Evidence of meeting #139 for Environment and Sustainable Development in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was pricing.
A recording is available from Parliament.
Mr. John Aldag (Cloverdale—Langley City, Lib.)
Mr. Amos, you still have four minutes and 25 seconds.
Liberal
William Amos Liberal Pontiac, QC
For clarity's sake, I'm going to be addressing issues that were raised by the witnesses. I'm going to continue doing just that. The comment was made around domestic repercussions of the quality of the carbon pollution pricing debate, so I think it's germane. The nature of the discourse, the quality and the depth of that discourse, is exactly why I'm asking these questions.
Mr. Cameron, what do you think might be the implications of an overly partisan discourse in the area of pollution pricing on the average Canadian, who doesn't think like an economist and who is trying to live in the real world and is only surfacing to examine some of these public debates at election time?
Executive Director, Clean Prosperity
Let me go back to your previous question for a second. I think there are two levels of discussion that are occurring within the Conservative Party. I've certainly been in dialogue with Conservatives, both federally and provincially, who have been quite sophisticated around questions of carbon pricing or what other alternatives exist to deal with greenhouse gas emissions. But there's a public discourse, particularly in social media, that I think is very negative and very rhetorical. We're trying to deal with a very complicated public policy problem, and it's probably good for all sides to tone down the rhetoric and focus on the substantive policy differences.
Liberal
William Amos Liberal Pontiac, QC
Thank you for that.
Mr. Rivers and Mr. Leach, I wonder if you have any comments to make on the challenges around creating a more positive discourse and the contributions of the opposition. If you have none, that's fine. I have other questions to move to.
Associate Professor, Alberta School of Business, University of Alberta, As an Individual
Let's stick with the substantive policy questions.
Liberal
William Amos Liberal Pontiac, QC
On the issue of jurisdiction, I know none of you are lawyers—that's great—but the issue around the federal jurisdiction to establish a backstop is a central one, and it's going to be played out before courts of appeal in Canada this year and likely next. How important is it to have judicial clarity around the federal government's jurisdiction in order for a pricing mechanism to be effective all across Canada? I ask each of you, anyone who is interested in getting into that issue.
Maybe I'll put it differently. What are the negative repercussions of the inability to have an equally imposed price on pollution across Canada, a baseline, if you will?
Executive Director, Canada's Ecofiscal Commission
I think it's the outcome that matters, from an economic perspective, the consistent, harmonized carbon price across the country, which is the outcome that will minimize costs overall. That coordination could be achieved from the bottom up, between provinces coordinating with each other, or it could be achieved from the top down, with the federal government playing the coordination role. From an economic perspective, it's the outcome of harmonized policy that is most important for minimizing costs.
Senior Fellow, Smart Prosperity Institute
Whether it's federally imposed and they pre-empt their provincial policies or there's bottom-up alignment.... We've done analysis in modelling going back to the national round table in 2008. We found that continued fragmentation increased the cost by about 25%. In the pan-Canadian framework milieu, looking at provincial policies, scaling them up and aligning them, the alignment of carbon pricing knocks about $50 off the carbon price. It's a fairly significant chunk, to the extent that you can basically grab low-cost reductions and various trade reductions within the federation and not strand low-cost opportunities somewhere else.
Associate Professor, University of Ottawa, As an Individual
I would only speak to the economic issue, which is where I have some qualifications to speak. I would echo the arguments the other two have made, which is that the economics field would suggest that we would want to have as level a playing field across the provinces as possible. That would be the role that the federal government is playing in imposing this backstop, to have a consistent playing field across the provinces.
Mr. John Aldag (Cloverdale—Langley City, Lib.)
You're out of time, so we'll move to Mr. Godin.
January 28th, 2019 / 4:25 p.m.
Conservative
Joël Godin Conservative Portneuf—Jacques-Cartier, QC
Thank you, Mr. Chair.
I want to thank the witnesses for being here today.
I think that what really matters, as many of you mentioned earlier, is the result. We're aware of climate change, and we must find solutions to improve our quality of life and the environment.
My question is for all the witnesses.
Have you assessed the Canadian situation? The Canadian situation is as follows. When it comes to the carbon tax, we can't refer to other countries, and I'll tell you why.
Canada is the second largest country in the world. We know that Russia hasn't implemented a carbon tax. To ensure that the carbon tax is the only way to achieve our goals, can you confirm that your research has taken into consideration what other high-density countries with large territories are doing in this area?
Executive Director, Clean Prosperity
I wouldn't say that a carbon tax is the only solution for any country. I think the panellists have said that carbon tax is, at best, part of the solution for Canada, but it's a very important part, putting a price on carbon. In terms of other large countries, China is bringing in place a carbon price starting this year. Australia, which is a very similar country to Canada, had a carbon tax system in place that they removed, but they did it on a national basis, and there is an emissions intensity scheme that they're working on now. It's not true that, simply because a jurisdiction is large, with a large geography, it can't do carbon pricing. I mean, California is as big as Canada in population and also very large geographically, and they have a carbon price. I don't think it stands up that, because we're a large country geographically, carbon pricing isn't a sensible solution for Canada.
Conservative
Joël Godin Conservative Portneuf—Jacques-Cartier, QC
It must be understood that we're not talking about populations here, but about territories.
Conservative
Joël Godin Conservative Portneuf—Jacques-Cartier, QC
It's very important to specify this.
We're not anti-carbon tax. We disagree with the federal government's decision to impose things. It comes with a cost.
It has been demonstrated that three provinces have achieved good results. British Columbia took the initiative, and you all spoke in favour of British Columbia. Alberta has achieved good results. Quebec has decided, for a variety of good reasons, not to apply a carbon tax, but to create a carbon market.
Each Canadian province knows its realities. As I told you at the beginning, our goal is to improve the environment. Wouldn't it be better to equip and support the different provinces and territories in order to achieve the desired results?
Like many people, you said that the carbon tax isn't the solution or that it isn't the only solution. Why does a federation such as Canada, which has the distinction of being a very large country and where the population is concentrated in the southern regions, want to apply the carbon tax uniformly to all the provinces, when the provinces don't have the same reality?
The same is true for economic development. The previous Conservative government had six ministers of economic development. Why? Because there are six different regions. We could extrapolate with more, but at some point, we need to group things together.
I want to hear your thoughts on this.
Associate Professor, University of Ottawa, As an Individual
I'll start.
I think it's important to note that the federal backstop is a backstop. It applies to provinces that don't have a similar regulation. Quebec, which has a cap and trade system, is not affected directly by the federal backstop. The cap and trade system is seen as functionally equivalent to the federal policy, so Quebec is proceeding with its own policy.
There is an equivalence between the cap and trade system that's being used in Quebec and the carbon pricing or levy system that's being used in some of the other provinces. You could think of someone driving a car. The way you're going to experience the cap and trade system in Quebec is through an increase in the price of gasoline in your car, and you'll experience that, as a commuter or a driver in Quebec, in exactly the same way you'll experience it in B.C., which has a tax on carbon. In other words, as a driver, there is no difference in incentives for you to reduce carbon emissions under the policy in Quebec compared to the policy in British Columbia. They're functionally equivalent, and that's why the two policies are both allowed under the federal rules.
Executive Director, Canada's Ecofiscal Commission
I'll chime in here too.
One of the advantages of the pan-Canadian framework is the flexibility it gives to provinces to implement their own carbon pricing policy in different ways. We've seen different levels and different approaches to output-based carbon pricing and output-based performance standards. We've also seen very different approaches to revenue recycling. Different provinces have had different priorities in different contexts that can legitimately justify different approaches to recycling their revenue.
So there is a balance between giving provinces the discretion to customize policy according to their own context, which is important and legitimate, and also moving towards that coordinated, harmonized carbon price across the country to minimize costs overall.
Wayne Stetski Kootenay—Columbia, NDP
Thank you for being here.
I want to talk about British Columbia for a minute. My riding is Kootenay—Columbia, in the southeast corner of B.C.
When carbon pricing in British Columbia comes up, we occasionally hear about different approaches to carbon reduction. I have to say that I have been in favour of pricing pollution, absolutely. We occasionally hear people say that the reason carbon decreased was that the economy was getting into trouble by about 2008 or so, and that was the reason the amount of carbon went down; it wasn't because of the pricing on pollution. We also hear at times that it started to go up because B.C. stopped adding to their price of carbon on an annual basis, which they were doing at one time.
I'd be interested in hearing those of you who have studied British Columbia closely talk about those issues.
Associate Professor, University of Ottawa, As an Individual
I have done some of the studies on British Columbia. There have been lots of other authors who have done similar ones, and they do try to grapple with the issues you're talking about. They try to say that there are all kinds of things that might affect greenhouse gas emissions or people's decisions in British Columbia, so how are we going to try to attribute any change in greenhouse gas emissions to a policy when we know there are all kinds of other things that could be driving that as well?
Basically, what those studies are doing is either taking data on individual households—such as how much gas a household consumes, or how far they drive—or taking data, for example, on gasoline sold each month in a province, and they're comparing it to what's going on in all the other provinces. The recession that happened in 2009, for example, is something that happened in other provinces as well. They try to control for other things that could be driving these trends, in addition to the carbon price, so changes in demographics or population or prices or other things. They're trying to do this comparison of other provinces, and also control for other factors to come out with these findings.
I should say that it's impossible to say with 100% certainty what the effect of any carbon price or any policy anywhere has been because we don't have two worlds. We don't have one world where this carbon price was applied and an exactly similar world where it wasn't applied. What we're trying to do with statistics is to create those different worlds and tease out the effect of the carbon price from those different data.
Kootenay—Columbia, NDP
On balance, are you comfortable that the science would suggest that the decrease in carbon was related, then, to pricing on carbon?
Associate Professor, University of Ottawa, As an Individual
Yes. Half a dozen studies have reached exactly the same conclusion. That suggests the carbon price has reduced emissions from where they would have been without the carbon price. This is not rocket science—the price of gasoline goes up, the price of natural gas goes up, and you expect people to use less of it.
We have thousands of studies on what we call “energy demand elasticities”—demands for natural gas or gasoline or diesel as the price of those fuels goes up or down. We can also use those studies to try to make some inferences. It's not as if a single study came out with this conclusion; there's now quite a robust body of evidence to support this finding.
Kootenay—Columbia, NDP
Occasionally we hear that, to be really effective, we have to go to $200 a tonne. It seems to be a common figure that I've heard over the last few years. Is there an ideal?
Executive Director, Canada's Ecofiscal Commission
I'll take a first shot at this.
Lower carbon prices will drive lower emissions reductions. Higher carbon prices will drive higher emissions reductions. It isn't a question of yes or no, or whether emissions reductions are effective or ineffective. It's a question of degree and of scale.
If the threshold is any emissions reductions at all, then that assertion is incorrect. Even low carbon prices drive emissions reductions, as we've seen in B.C. If it's a question of achieving the target and achieving the national emissions reductions we've set for ourselves, then, as some of the others have said, higher carbon prices or more stringent policies will be required to get those deeper emissions reductions.