EDITOR’S NOTE: This is the first in a series of articles from climate and energy policy economist Jennifer Winter about the federal political parties’ climate plans.
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Political party election platforms are generally long on aspirations and short on detail. This can make them challenging to evaluate, especially compared to lengthy (and oh so detailed!) policy documents, laws and regulations. The Conservative platform is no exception, spending eight pages on 13 different policy areas, including zero emissions vehicles, industrial emissions, technology investments and a low carbon fuel standard.
The best part about the Conservative climate plan, Secure the Environment, is that there is one.
The climate section of the platform is little different from the climate plan the Conservatives released in April 2021. However, as noted by several climate thought leaders in April, this plan is very different from the Conservative platform in the 2019 election. Fellow economist Andrew Leach noted then that the 2019 plan was a promise to do “nothing that costs anyone anything” and “nothing to disrupt the status quo.”
Better late than never
So kudos to the Conservative Party for (finally) taking climate change seriously and putting forth a credible plan that stands a chance of meeting Canada’s emissions reduction commitments. Better late than never! It means right-leaning voters that care about the environment and climate finally have a reasonable option on that side of the political spectrum.
Another major positive of the Conservative plan is that it acknowledges that Canada “has a working system to reduce carbon emissions from industry” and commits to not “chang[ing] the rules just for the sake of change.”
This commitment to policy certainty — with any change requiring greater emissions reductions — is incredibly important for investment certainty. For industry, particularly those considering large capital investments in long-lived and low-emissions projects or emissions-reducing investments like carbon capture and storage, confidence that Canada will commit to increasingly stringent climate policy is essential.
Some (really) bad ideas
At the same time, however, the plan also creates policy uncertainty by explicitly stating a Conservative government would eliminate the planned Canadian industrial emissions pricing path (to $170 per tonne by 2030). Instead, the price would be tied to that of trading partners: the European Union and the United States. Both currently have a cap and trade system, though in the U.S. it’s only in California. (The Conservatives promise to revisit this idea after two years if Canada is not on track to meet 2030 emissions reduction commitments.)
Shell Canada’s Quest carbon capture and storage project at the Scotford Upgrader north of Edmonton. Convincing investors to back long-term projects requires certainty, and the Conservatives’ climate plan lacks that, says economist Jennifer Winter. (Jason Franson/The Canadian Press)
On the face of it, this may seem like a good idea. A price on emissions tied to that of trading partners means Canadian firms face the same price as their international competitors, levelling the playing field. In reality, it’s a spectacularly bad idea.
Why? A carbon tax creates price certainty through a set price schedule that everyone knows about and takes into account when making investment and consumption decisions. There is (some) uncertainty in emissions reductions, since we don’t know exactly how much firms and households will respond to that carbon price.
Cap and trade systems, on the other hand, have a set allocation of permissible emissions in any given year, and the emissions price is determined by firms trading their emissions permits. There is quantity certainty, but not price certainty.
Tying the Canadian industrial emissions price to a price determined by other countries’ cap and trade systems is the worst of both worlds: it eliminates the price certainty (and investment certainty for businesses) and eliminates any certainty about expected emissions reductions, because there will be no restriction on the quantity of emissions. Like I said, a spectacularly bad idea.
The second major questionable component of the plan is the personal low carbon savings account, which would replace the current federal fuel charge on combustion emissions.
Instead of the government collecting the carbon tax revenue (and distributing it independent of individuals’ consumption choices), under the Conservatives’ plan, someone buying a tank of gasoline would have the equivalent revenue placed in their “savings account” to use for low carbon purchases. The more gasoline one purchases, the more one has to spend on green items.
The incentives here are interesting to consider. Would individuals avoid purchasing fossil fuels to avoid the restrictions of the savings account? Or would fossil fuel purchases increase in some strange state of the world where the savings account allows access to discounted green purchases?
The Conservatives’ plan to replace the Liberal carbon tax with a carbon savings account would move us from a simple system of incentivizing emissions reductions to a complex and restrictive one that makes life more complicated, not less, says economist Jennifer Winter. (CBC)
Aside from the bureaucracy involved (which seems horrendous), this moves from a simple system of incentivizing emissions reductions to a complex and restrictive one that makes life more complicated, not less. This, perhaps, seems like change for the sake of change. But it’s not surprising, given their years of vehement opposition to carbon pricing.
The commitment to work with the Biden administration on vehicle emissions standards and standards for industrial emissions also creates policy certainty. Policy harmonization lowers trade barriers and improves economic growth.
But, it can also be an excuse for doing nothing, or doing something very slowly. This appears to be part of the Conservative approach to climate policy; on the one hand, the platform claims a Conservative government will meet Canada’s Paris commitments. But on the other hand, they will delay increases in policy stringency unless the U.S. moves too. This suggests they view Canada’s commitment as contingent on U.S. action, rather than a firm promise.
We typically think of conservatives (both small-c and big-C) as being in favour of smaller government and market-based solutions. Not all environmental problems can be solved by market-based solutions, but many can.
The Conservative platform acknowledges “the most efficient way to reduce our emissions is to use pricing mechanisms.” And then it proposes several policy changes to move away from a market-based approach. (Not to mention calling the carbon price “arbitrary” when in fact the increase to $170 per tonne is based on meeting the 2030 targets while minimizing the cost of doing so.)
This is an inconsistent approach to policy, and a significant inconsistency in messaging. This Conservative plan is better late than never, and certainly better than the last one, but on many of the key climate policy issues it appears to be merely change for the sake of change.
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