Carbon Pricing Across Canada:
Examining Policy Variation for Resiliency,
Design, and What CCL Can Learn
BRETT CEASE
Third Coast Regional Coordinator
Citizens’ Climate Lobby
PhD Student at UT-Dallas Public Policy & Political Economy
Carbon Pricing
Research Motivation
Why have Quebec, British Columbia and now Alberta and
Ontario adopted significant carbon pricing policies while
neighboring Manitoba and Saskatchewan have not?
These provinces share similar geography, economic,
and political structures, but considerable variation
exists across provinces’:
•GDP (from Manitoba’s $64B to Ontario’s $721B)
•Labor force participation in natural resources (from
Ontario’s 0.9% to Alberta’s 6.9%)
•The scope of each provinces’ carbon-pricing
policies are not fully predicted by current literature
Tonight’s Agenda
• Where are we today
• Quick History of Carbon Pricing in
Canadian Provinces
• Literature on Policy Resiliency
• What We’ve Learned from Quebec
• What We’ve Learned from BC
• Discussion on Policy Design
• Closing Thoughts
• Q&A
• “The Trillion-Dollar Question.” Editorial Board, 8 Oct 2016
• “Beginning in 2018, carbon will have to be priced at $10 a tonne, with the price
rising by $10 a year until it hits $50 in 2022.”
• “80% of the population lives in a province that either already exceeds the 2018
federal standard – in the case of B.C. and Quebec – or is in the midst of
implementing its plan to get there (Alberta and Ontario).”
• Saskatchewan Party Premier Brad Wall against approach due to removing money
from families and rural provinces, yet revenues will be decided and spent on the
provincial level.
• Concludes: “Economically speaking, the Trudeau government’s approach is the
right one. Environmentally speaking, too. The question is whether, over the long
run, it can be sustained politically.”
Crash Course in Provincial History
Since 2007, Canadian provinces have implemented four
types of carbon pricing instruments:
• 1) Revenue-enhancing carbon taxes (in Québec and
Manitoba)
• 2) Revenue-neutral carbon tax (in British Columbia)
• 3) Cap-and-trade in the framework of the Western
Climate Initiative (WCI)—a regional partnership lead by
California (implemented in Québec and Ontario but
also considered in Manitoba and British Columbia)
• 4) Intensity-based emissions trading (in Alberta and in
British Columbia).
Source for most information in presentation: Dr. David Houle, paper presented at APSA’s
Annual Meeting 2016, Climate Policy Resilience in the Canadian Provinces
Specific Provincial Policies
• The first carbon pricing instruments in Canada were implemented by Quebec
(Annual Duty to the Green Fund) and Alberta (Specified Gas Emitters Regulation
(SGER)) in 2007.
• In 2008, British Columbia implemented a $10tCO2e carbon tax, on the purchase of
fossil fuels in the province. The tax increased gradually, $5tCO2e every year, and
reached $30tCO2e in 2012, and was subsequently frozen to that level.
• BC, along with Ontario, Manitoba, and Quebec is involved in the California- lead
Western Climate initiative but has never implemented a cap-and-trade system.
• The province of Manitoba adopted in 2011 a narrow-based revenue-enhancing
carbon tax, which applies a rate of $10 per tCO2e on emissions related to coal.
• Canada’s most populous province, Ontario started to implement its cap-and-trade
on July 1, 2016. This development was long awaited as Ontario signed several
bilateral (with Quebec) and multilateral agreements to enact a cap-and-trade
system since 2008 and was involved with the WCI.
• Many other significant climate policies in provinces (generous renewable energy
subsidies, coal-fired plant shuttering, etc.) beyond focus of today.
(Houle, 2016)
The Policymaking Process
Policy Resiliency Theory
• Early Research, but emerging field with
climate policy focus (Harrison, Macdonald,
Rabe, Houle, Lachapelle).
• Politics shape policies, but also policies
reshape politics through various pathways
• How and where feedback occurs matters
• How policies are implemented makes a big
difference in their own viability/stability
Policy Feedback Streams
• System Level: Micro vs. Macro (policymakers vs. societal)
•
Direction: Negative & Positive (critique vs. consensus)
“A policy is resilient when positive policy feedback, through
the building of enhanced policy capacity, expression of
support from various groups, and lock-in processes have a
greater effect than negative policy feedback constituted by
the pressure exerted by groups opposed to a specific policy”
(Houle, 2016).
A Tale Of Two Policy Approaches
British Columbia and Quebec:
Case Studies & Outcomes
Quebec Annual Duty to the Green Fund
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In 2007 Quebec was the first government in North America to
introduce a carbon levy, which Premier Charest called a ‘mesure
incontournable’ to reduce the use of fossil fuel
Set up to bring 200 million dollars per year.
Government changed the rate applied to various fuels each year
in order to achieve that financial objective.
Policy Feedback
Designed to target fossil fuel importers, distributors, and
refineries
Exemption was created for independent fuel distributors
Quebec Premier Charest (2007)
Manufacturing firms were also involved
Overall, most industries did not campaign publicly against the
measure.
Interparty consensus on climate change policy prevailed,
(meaning mostly subsystem level negative feedback)
When Quebec began planning to join the WCI in April 2008, many
industries expressed concerned at being simultaneously targeted
by the annual duty to the Green Fund and the emissions trading
Quebec Natural Resource
system and asked for exemptions, which were granted in 2013.
minister Claude Béchard
(Houle, 2016)
(2007)
Quebec Cap-and-Trade (SPEDE)
SPEDE was developed with California and the WCI.
• Its main components: a hard cap on emissions, a policy
target that include both industrial facilities and fossil fuel
distributors that emit more that 25ktCO2e per year, a
slowly rising carbon price, and various compliance
mechanisms.
Two distinct implementation periods took place:
• 2012 & 2014: Cap of 23.2 million CO2e (GtCO2e)
• January 1 2015: Included transportation and energy
sectors. Cap of 65.3 GtCO2e.
Cap is scheduled to decrease by ~2.11GtCO2e annually to
reach 54.74 GtCO2e in 2020 (13.37% reduction). (Houle, 2016)
Quebec Cap-and-Trade (SPEDE)
Policy Feedback
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Elected in 2003, Premier Jean Charest supported the federal government plan to
implement a national emissions trading system and was eager to see a carbon stock
exchange created in Montreal.
Quebec’s 2006-2012 climate change action plan also indicated interest in RGGI
Many industrial sectors (not Aluminum) opposed measure publically as it would increase
their compliance costs and be detrimental to their competitiveness.
Quebec oil distributors and refineries (Canadian Petroleum Institute) were in favor of
carbon pricing
Alliance Switch, a wide coalition of policy actors that advocate for a ’green transition’ of
Quebec economy- Gas distributors, green businesses, financial institutions,
manufacturing industries, environmentalists, academics, and policy entrepreneurs
Negative feedback came from the oil distributors (Canadian Fuels Association)
contended that the decision by Quebec to implement a cap-and-trade system could only
be justified if other jurisdictions were going to follow
More recent challenges to Quebec cap- and-trade program, more specifically to the
Green Fund management surfaced in 2015.
Couillard government responded swiftly announcing an overhaul of the Green fund,
(Houle, 2016)
adding clear objectives, public data, and evaluation processes.
British Columbia Carbon Tax
• British Columbia implemented a
$10tCO2e carbon tax, on the purchase of
fossil fuels in the province starting in
2008.
• The tax increased gradually, $5tCO2e
every year, to reach $30tCO2e in 2012,
and was subsequently frozen to that level.
• Policy Feedback
– 1) Adoption of the BC Carbon Tax (February
2008).
– 2) Implementation of the BC Carbon Tax
(June-July 2008).
– 3) The 2008 federal election (SeptemberOctober 2008).
– 4) The 2009 BC election (April-May 2009).
– 5) The BC 2013 election.
(Houle, 2016)
BC Liberal Premier
Gordon Campbell (2008)
BC Finance Minister
Carole Taylor (2008)
British Columbia Cap-and-Trade
Since the BC carbon tax does not directly cover industrial process
emissions, the expectation was that an emissions trading system
would also emerge.
Policy Feedback
– 2008: Hearings were held, Oil & Gas Development a major theme
– Canadian O&G doesn’t oppose carbon pricing but it does oppose
the WCI framework (no room for industry growth)
– 2012: Timing of change in Premiership from Campbell to Clark
– October 2014: Environment Minister Mary Polak introduced a
legislation the Greenhouse Gas Industrial Reporting and Control Act
(GGIRCA)
– Repealed the Greenhouse Gas Reduction (Cap and Trade) Act and
replaced it with an intensity-based emissions trading system
(Houle, 2016)
What We’ve Learned For CCL
• For Carbon Pricing, “a policy would be more likely to be
resilient if it could rely on positive macro-level
feedback, while negative policy feedback is confined to
the policy subsystem.”
• Micro-level feedback can enhance policy resilience by
identifying early problems to adjust
• The Amount of Visibility Matters
• Ask: Does the policy allow coalitions of industries to
organize?
• Ask: How much of the compliance costs are assumed
by industry?
• The Importance of transparency in funding
(Houle, 2016)
“But what about the politics?”
• Importance of Differentiated Treatment
• Budgetary vs. Regulatory Process
• Revenue-Neutrality key for Business
Communities
• Pressure to change carbon markets (location
of offsets)
• Difference in provincial response to shale gas
development
(Houle, 2016)
Concluding Thoughts
• Both the BC carbon tax and the Quebec cap-and-trade
system, have relied on sophisticated design allowing
them to both create constituencies that support them
and respond to negative feedback from specific groups
or industries, while also breaking down coalitions that
could have oppose the policy
• Governments should pay close attention to both policy
adhesion and revision mechanisms
• Well-designed federal complementary measures to
provincial carbon pricing could help industries make
the transition to a low-carbon economy preventing
negative feedback.
(Houle, 2016)
Time for Questions