The goal of the Canadian government in pricing carbon, I would say, is threefold. First of all, the government believes that Canada should do it's part along with the rest of the world in trying to mitigate greenhouse gas emissions. Canada, on its own, cannot prevent climate change from occurring. On the other hand, if we fail to act, then it's the government's view that we have no basis to argue that other countries should act. Therefore, the government's position is that we need to act.
Then the question is how we should act. In the pan-Canadian framework, the government, along with first ministers, developed a strategy that puts carbon pricing as a foundational element, but not the exclusive element. The reason for its being a foundational element is that carbon pricing is the most economically efficient way to reduce emissions. This is because it provides maximum flexibility as to how emission reductions occur, as compared to a regulation, for example, that prescribes action or a financial subsidy, which targets certain activities. That's the basic reason for choosing carbon pricing.
On the other hand, the pan-Canadian framework also includes complementary regulatory measures and spending. Complementary regulatory measures are needed to address issues that can't be addressed by pricing. In some cases pricing simply won't work. In other cases pricing might not work fast enough. Therefore, we want to ensure, for example, that energy generation utilities no longer invest in coal-fired electricity generation facilities. Those are multi-million dollar facilities that have a lifetime of decades. In order to ensure that no new facilities are built, and then to ensure that they not continue to operate for another 20 or 30 years, or to avoid having them built and then mothballed and basically putting all that money in stranded capital, the government has elected to also regulate certain activities. Then, in addition, to address some well-known market failures or challenges in stimulating innovation in technology, the government has also chosen to provide financial support for clean technology.
That's the overall approach. Then, what's the risk of not including carbon pricing in that suite of activities? The simple answer is that if we take the first point, that we need to do our part, that we need to reach our Paris goal, the alternative would be to choose some other suite of measures that doesn't include carbon pricing to achieve that goal. Those measures by definition, in the absence of carbon pricing, would cost the Canadian economy more because they would be less efficient.