Sep 21, 2016

Previewing Canada’s climate action plan


It’s been six months since First Ministers unveiled the Vancouver Declaration on Clean Growth and Climate Change. At the time, the Declaration was somewhat of a disappointment: no new national greenhouse gas reduction target, no consensus on carbon pricing, and a parallel push for pipelines (for a review and analysis, see this post). Basically, Ministers agreed to keep talking and gave themselves until October 2016 to come up with a plan.

Since then it’s basically been crickets chirping. Even the federal gateway for information on climate change and action looks like it has not been updated in many long months. So what’s going on?

The behind-the-scenes action is in four working groups, as set out in the Declaration: (1) Clean Technology, Innovation and Jobs; (2) Carbon Pricing Mechanisms; (3) Specific Mitigation Opportunities; and (4) Adaptation and Climate Resilience. These groups have been meeting over the summer to develop options and recommendations for Ministers. Thanks to the Métis Nation for providing the interim reports for each of the working groups. I reviewed each of these reports to preview what’s on the menu for this Fall’s climate discussions.

The first working group, Clean Technology, Innovation and Jobs, reflects a streak of techno-optimism in the Vancouver Declaration. Politicians love this new technology and innovation theme, even though we know that we can get to our targets with existing technologies. It’s not about waiting for new technology to arrive and save us, it’s about the political will to get over entrenched economic interests, and put us on that pathway to low and eventually zero carbon emissions.

The interim report is disappointing, full of vague references about “accelerating the development of new clean technologies,” but short on what a program would actually look like. Even specific industries are not mentioned in favour of generalities about early research and development; commercialization of research; and adoption of new technology. The feds have long been enamoured with the idea of boosting new technology and innovation—I worked as a federal economist on technology-related issues back in the 1990s, and recognize some of the policy language—but unfortunately it’s as nebulous as ever. The interim report is largely a compilation of the wide range of existing federal and provincial technology-promoting initiatives, none of which have been particularly successful. I suspect that little will come out of this working group that is serious about reducing emissions, at least relative to the hype in the Declaration.

The next couple months will be crucial to Canada’s climate policies going forward, and will tell if Canada will finally begin to walk the talk on climate.

The policy content gets more interesting in the working group on Carbon Pricing Mechanisms. Their interim report provides a decent primer on carbon taxes and cap-and-trade systems, and their pros and cons. It rightly notes that carbon pricing is one aspect of a GHG reduction strategy, and should be viewed as complementary to regulations and standards, and public investment in R&D and infrastructure. Indeed, it provides a long list of reasons why “carbon pricing mechanisms may not be sufficient on their own,” including lack of information, market power, split incentives, lack of capital, and lack of certainty about emission reductions. The interim report also acknowledges (unlike the slogan “we need to put a price on carbon”) that we already have a price on carbon in the form of fuel taxes, ranging from $26.50 per tonne in the Yukon to $82 per tonne in Quebec, and higher still if we include local fuel taxes (Table 1, page 8). Finally, it also raises the potential for using carbon pricing revenues to reinforce climate action and address adverse impacts on certain groups or industries.

That said, the interim report gives no further direction on what approach would be best in the Canadian context. This is where the political conversation comes in, and the interim report merely concludes with a set of principles reflecting the earlier discussion. The federal position on this issue appears to have shifted. In the lead up to the Vancouver Declaration, the federal emphasis was on coordinating provincial efforts, with Saskatchewan premier Brad Wall a notable opponent of carbon pricing. Over the summer, it was reported that Finance Canada was pushing for a national carbon tax in the working group, supported by Finance Minister Bill Morneau, but opposed by several provinces. More recently, Environment and Climate Change Minister McKenna echoed these sentiments about a national carbon tax. Implementing such a tax and ploughing most of the funds into much-needed (green) infrastructure would be a top priority for me, one that aligns nicely with the federal government’s ambitious (and under-funded) promises around infrastructure.

Much of the heavy lifting comes from the third working group, Specific Mitigation Opportunities. The interim report covers a wide range of areas and industries, and is the closest of all the groups to staking out specific policy positions. Its weakest part is around the thorny challenge of large industrial emitters, and the report seems to take as given the expansion of the oil and gas sector. But the interim report also tables measures to reduce emissions from transportation, built environment, clean electricity generation and transmission, forests, agriculture and waste, plus government operations. A lot of these are proposed regulations aimed at fuel switching (especially to clean electricity), improving energy efficiency, and raising energy standards for new cars/homes/products entering the marketplace in the future. These proposals are all conveniently listed in an Appendix.

Will all of this be enough? The working group’s interim report contains a lengthy discussion about purchases of carbon credits (aka offsets) from other jurisdictions, rather than compelling domestic emission reductions. This is problematic and also reflected in some discussion in the carbon pricing interim report. Notably, the governments and Ontario and Quebec have expressed interest in buying carbon credits from California through the Western Climate Initiative cap-and-trade system, and recently signed a deal with Mexico to buy more carbon credits to meet GHG reduction targets. These moves are troublesome, given the problems to date with offsets/credits in international and domestic arenas, from dubious accounting to outright fraud. Others have estimated a limited supply of bona fide credits, as all countries aim to reduce their emissions.

The final group, Adaptation and Climate Resilience, reflects the need to plan for climate change already locked in. It’s a concession that at a global level we have failed to constrain carbon emissions. The interim report provides a good summary of adaptation planning in Canada to date, and its key thrust in terms of recommendations is for major infrastructure investments. Like the need for enhanced infrastructure elsewhere, action requires financial commitment on the part of governments.

In all, there is a wide range of policy measures coming out of the working groups, raising the prospect of meaningful climate action across the country. At this stage it’s hard to say more, as final reports will be drafted this month. Then the fun begins when Ministers have to stake out positions and come to some form of consensus on a pan-Canadian plan.

It is definitely good news that as a nation we are having these high-level discussions, with an unprecedented level of seriousness after a long absence of leadership from Ottawa. At the same time, federal leadership will be tested with pending decisions on proposed LNG export terminals and bitumen pipelines. And we will need a plan that is more than a laundry-list of measures – it has to be able to demonstrate that it concretely lowers GHG emissions on a path that sees us meet specific targets. A new and more ambitious emissions reduction target should also be on the table, something Canada will need to establish sooner or later as part of the Paris Agreement process. So the next couple months will be crucial to Canada’s climate policies going forward, and will tell if Canada will finally begin to walk the talk on climate.