These continue to be busy times for those interested in the business and policy of carbon in Canada and elsewhere. Below is a snapshot of some recent developments of note.
NY Climate Week
This week marks the eighth annual climate week in New York City and government officials, academics, industry representatives and other interested parties are meeting to discuss the global transition to a “low-carbon” economy. In the past, the rhetoric around climate change has often been muted. However, the recent ratification of the December, 2015 UN Paris Agreement on climate change matters by both the U.S. and China has brought climate change and in particular, the issue of carbon pricing, into the forefront of both government and industry discourse. The general acceptance of some type of carbon pricing scheme has transformed the key question from “will there be a price on carbon?” to “what will the price on carbon be?” This question of the level or quantum of carbon price will be a central item in the debates in Canada for the months and years to come.
Federal National Carbon Price
The Canadian Federal Government has recently announced its intention to impose a minimum national carbon price on provinces which either fail to adopt their own pricing initiatives or impose initiatives that are inadequate to meet Canada’s commitment under the Paris Agreement. Canada is committed to cut greenhouse gas emissions by 30% below 2005 levels by 2030, the same target set by the previous Conservative government. In spite of calls for a more aggressive target, a recent report by the Pembina Institute suggests that in “even with all national and sub-national climate efforts to date, Canada must bring in new ambitious new policies and/or significantly increase the stringency of existing programs” in order to meet its current target. In support of this premise, several provinces have already implemented their own carbon pricing regimes, namely a carbon tax in British Columbia and Alberta and cap-and-trade policies in Quebec and Ontario, However, many other provinces are firmly against a national regime and Premiers in both Saskatchewan and Nova Scotia have been outright vocal against a national price on carbon.
Quebec and California Cap and Trade Challenges
Even where a carbon policy is in place, there is no guarantee that it will be effective. Look no further than the Western Climate Initiative which links the cap-and-trade schemes in Quebec and California. The legality of California’s cap-and-trade policy is currently undergoing judicial review. As a result and for other nuanced reasons, combined cap-and-trade auction proceeds have returned just a fraction of the expected revenue necessary for each of the governments of Quebec and California to fund their carbon reduction policies. This illustrates the difficulty associated with cross-jurisdictional carbon regime and may spell trouble for Ontario when it looks to join the Western Climate Initiative at the beginning of 2018. While it remains to be seen what unfolds in Canada, California and around the world, the details surrounding carbon pricing and its ability to balance economic interests and climate contingencies is still far from decided and could be one of the biggest policy challenges of our time.