Developing an effective national climate strategy that won’t damage our economy is one of the most important challenges our new government is faced with. Canada can become a leader on the climate without hurting our economy but only if our competitiveness is protected.
1. Ensure a minimum national carbon price of $30 per tonne starting in 2016 applying to at least 70% of all Canadian emissions.
B.C. already has a $30 carbon price, and Alberta will have a carbon price of $30 on some industrial emissions by 2018. This is close to the levels that Environment Canada, the U.S. Environmental Protection Agency and others have estimated as the “social cost of carbon” – the price in today’s dollars of potential climate impacts in the future. The Government of Canada should set this as a baseline price for future carbon policy across Canada.
2. Encourage provinces to implement their own carbon pricing systems with a $30 per tonne base price.
The federal government should allow each province to bring in a system that meets its own needs, and each province should be able to use the revenues as they see fit (although in our view the best use of revenues is refunding them to businesses and families as tax cuts) – as long as those systems are compatible with each other and reflect the $30 minimum price. Provinces choosing a cap and trade system instead of a simple fee, will need to show that at least 70% of their in-province carbon emissions is being priced at an average of $30 per tonne.
3. Where provinces do not act, or do not take sufficient action, the federal government should bring in a minimum $30 per tonne price.
If provinces decide not to implement a broad based carbon price, the federal government must ensure a level playing field. Therefore, in provinces that don’t bring in a carbon price in the $30 per tonne, the federal government should step in and bring in a $30 per tonne carbon fee modelled on British Columbia’s. Where provinces take partial action – a carbon price at a lower level or covering less emissions than the B.C. system – the federal government should bring in a carbon fee that makes up the difference. If a province brings in or increases its own carbon price, than the federal carbon fee should be reduced accordingly.
4. Commit to increasing that carbon price by 10% a year.
To achieve the emissions goals Canada has already committed to, we will need carbon pricing to rise to a sufficient level to lead to real changes in energy use and carbon emissions. A $30 carbon price is a good start, but it is not sufficient – consumers and businesses alike need a long-term price signal to encourage adoption of cleaner energy and less emissions intensive products and industrial processes.
5. Send all revenues raised within a province back to that province.
Carbon pricing should not be a revenue-raising tool for the federal government. The purpose of carbon pricing is to change behaviour and create market incentives for consumers and businesses to use less carbon, not to fund government programs. Therefore, any revenues raised by a federal carbon fee (which only happens if a province chooses not to act sufficiently on its own) should be returned to the citizens of the province those revenues were collected in – whether this is done in the form of a direct rebate or tax credit to citizens, or simply a transfer to the provincial government.
6. The federal government should implement border carbon adjustments to keep carbon intensive Canadian industries competitive.
To keep our trade sensitive industries competitive, the federal government should charge tariffs on imports of carbon intensive products or rebate carbon fees paid on exports at the border. Under international trade rules, this is a more appropriate role for the federal government to play than for provinces to do on their own.