Fraser Forum

It’s time for Canada to reassess its climate policy

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The federal government recently unveiled its new national carbon pricing scheme, calling it a “backstop.” Under the backstop plan, provinces are given until 2018 to create their own carbon pricing system or Ottawa will impose its own.

The model that the federal government proposes the provinces adopt is a hybrid system composed of two instruments—a carbon levy charged on fuels and an emissions credit trading system for major industries. The plan involves starting the carbon levy at a floor price of $10 per tonne of emissions in 2018, rising to $50 per tonne by 2022. Given the current circumstances, however, it may be better for Canada to reassess this climate policy, preferably reconsidering both its backstop system and timelines.

As predicted by many, President Trump has pulled the United States from the Paris climate agreement, for the purpose of strengthening American competitiveness and the overall economy. Consequently, easing regulations in the U.S. would lower American business costs and enhance job-creation, while the backstop plan would drive up Canadian business costs, making Canada less competitive for investment.

Pursuing the backstop plan can, indeed, harm our economy, now that our biggest trading partner is extensively cutting its climate regulations and is seeking to lower its business taxes. The negative impact would be worse in provinces like Saskatchewan, which has both emission-intensive and trade-exposed industries. When the Canadian carbon price floor reaches $50 per tonne in 2022, the carbon tax could purportedly cost Saskatchewan alone $2.5 billion, undermining the province’s ability to compete with its cross-border rivals.

There are other reasons to justify reassessing the backstop plan.

Among all the sectors, energy is the one of the most impacted by climate change regulations. The energy sector in Canada has been undergoing difficulties, the most recent of which involves barriers raised against energy development in Western Canada. The recent agreement between British Columbia’s NDP and Green Party, which may result in the formation of a coalition government, could lead to governmental opposition to major energy projects like the Kinder Morgan Trans Mountain pipeline expansion and Liquefied Natural Gas (LNG) production.

Given President Trump’s platform for energy independence, the need for Canada to access global markets and diversify the customer base through pipeline construction is more urgent than ever. Nonetheless, the new B.C. minority government has explicitly expressed it would employ every tool to stop the Trans Mountain pipeline and block Canada’s crude exports to Asia. Although the federal government has supported building this pipeline, the incoming B.C. government brings uncertainty to the energy front, potentially causing lower investment and substantial costs to the economy.

All this considered, it’s time for Canada to reconsider its climate policies, targets, and respective timelines to avoid harming the Canadian economy.


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