than $700 a year. As in B.C., the proceeds would be better recycled in the form of reduced corporate income taxes, personal taxes, and subsidies to low-income households, to offset the extra burden and distortions a carbon tax would create. But unlike the current SGER, a carbon tax would succeed in being more than a symbolic, largely futile gesture.
2014
Global increases of greenhouse gas (GHG) emissions, particularly over the last fifty years, have put climate change mitigation on the international policy agenda. There is a general consensus that carbon dioxide from fossil fuel combustion, accounting for approximately 80 percent of total GHG emissions, is the main cause of global warming. Increasingly, policymakers have coalesced around market-based policies as the most efficient means of lowering emissions. This analysis looks at one of these policies, the carbon tax policy in British Columbia, and assesses its effectiveness to date. Implemented in 2008, this policy is the most expansive climate change mitigation policy currently in existence in the Western Hemisphere. In order to assess its effectiveness, this analysis employs a fully specified difference-indifference in difference model that controls for provincial-level, time, and economic sector fixed effects. Unlike most other studies of the policy, this analysis finds no evidence of a relationship between implementation of the carbon tax policy and the province's per capita emissions totals.
Climate Policy Resilience in the Canadian Provinces: Carbon Pricing in Quebec and British Columbia
The Canadian provinces have taken critical steps to address climate change in the absence of federal leadership. Since 2006, five provinces have adopted carbon pricing instruments, under the forms of either carbon taxes or emissions trading. In the context of recent policy reversals—including the repeal of the British Columbia cap-and-trade legislation and the shift from a carbon tax to a cap-and-trade system in Quebec—how can we explain that some carbon pricing instruments have been more resilient than others? The paper answers this question by using a combination of process tracing and comparative analyses while investigating four cases of carbon pricing instruments in Quebec and British Columbia. To shed light on these cases, the paper applies the concept of policy resilience, understood as the outcome of both negative and positive policy feedback cycles interacting with the design of policy instruments. It also introduces a distinction between micro-level policy feedback—observed at the level of the policy sub-system—and macro-level policy feedback—observed in public debates, generally involving political parties. Recent developments in British Columbia and Quebec lead us to conclude that the carbon policy instruments that have proven the most resilient so far—the BC carbon tax and the Quebec cap-and-trade system—have relied on sophisticated design and adhesion mechanisms. Such design allows them to foster positive policy feedback, by creating constituencies that support them, and disrupt coalitions that oppose (or could have oppose) carbon pricing instruments. While the distinction between micro and macro-level feedback proves useful to better describe the dynamic at play in each case, the interactions between the different level of policy feedback and their impact on carbon pricing resilience were found to be complex and in some cases, especially the BC cap-an-trade, counter-intuitive. These findings underline the necessity to pay close attention to the evolution of the ideational, institutional, and structural contexts surrounding the policy-making process, which can also have an impact on policy resilience.