September 7, 2015 by Rohan Nongpiur
Carbon pricing matters but it can’t do everything.
Ontario announced recently that it will be putting a price on carbon with a cap-and-trade system. And this fall Ontarians will find out the details of that. But as the government plans its climate change strategy, it needs to recognize that carbon pricing can’t do it all.
To be clear, carbon pricing is a good thing and a critical tool in the fight against climate change. And it’s important to debate the specifics of carbon pricing, because design matters, a lot.
But, as important as carbon pricing is, in the fight against climate change, a price on carbon is necessary, but insufficient.
Here’s why: if carbon pricing is the only mechanism used to reduce emissions, the price on carbon pollution needs to be really high. Well over $100 per tonne and perhaps in excess of $200 per tonne of CO2.
That kind of carbon price just isn’t on the table right now. Ontario has joined Quebec and California in the Western Climate Initiative, where the price on carbon is just over $15 per tonne. That price is scheduled to rise, but it will take a long time to crest the $100 mark.
In British Columbia, which has the highest carbon price in Canada – the price has been stuck at $30 per tonne since 2012 and is not up for review until 2018.
It appears that, as hard as it may be for governments to take action and put a price on carbon, it is equally as challenging to ratchet that price up to the level that economists agree is needed in the absence of other policies. And, sadly, it looks as though the correlation between B.C.’s carbon tax and emission reductions it is credited with may have started to fade since the price was frozen.
That doesn’t mean carbon pricing isn’t important. It just can’t do it all, which means that other policies need to be part of Ontario’s climate change strategy.
And that’s why earlier this summer we gathered with 150 stakeholders, from industry, labour, farmers, health charities, businesses and others, to talk about and make recommendations for Ontario’s climate strategy.
We mined the expertise of Ontarians who specialize in transportation and land-use planning, heavy industry, energy efficient buildings, municipalities, the health impact of climate change, clean tech and innovation, and generated a list of tangible actions that, in the opinion of a diverse set of stakeholders, must also find their way into Ontario’s climate strategy.
The climate strategy needs to enable actions like transitioning to a 100-per-cent renewable electricity system. It needs to inform how Ontario’s communities grow, and how transit plans and municipal plans account for and enable lower carbon living. It needs to recognize that climate change is also a pressing health issue that is already impacting people’s health. And it needs to really drive energy efficiency, for example, by requiring energy reporting and benchmarking for large buildings as well as energy audits and energy report cards for homes.
The strategy also needs to consider how to enable investors and consumers to take carbon into account, for example, by requiring pension funds to disclose their carbon footprints or by requiring large companies to report on their carbon profiles. And the strategy must also bring everyone – First Nations, low-income Ontarians, workers, urban and rural citizens – along.
If we’re really going to address the issue of rising carbon emissions, we need to have a comprehensive approach. From cleaner air to new business opportunities to less congestion on our roads, we need to see the benefits that come with climate action. For example, how can Ontario capture a larger share of what analysts at McKinsey and Co. say is the largest business opportunity in a century?
A comprehensive approach that spurs greater energy conservation or leads to fuel switching can help reduce emissions while keeping the carbon price low, which is important since it seems that we can’t bear a price as high as what economists say is needed.
It’s worth noting that California’s cap-and-trade program is only expected to yield 16 per cent of the total reductions in the state. The rest come from the other elements in their strategy.
Ontarians support climate action. And they have good ideas about how we can reduce our emissions in a way that cleans our air, generates new opportunities for businesses and creates jobs. A lot of good ideas have just been sent in to the province. We hope they get the attention they deserve.
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