In December 2016, the federal government and all but two province and territories adopted the Pan-Canadian Framework for Clean Growth and Climate Change, a national plan to meet Canada’s emission reduction target. It is an ambitious effort that rightly focuses resources and attention on one of the most pressing ecological and economic issues of our day. But a crucial piece of the plan is missing.
The Pan-Canadian Framework mentions in passing the need to minimize the competitiveness impacts of climate policies. If offers, however, no concrete details on what the federal role will be to ensure businesses and jobs stay within Canada. Instead, First Ministers will review a report in 2020 to consider approaches and best practices to address the competitiveness of only one part of the economy, emissions-intensive businesses that are highly exposed to trade.
The new U.S. administration has dramatically changed the conversation over economic competitiveness. With proposals ranging from changes in environmental regulation, imposing a border tax, reductions in corporate taxes and renegotiating NAFTA, politicians south of the border are moving aggressively to improve their country’s competitiveness. Many Canadian businesses are deeply concerned that, without a similar plan to lower costs and take full advantage of opportunities, they will increasingly be at a disadvantage, threatening jobs and tax revenue. New climate policies, particular carbon taxes or trading systems, are being imposed at a time of anxiety for Canadian business community.
2020 is too late for governments to adopt a plan to address Canadian competitiveness in a new era of climate policies. We need a frank discussion of the possible competitiveness impacts today. On March 16, we are launching a project to develop recommendations for how governments can move forward with climate policies while protecting the competitiveness of Canadian businesses. In our first roundtable in Calgary, we will start the discussion by exploring five major themes.
Put the money towards the mission
Higher costs for everyone can only be justified if these revenues are applied to the mission at hand: reducing greenhouse gas emission at the lowest cost to the economy. Revenues from carbon pricing must be used to ease the transition to a low carbon economy. Otherwise, governments are just using climate as an excuse to raise taxes.
Carbon pricing OR regulations, not carbon pricing AND regulation
Economic analysis indicates that carbon pricing is the least costly way to reduce an economy’s emissions. When choosing carbon pricing, governments should trust the market and ensure the regulatory regime is not adding undue costs to business.
Remember the goal is to reduce global emissions, not meet targets
Focusing too narrowly on achieving national or provincial and territorial emissions targets may lead governments to miss opportunities to reduce global emissions through trade or other forms of international cooperation. Canada’s relatively emissions-free electricity grid creates a unique opportunity for the production of low-carbon commodities and manufactured products and services. By supporting low-carbon projects in nations, governments or business can often reduce emissions at lower costs then what could be achieved within Canadian borders.
Invest in negative emissions technologies
While in many sectors low-carbon alternatives are increasingly available, fossil fuels will continue to play an important role in the economy for years to come. Offsets and technologies that remove emissions from the atmosphere could play an important role in allowing Canadians the benefit of many goods and services supported by fossil fuels while making progress towards their emissions goals.
Consult with business
Ultimately, businesses are the ones that will be leading the transition to a low-carbon economy. Governments must be transparent about the economic analysis behind their policy and program development, making sure that businesses of all sizes know what impact they will have on costs.
To effectively deal with climate change, our leaders must have their hearts with the environment, but their heads in the world of business. Our project will provide governments across Canada practical advice on how to truly achieve greener growth.
For more information, please contact Katrina Marsh, Director, Environment and Natural Resource Policy.