$300-per-tonne carbon tax required to meet climate targets

March 30, 2017 - OTTAWA — Environment Canada told Catherine McKenna early in her mandate as minister that a price on carbon would have to go as high as $300 per tonne in 2050 for Canada to meet its climate targets, a secret briefing document shows.

The document obtained by the National Post, signed off on by the department’s deputy minister, outlined carbon pricing options for the nascent Liberal government in November 2015. The Conservative party obtained the document with an access-to-information request.

To achieve 30-per-cent reductions from 2005 emissions levels by 2030 — the target set by Stephen Harper’s Conservative government and maintained by the Trudeau Liberals — a price of $100 per tonne would need to be in place by 2020.

Based on external modelling, the price would then have to go up to between $200 and $300 per tonne by 2050, government experts suggested.

The numbers are based on a carbon pricing plan beginning in 2015, and assume a carbon-tax-only policy, absent new regulations. Any delays in implementation, the briefing note says, “significantly increase required price.” The seven pages immediately following those numbers are redacted.

The presentation prepared for McKenna contains research not just on carbon pricing but on other systems such as cap-and-trade, which sets a cap on emissions and allows the market to trade limited carbon “allowances” back and forth.

It suggests that using both systems together would “incent emissions reductions at the lowest cost” and “raise significant revenue.” It adds, too, that most studies on carbon taxation elsewhere in the world “have not identified a robust link with negative economic or competitiveness impacts.”

The Liberals ended up promising only a more modest version of the carbon tax, announcing last October that a national floor price of $10/tonne — paid by private-sector emitters — would be established starting in 2018, rising to $50 per tonne in 2022. The full plan, including how much costs will rise in the future, has not been released.

The briefing says “regardless” of what happens with carbon pricing, complementary measures will be needed to meet what is an “ambitious target.”

McKenna’s staff say they are confident targets will be reached with other tools negotiated in the federal-provincial “pan-Canadian framework,” including updated regulations.

“We’re working on a clean fuel standard; we’re working on building codes. We then also chose that we would accelerate the phase-out of coal. And then the significant investment in green infrastructure,” said Marlo Raynolds, McKenna’s chief of staff.

He acknowledged the numbers are what would be needed if carbon pricing was the only measure being used. But instead, the Liberals are pursuing “a portfolio of different policies.”

Raynolds said the government is confident it will meet its climate targets. “The rubber is really hitting the road this year in terms of trying to get these things implemented now.”

Still, they’re not there yet, says expert Andrew Leach, a professor at the University of Alberta who worked at Environment Canada under the Harper government and chaired the panel that advised Alberta Premier Rachel Notley on carbon taxation.

“Unless you’re going to go further than you’ve said so far, in between the years of 2022 and 2030,” Leach said, the government won’t be on track to meet its target. “You’re going to need more stringent policies.”

He said a “disconnect” between climate targets and actual policy is same-old. “It’s not something that is in any way new that there would be this discrepancy between the policies that we’re talking about, so far, and the outcomes of those policies.”

The numbers are in line with what scientists at Environment Canada were telling the previous Conservative government, and what climate experts have been saying for years, Leach said.

The Tories reject a carbon tax altogether, however. Conservative MP Garnett Genuis said the document raises questions about what the government intends to do in the future — “whether that’s further tax increases or coming up with other kinds of policy measures that would have a negative impact on our industry.”

He said the Conservative approach under Harper was to use “binding, intensity-based, sector-by-sector regulations,” and there is no need to introduce taxes. “The Liberal talking point is (that) the only possible action is to increase taxes. That’s the tool they apply to every problem that they see,” Genuis said.

Leach says research shows carbon pricing ultimately has a lower economic impact than other measures, such as regulations or carbon-capture technology, although it is hard to predict how major technological change could impact the equation.

“If you say, ‘I’m committed to this target. What is the way we can do this at the least total economic cost, I can stimulate the most innovation, I can make sure that I am costing the economy the least on average?’ Then your carbon price is the right way to do it,” he said.

He accused politicians of focusing on the “taxation” aspect without looking at facts. Saskatchewan Premier Brad Wall, for example, has been a critic of the federal carbon tax costing hundreds of dollars per tonne, but has been an implicit supporter of carbon-capture and storage technology in his province that is also costing hundreds of dollars per tonne, Leach said.

There are those who believe the Liberals aren’t going far enough. Several environmental organizations and political parties, including the New Democrats and the Greens, believe Canada’s climate target itself is much too weak.

Meanwhile, the Trump administration appears on track to dismantle most of the states’ infrastructure supposed to help mitigate climate change — making for a politically tricky environment.

Provinces will have considerable leeway to decide how they will meet the federal government targets, whether with carbon taxation or cap-and-trade systems.

British Columbia has already had a carbon tax since 2008, now at $30 per tonne, which has been estimated to cost consumers about seven or eight cents per litre at the gas station.

Alberta started its own carbon pricing Jan. 1, at $20-per-tonne, ramping up to $30 per tonne next year. This year, the Alberta government estimates impacts of almost $200 for singles and $360 for a family of four. It offers rebates that will mitigate cost for some households.

The Liberal government has estimated how consumers will be affected by the federal floor price, but they haven’t released the numbers. The Canadian Taxpayers Federation claims average households could see a cost of up to $2,500 per family with a $50-per-tonne price, while estimates from think-tanks and academics put the number closer to $1,500.