On April 7, 2015, Canada’s Ecofiscal Commission (“Ecofiscal”) released its report called “The Way Forward: A Practical Approach to Reducing Canada’s Greenhouse Gas Emissions” (the “Report”), which discussed the most cost-effective and practical approach to lowering greenhouse gas emissions in Canada. Some key points from the Report include:
- Given the significant cost to Canadians from delaying policy action on climate change, the Report emphasized that the question facing Canada today is not “if” greenhouse gas reductions must be accelerated, but rather “how”;
- The fastest and smartest way to get Canada on track to reducing greenhouse gas emissions is for every province to put a price on carbon, especially given the fact that some Canadian provinces have already gained momentum through existing or emerging policies;
- Making the best design choices possible for new and existing provincial policies is crucial to success. Ecofiscal did not endorse a specific carbon pricing mechanism but suggested that both a carbon tax and a cap-and trade (or a hybrid of the two) can work well. However, the stringency of the policy is significant (i.e. a carbon tax with a very low price or a cap-and-trade with a very high cap will not achieve the emissions reductions required to realize the provincial 2020 reduction goals along with the deeper reductions required in the longer term);
- Broader policy is better policy – the more emitters and emissions are covered by the policy, the more incentives exist to realize all available low-cost reductions;
- Recognizing significant differences between Canadian provinces, policy design can remain customized to provincial context, especially upon initiation of the policy. However, consistency in provincial carbon pricing is desirable in the longer term to ensure overall cost-effectiveness and to guarantee a level playing field;
- There is a role for other levels of government and a suite of regulatory options to address climate change; and
- Carbon pricing should be a fundamental ingredient in any carbon reduction regulatory regime.
As Ontario has announced its intention to price carbon, we will soon have the majority of the Canadian economy (4 provinces) with some aspect of a carbon price. This report is a helpful endorsement of the concept and provides some real food-for-thought.
For more information, click here for a summary of the Report or here for the full Report. The Globe and Mail also reported on it here, with a special article from Chris Ragan here.
Written By Alexandra Kocherga and Laura Zizzo
