Canada’s Ecofiscal Commission is a group of independent, policy-minded economists from industry, environment and broad political thought who seek to inform the public and policy-makers of necessary ecofiscal policy reform required for economy and environment to work together for our future. This Commission has long proclaimed the need for cost-effective policy to achieve Canada’s environmental objectives.
On November 23, 2019, the Commission released a report entitled ‘Bridging the Gap: Real Options for Meeting Canada’s 2030 Greenhouse Gas Target’ to inform the climate debate with the latest evidence and new economic modeling options needed from the federal government. These economic models are needed to toughen climate policies in order to reach the 2030 target of reducing greenhouse gas emissions(GGEs). This report came out the same week as the UN Environment Programme’s yearly Emissions Gap Report which assesses the gap between anticipated emissions for 2030 and now. The UN report shows the world having agreed to limit warming to 1.5C degrees in 2015, now moving instead toward 3.2C. It also states Canada’s current gap of 15% in reaching its carbon reduction target.
The Commission Report indicates if governments want to meet their climate goals with the least cost, they should rely on increasingly stringent carbon pricing. Canada will need to quadruple its carbon tax to C$210 per tonne by 2030 – enough to raise gasoline prices by about 40¢ per litre – if the government relies solely on pricing to hit its 2030 target and rebate the revenues to consumers. Canada’s carbon tax is currently proposed to rise to $50 a tonne by 2022.
It goes on to say if policymakers choose not to close the gap to Canada’s emissions target using carbon pricing alone, flexible but stronger regulations can be combined with carbon pricing policies to collectively achieve Canada’s target. Policies would mean, for instance, halving emissions from industrial production by 2030 from 2010 levels and as of 2020, all new equipment in buildings installed reflecting zero emissions. ‘Historically, climate policy approaches in Canada have relied on a mix of flexible regulations, prescriptive regulations, and subsidies that commonly overlap in coverage, creating duplication and higher costs.’
The report discusses the visibility of the three main types of climate policy instruments to focus on given factors such as how simple or complex they are to understand, or how directly or indirectly households and businesses experience the costs. For instance:
1) Carbon pricing attaches an explicit price to emitting GGEs. As a result, households and businesses can often easily connect rising fossil fuel costs to carbon pricing.
2) Regulations, however, impose costs on emitters by requiring actions they would not otherwise have taken to reduce emissions. For example, a higher emission-intensity standard for electricity generators will increases costs for aluminum producers; manufacturers that are large consumers of aluminum likely notice the price increase but households are unlikely to associate regulations with the cost of a can of pop.
3) Subsidies require public funds to reward emitters that purchase or adopt low-carbon alternatives such as heat pumps and better-insulated windows but the costs are hidden. In any event, the costs of subsidies ultimately falls on taxpayers as governments can only finance subsidies through increased taxes, spending cuts, or taking on more debt.
Activity Rating: *** Moving Forward
This report scales up policies implemented or proposed for Canada to meet the 2030 target primarily with carbon taxes and regulations. It recognizes but discourages subsidies, since using taxes to fund them can reduce investment and result in lower economic growth.
To request action, please contact Minister Wilkinson with the following message:
A year ago, your Ministry advised that its existing menu of policies leaves the country 79 million tonnes short of its 2030 targets. In November, Canada was noted among the three members of the G20 least likely to reach their 2030 climate targets. In preparing for G26 deliberations, Canada has less than a year to move its ambition forward and reach its existing 2030 targets earlier. Please examine the Commission’s report fully for gap solutions.
The Honourable Jonathan Wilkinson, Minister of Environment and Climate Change
Mail: House of Commons, Ottawa, ON K1A 0A6
Tel: 1 613 995-1225
For more information, please email Climate Scorecard Canadian Country Manager: Diane Szoller at Canada@climatescorecard.org.