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Here's A Solution To Canada's Federal-Provincial 'Climate Wars'

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Things have been moving at warp speed in the Canadian "climate wars."

Last week, the federal Liberals passed a bill ratifying the Paris Agreement. As expected, it was done without first concluding an agreement on climate change with the provinces and territories. To add oil to that particular fire, the prime minister made it clear the day before that provinces failing to adopt some form of carbon pricing would be punished with a federal carbon tax.

This announcement was not really a surprise; but timing was obviously a factor. Trudeau decided to ratify at just that moment when Canada's signature (along with that of the EU) would push the Agreement past the point at which it would come into force (ratification by at least 55 countries representing 55 per cent of total emissions).

Good PR, but of little real significance since Canada emits less than two per cent of global emissions. And why do this now, when the provinces are still at odds over the rules for reaching the Paris targets?

Not surprisingly, there were some fairly negative reactions to the feds' use of the Big Stick. Saskatchewan has repeated its opposition to the imposition of a federal carbon tax (indeed, any carbon tax), calling the Liberals announcement "disrespectful." And the Conservative opposition in Parliament has also opposed this tax, as they did when they were in power. The Conservatives were also the only party to vote against ratification, when their motion to prevent the introduction of a carbon tax was defeated.

Both the NDP and the Greens supported ratification but the NDP pointed out correctly that the government's targets are deeply flawed and un-ambitious and need to be strengthened. And Nova Scotia has now decided to ditch the idea of a carbon tax completely, opting to go with cap and trade, while Manitoba has said the opposite, distancing themselves from cap and trade and suggesting they may consider a carbon tax!

What's next in the federal-provincial climate wars, you might ask? Since last week's initial ruckus, the combatants have gone quiet. But it is likely that the provinces are just solidifying their positions, for or against the federal tax, prior to Trudeau's proposed next meeting of the premiers in December. They are also rushing to implement their own programs, to strengthen their bargaining positions and perhaps to prove that they can meet the federal targets without a new federal tax.

Despite this temporary armistice, something clearly needs to be done to reverse the harm done to federal-provincial relations, while still moving towards an early agreement on carbon. Here's what I think is needed to get this done:

First, the forthcoming federal-provincial negotiations should focus on re-setting targets, not on the methods used to achieve them. Providing the targets are fair and evenly shared, this will be a lot easier than forcing all provinces to accept carbon pricing as the sole means of achieving the targets.

Many of the provinces have already established targets, but they have done so using different baseline years (the reference year on which the reductions are based) and in some cases, different target years. For example, six provinces use 1990 as the baseline year, while only three use 2005, the baseline year used in the Paris Agreement.

This small discrepancy can be easily dealt with, as information for establishing a 2005 baseline is readily available.

Fortunately, all provinces have included 2030 as one of their target years, so there will be little need for adjustment there. But the ambition of these targets differs from province to province and will not be sufficient to meet the federal goal of a 30 per cent reduction (I mentioned this problem in a previous blog).

Second, the Liberals' insistence that carbon pricing is the best way to achieve the Paris targets should be challenged. Carbon taxes, for example, are often ineffective unless they are supported by effective regulation and appropriate policies to help companies and organizations meet their targets. Much the same can be said for cap and trade, where companies have fixed "caps" (targets) to meet but can be helped to achieve their caps by policies that incentivize cleaner production or improved efficiency.

The most important thing for all parties to accept is that carbon pricing and regulation are not conflicting choices; they are two sides of the same coin, i.e. they are both ways of reining in carbon emissions.

In fact, studies of this topic globally have shown that regulation has actually been more effective in reducing emissions than carbon pricing alone. An excellent Canadian example of this is Alberta, where a decision to phase out coal-powered electricity by 2030 will take a 17 per cent bite out of the province's large carbon footprint, even without its proposed carbon tax; and Ontario, where a similar decision to close out coal-fired power led to a larger reduction in emissions than all other programs and provincial actions combined.

In the case of energy efficiency, there are already many robust policies in place nationally and provincially, and carbon pricing can serve to enhance these. But as my colleague Martin Adelaar has argued, carbon pricing will not in itself "address the significant market barriers that will impede optimal levels of energy efficiency."

Ideally, then, Canada needs a mixture of the two, for example by developing new and more aggressive policies on energy efficiency in areas such as transportation, industry, or buildings while also introducing carbon pricing where regulation is not sufficient. Much the same could be said of policies to encourage renewable energy production or reduce fossil fuel use in transportation.

If regulations are appropriate and effective, then carbon pricing will work better than it would without such regulation. If Saskatchewan or other provinces or the territories choose regulation instead of carbon pricing, that is also acceptable as long as they assume their fair share of the effort to help Canada meet its Paris targets.

I promised last time to explain how offsets could be used to achieve Canada's target, until the events of last week took over. Next time!

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