There is no place where the nonsensical, ideologically-driven agenda of the Harper Conservatives runs more spectacularly aground on the shoals of the environment, economics, and even reason and consistency, than in the case of carbon pricing.
It is indisputable that the world is rapidly nearing a climatic tipping point, based in large measure on carbon dioxide emissions from fossil fuels. Indeed, there is evidence that we may already have reached -- or even passed -- the point where we may be able to halt runaway climate change. The evidence is legion, dramatic, and well documented by a plethora of scientific studies examining a wide range of phenomena. Interested readers can peruse Loaded dice in the climate change casino, Passing gas: Peter Kent and Canada's bogus GHG emissions, Head in the sand: tar in every orifice, Thermometer rising: Ice, methane, and climate change, Acid path: Evil twin of climate change, or Pestilence, famine, and climate change: Horsemen of the Apocalypse for a small inkling of what is at stake and in store if we are unable to halt this degradation of the biosphere.
As The nine habits of highly effective resource economies: Lessons for Canada, published by the Canadian International Council (CIC) and written by Madeline Drohan, points out, pricing carbon emissions, whether by a carbon tax, a cap and trade system, or a combination of both -- is an economic, environmental, and political necessity. This need is at the core of the report's Habit # 4: Keep up with the world: Put a price on carbon.
There is nothing mysterious, arcane, or contentious in this. Economics is about attaching value to entities. For an economic system to correspond to the real world, the elements of that world (i.e., carbon) must have a price. No price = no value = no economic existence. Attaching a value (positive, in the case of desirable commodities; negative, in the form of a tax, in the case of undesirable commodities such as carbon dioxide emissions) is the sine qua non for moving economic levers towards rational and desirable goals. To leave something without economic value is like having a wheel with no cogs -- there is no way to engage it to move it toward desirable outcomes. To attach no price, and hence no value, to a globally critical pollutant such as carbon dioxide is folly and, as is becoming increasingly clear, potentially catastrophic and suicidal. No one in their right economic (or political) mind could possibly counsel this.
Yet, this is precisely the view of the Harper Conservatives. In recent months they have repeatedly railed at carbon pricing calling it "job killing" and "a tax on everything." Responding in Parliament to a question from NDP environment critic Megan Leslie, Prime Minister Stephen Harper referred to carbon taxes as "something the economy cannot take and something that Canadians will never accept."
In addition to economic absurdity and environmental folly, such a position is also politically inept. The CIC report points out that in large measure the Canadian business community has already accepted the necessity and inevitability of carbon pricing. The Canadian Council of Chief Executives -- arguably the preeminent voice of the establishment business community -- has repeatedly called for "a clear, nationally consistent carbon price across the economy" most recently as a "key principle" in their 2012 submission to the Council of the Federation, Framing an Energy Strategy for Canada.
In roundtable meetings held in Vancouver, Calgary, Saskatoon, and Winnipeg, including representatives of government, academia, agriculture, transportation, manufacturing, energy, mining, and NGOs concerned with developing a low-carbon economy, the Canada West Foundation in their report Cautious Optimism: Western perspectives on a low-carbon Economy, found a strong consensus that a Canadian energy strategy, "needs to put a price on carbon and move the conversation beyond a fairly narrow focus on carbon emission reduction targets. Participants stressed that a successful strategy requires leadership and vision from Canada's politicians and business leaders -- something that is currently lacking in their opinion."
An astonishing fact is that even most oil companies have come to the conclusion that carbon pricing is a necessity. Lorraine Mitchelmore, Canadian president of Royal Dutch Shell PLC, has urged federal and provincial governments to introduce a "significant price" on carbon. Shell, who has been at the forefront of developing carbon capture and storage (CCS) technology through a $1.35 billion project at their Scottford upgrader, recognize the economic opportunities of a low-carbon economy and how projects like CSS require carbon pricing to be economically competitive.
In an article in The Tyee entitled Canada's oil insiders want a carbon tax by Geoff Dembicki, senior executives from Suncor and Cenovus, two of the largest and most profitable bitumen sands companies in Canada, indicated that they support a national carbon tax. Dembicki also refers to Kaija Belfry Munroe's report Business, risk, and carbon pricing: Business preference for climate change instruments in Canada prepared for Sustainable Prosperity. That study found that the business community in Canada was "overwhelmingly in favour of a price on carbon" based on risk management considerations. It's worthwhile quoting the number one recommendation of their report in its entirety:
"The assumption that a price on carbon would be bad for business in Canada is clearly untrue. The business community is nearly unanimous in its support of a carbon price. Indeed, the continued delays and obfuscations on the part of the federal government create a climate of uncertainty that is far worse for economic growth and development than a clear and reliable policy regime would be. The current policy void undermines planning and increases the risks of investment in Canadian companies, putting them at a disadvantage vis-à-vis other jurisdictions. Consequently, the best policy choice for the Government of Canada would be to concede to business demands and put in place a price on carbon as soon as possible."(emphasis added)
In optimistic moments one might hope that this across-the-boards endorsement of carbon pricing by the Canadian oil, energy, and business communities reflected a recognition that forceful economic instruments must be used to used to combat climate change. Be that as it may, it is certainly the fact that such imperatives recognize that the writing is on the wall in terms of carbon profligacy, and a level carbon pricing playing field is rapidly becoming an economic necessity. The longer federal and provincial governments stonewall and obfuscate in the face of this prevailing wind, the more they put the Canadian economy at a disadvantage. Indeed, in the face of government inaction on this front, many bitumen sands developers such as Nexen, Shell, Suncor and Cenovus already factor what is called "carbon shadow pricing" (in some cases as high as $65 per tonne) into their development plans in order to anticipate the impact of future carbon pricing on the feasibility and profitability of projects.
As for a carbon tax being a "job killer" as the Harper Conservatives continually allege, it's worth reflecting on the fact -- pointed out by environmental economist Andrew Leach in his article When it comes to carbon pricing, you have to take the good with the oil sands -- that each tonne of carbon dioxide emission from the bitumen sands (at current prices) generates some $900 worth of revenue reflecting a profit of $400-$500. Leach underscores that, "If you think that an investment with that kind of value proposition is going to dry up in the face of a $30-$50 (or even much higher) per ton carbon tax, think again." It ain't gonna happen, a fact that seems abundantly clear to everyone -- except the Harper Conservatives.
But this dumb-as-dirt intransigence of the Harper Conservatives is even worse. Not only does it fly in the face of all environmental imperatives, economic reason, and the will of the business and energy communities, it's also wildly inconsistent and illogical -- a policy flip-flop of forehead-slapping proportions. As documented by McLeans writer Aaron Wherry in Great moments in farce: The definitive collection, the Harper Conservatives themselves strenuously supported carbon pricing between 2004 and 2009. Prime Minster Stephen Harper, Finance Minister Jim Flaherty, (then) Environment Ministers John Baird and Jim Prentice, Conservative MPs Bob Mills and Mark Warwara, the Conservative Party platform, and the Throne Speech all spoke emphatically about the need and plans for carbon pricing.
On February 26, 2008 Jim Flaherty emphasized, "Our government is also providing $66 million over two years to lay the foundation for market based mechanisms that will establish a price for carbon and support the development of carbon trading in Canada." Later that year John Baird opened the Montreal Climate Exchange with a speech in which he said, "Carbon trading and the establishment of a market price on carbon are key parts of our Turning the Corner plan to cut Canada's greenhouse gases an absolute 20 per cent by 2020." Now, when questioned about past commitments Stephen Harper attempts to turn historical fact on its head. The absurdity of what the Harper Conservatives can and do say seems to have transgressed all bounds, veering into an Alice in Wonderland fantasy world. It's hard to even know what to make of such nonsense.
Back to the Canadian International Council report, which provides four clear and compelling reasons for why Canada should adopt carbon pricing:
1. Other are doing it. Carbon pricing is being implemented around the world. Carbon pricing (either through a carbon tax, a cap and trade system, or both) are already in place in Australia, New Zealand, India, throughout Europe including the European Union, and in many sub-national jurisdictions (including British Columbia, Alberta, and Quebec). Mexico, South Africa, South Korea, Taiwan, Thailand, and Vietnam are about to implement them. If we don't act Canada will be left in the bitumen dust.
2. Lack of a carbon price hurts our brand. The Canadian "brand" with respect to the environment is at an absolute nadir. After formally withdrawing from the Kyoto protocol, and after its role at the Copenhagen and Rio +20 summits, Canada is seen an exemplar of obstructionism on international accords (see Empty rhetoric, empty oceans: Will Rio +20 change the tide? for an illustration of how this has played itself out in the context of marine biodiversity). How costly this is to Canada already is difficult to quantify, but it certainly hurts Canada's international reputation and foreign economic prospects.
3. Canadian resource companies are not developing products and services the world increasingly wants. My earlier article in this series, Raw deal: The Canadian resource economy -- Part 2 has already touched on ways that Canada is failing to add, build, and extract value from the country's resources. The Conference Board of Canada's report Global climate-friendly trade: Canada's chance to clean up emphasizes this point by saying: "Canadian businesses have generally failed to seize new -- or even maintain existing -- opportunities to sell climate-friendly technologies globally, and they have adopted other countries' technologies more slowly than the world average." We are missing the boat.
4. The current system is costly for resource companies and governments. The CIC report argues that a straightforward system of carbon pricing would be better and more efficient than the current hodgepodge of provincial and federal regulations.
If all of this wasn't convincing enough, the just-released report of the National Roundtable on the Environment and the Economy (NRTEE), Framing the Future: Embracing the low-carbon economy published in October, 2012 provides a strikingly thorough, well-researched, and visionary blueprint for how Canada could become a world leader in the provision of low-carbon goods and services (LCGS). The NRTEE document says:
"Annual global spending on LCGS is significant and growing quickly. Spending stood at roughly $339 billion in 2010. Our analysis shows that global spending could reach between $3.9 and $8.3 trillion by 2050, depending on climate policy assumptions. The growth potential in Canada is also notable. Taking into account existing and proposed climate policies, annual domestic spending on LCGS could rise from the $7.9 billion estimated for 2010 to $36 billion in 2050. Climate policies that cut emissions by 65 per cent from 2005 levels could drive domestic spending of roughly $60 billion in 2050. In either scenario for 2050, LCGS sectors grow more rapidly than the Canadian economy overall."
Framing the Future provides a detailed master plan for how Canada could become a low-carbon superpower, poised to take maximal advantage of this burgeoning market. In broad terms the measures the report proposes fall into four categories:
1. Stimulating innovation in the low-carbon sector;
2. Mobilizing investment in low carbon infrastructure and technology;
3. Enhancing Canadian firms' access to fast-growing low-carbon markets; and
4. Fostering low carbon talent and skills development in Canada.
These broad areas are fleshed out in considerable detail in the report. It's worth, however, drawing attention to the four essential conditions that NRTEE feels are required to bring these measures to fruition:
1. A unified long-term price on carbon;
2. A level playing field for fossil and non-fossil energy sources;
3. Transparent and long-term climate, energy, and innovation policy; and
4. Outcome-based, adaptive regulatory regimes that integrate economic and environmental costs and benefits.
And the response of the Harper Conservatives? They:
1. Reject placing a price on carbon;
2. Have tilted the energy playing field emphatically in favour of fossil fuels [for example, federal and provincial governments subsidize upstream oil activities in Canada to the tune of $2.8 billion a year (2008 data)]. The report notes that, "fossil fuel subsidies often work counter to and are ultimately incoherent with the introduction of a carbon price.";
3. Have an utterly disingenuous climate change policy with bogus targets based on 2005 emission levels that the federal government's own documents show have no possibility of being realized. Rather than a 17 per cent reduction by 2020, government estimates indicate that emissions are apt to be 7.4 per cent above 2005 levels. Environment Commissioner Scott Vaughn's assessment that Stephen Harper's government is "unlikely" to be able to meet its own climate-change goals wryly understates the situation. The report urges the government to adopt "investment-grade climate change policy." The present federal government policy doesn't event reach the junk bond level.
4. There appear to be few signs of meaningful "regulatory regimes that integrate economic and environmental costs and benefits" on the Canadian horizon. Indeed, the thrust of the government's omnibus budget bill (C-38) in the spring of 2012 went precisely in the opposite direction, repealing the Environmental Assessment Act, undercutting many provisions of the Environmental Assessment Agency, killing the Kyoto Protocol Implementation Act, gutting the Fisheries Act, weakening the Navigable Waters Protection Act, making decisions of the National Energy Board subject to reversal by cabinet, implementing exemptions to the Species at Risk Act, making various oil, gas, and nuclear regulations less environmentally rigorous and more industry friendly, scaling back Environment Canada's Environmental Effects Monitoring Program, cutting the Municipal Water and Wastewater Survey … the list goes on and on (see Abuse of process: Bill C-38 and the Harper agenda for further details.) Not all of these changes relate directly to economic and environmental costs and benefits, but many do and the thrust of the Harper Government policy appears to be towards maximal deregulation instead.
Even before receiving this report, the Harper Conservatives delivered their response: eliminate the National Round Table on the Environment and Economy (it will cease to exist in 2013). If you don't like the message, shoot the messenger! The government let it be known that NRTEE's advocacy for a carbon pricing was the reason it was liquidated. Speaking to Parliament, Foreign Affairs Minister John Baird said, "Why should taxpayers have to pay for more than ten reports promoting a carbon tax, something that the people of Canada have repeatedly rejected? It should agree with Canadians. It should agree with the government. No discussion of a carbon tax that would kill and hurt Canadian families."
While frequently wrong-headed, the policies of the Harper Conservatives are often sadly predictable: abject capitulation to the interests of the one per cent. In the case of carbon pricing, even many highly conservative business interests (at least those not in the thrall of the climate change denial movement) have grasped that it makes no sense to swim against this tide. Whether the Conservative government's policy has now become a simple extension of the Koch brothers political agenda, or if the government is listening to other delusional libertarian voices, seems difficult to ascertain. However, the issue of carbon pricing exposes the assault on reason and death of evidence that have become the hallmarks of a regime out of touch with its citizenry -- and of the planet.
[Part 4 of this series is Resource capitulation: FIPPA, fibs, and Canadian sellouts; Part 2 is Raw deal: The Canadian resource economy.]