Report of the National Roundtable Points the way to change

Vancouver, Canada (GLOBE-Net) – A report tabled this week by the National Roundtable on the Environment and the Economy (NRTEE), states Canada can achieve its greenhouse gas (GHG) reduction targets of 20% by 2020 and 65% by 2050 by Implement a strong, clear, consistent and certain GHG emission price signal across the entire Canadian economy as soon as possible. The report, entitled Getting to 2050: Canada’s Transition to a Low-emission Future, argues that the immediate introduction of market-based policy that takes the form of an emission tax or a cap-and-trade system or a combination of the two not only is economically feasible, but quite likely is the only way of achieving the federal government’s stated emission reduction targets. Corporate reactions to the NTREE report have been generally positive.

In November of 2006 NTREE, a federally-funded advisory panel was asked by then Environment Minister Rona Ambrose to report on how Canada could meet the government’s 2050 targets to reduce air pollutants and green house gas emissions. NRTEE set out to explore a wide range of possible scenarios for achieving deep, long-term GHG emission reduction targets (20% by 2020 and 60% to 70% by 2050 from 2006 levels).

The research was guided by three key criteria:

• First, the overarching objective of Canada’s climate change policy should be to contribute to the global goal of climate stabilization;

• Second, Canada’s medium- and long-term emission reduction targets have been defined; and

• Third, Canada has national economic and environmental circumstances that need to be taken into account in the design and implementation of its climate change and clean air policies

Following extensive consultations with all major sectors of the economy, the advisory panel set out a comprehensive framework for how Canada could make the transition to a low-emission future and achieve long-term and stable emission reductions.

The central recommendation of the report is the establishment of an economy-wide price signal for carbon emissions as soon as possible. NRTEE research shows the most effective and efficient policy approach would involve market-based instruments such as an emissions tax, a cap-and-trade system, or a combination of the two. To achieve emission reduction targets, this policy would need to be complemented by sector-specific regulatory measures to force emission reductions from those parts of the economy that do not respond to these price signals.

"Our analysis shows that putting a price on emissions is the most effective tool to achieve deep GHG reductions over the long-term" said NRTEE Chair Glen Murray. "An early and clear price signal is needed to influence the investment decisions by industry in the technology and innovation required to achieve deep reductions and also to influence consumer decisions and behaviour."

A carbon tax system would require industry to pay a fee for every tonne of harmful emissions released into the atmosphere. A cap and trade system would allow companies to emit up to specific limits, and permits to emit above the cap would have to be purchased from companies that have lowered their emissions below their mandated cap.

Thomas d’Aquino, Chief Executive and President of the Canadian Council of Chief Executives (CCCE)., noted that the NRTEE Report provides Canadians with a sound and comprehensive policy blueprint to achieve significant long-term reductions in greenhouse gas (GHG) emissions. "Canada’s business leaders are committed to effective action on climate change, and in that spirit we strongly welcome the NRTEE’s final Advisory Report on long-term reductions of greenhouse gases and air pollutants," said d’Aquino, whose organization represents 150 chief executives and leading entrepreneurs from all major sectors and regions of the country.

Environment Minister John Baird, speaking to reporters following the release of the NTREE report, appears to have rejected the idea of a carbon tax. Tuesday’s Globe and Mail reports Mr. Baird’s rejection of a carbon tax, though he has embraced the report’s general premise of making polluters pay. "We think a new tax sounds like a Liberal idea," the Minister is quoted as saying.

The concept of a carbon tax is politically risky because it is perceived in some corners as being regionally divisive and consumer unfriendly. In 2006 Prime Minister Stephen Harper rejected the idea, saying a carbon tax would be akin to the national energy program that penalized Western oil when it was introduced in the 1980s. It is also likely that any tax imposed on domestic oil production would be transferred to consumers, escalating already high energy prices. "That is something this government will never do," Mr. Harper said in 2006.

Liberal Leader Stéphane Dion, a former minister of the environment, has also criticized the idea of a carbon tax in the past. "I’ve always been against it. I will have other ways to get there," Mr. Dion said during the Liberal leadership race last year.

The Prime Minister’s views may be shifting with respect to the imposition of a strong market-based price signal for carbon emissions. In a year end interview he noted that dealing with climate change will not be easy. "There are going to be costs," he cautioned.

Environment Minister Baird echoed these thoughts yesterday. “We believe that we have to put a price on carbon and that’s what our regulatory regime does," Mr. Baird said. "We believe we can regulate emissions lower by the big polluters under a strong principle of polluter pays."

The NRTEE report also notes that the economic fallout from introducing a market based price on carbon emissions may be overestimated. Further research on possible economic impacts will be undertaken over the next year. However, the Advisory body notes that any delay in action will result in greater economic losses in the long run. "Delaying action comes with unnecessarily high economic and environmental risk." stated Murray. "Our research shows that a faster, deeper pathway to achieve the government’s long-term GHG reduction targets of 20% by 2020 and 65% by 2050, has the least overall economic impact in the long-run, and better environmental outcomes resulting in the equivalent of 5 years of no GHG emissions into the atmosphere over this period as we meet our targets."

The report concludes that the government’s medium and long-term targets are achievable with the equivalent impact on Canada’s GDP of 1 to 2 "years of lost GDP" over the 44-year period from 2006 to 2050 if a tax is introduced.

The panel said it is too early to say exactly what the price on carbon emissions should be and pledged to explore the specifics of a carbon tax and cap and trade system in a future report. The panel is urging government leaders to quickly put in place a "strong" market-based price signal on industrial emissions of greenhouse gases and air pollutants and says the sooner the better for both the economy and the environment.

This same point is echoed in the statement from the Canadian Council of Chief Executives. It notes that regardless of the specific mechanism, the goal of any such system must be to make maximum use of market forces, to ensure transparency, and to avoid giving any one sector or region an unfair advantage. Of equal importance is the need to ensure that any new environmental tax is offset by reductions in other forms of taxation, to ensure revenue neutrality.

The federal government is currently proposing a cap and trade system based on intensity targets, meaning the emissions per unit of production is capped but not a company’s absolute emissions. The panel suggests that if Canada is to implement a cap and trade system, it should follow the European model, where a company’s emissions cap is measured in megatonnes. As the report points out, an intensity approach can allow to emissions to continue to grow as production increases.

The NRTEE report sets out five critically important "enabling conditions" it believes should be reflected in Canada’s long-term climate change policy framework. These are:

Global Competitiveness - Canada will have to act in concert with the world, to address competitiveness issues. If Canada moves out of step of the climate plans of China, India, Europe and the United States, it may hinder Canada’s competitiveness in the global market.

Policy Certainty - Policy certainty beyond the short term is critical, to ensure predictability for new investments. Business leaders at the Bali conference made it very clear they would invest in the environment once nations have developed incentives through policy and regulation.

Carbon Pricing - An economy-wide emission price signal with complementary regulatory policies is necessary, to foster investment, technology deployment, and change consumer behaviour.

Technology Deployment - Technology deployment is imperative, and will need to be wide-spread throughout all segments of the economy. Companies will require more energy efficient and cleaner technologies in order to reduce emissions and remain financially competitive.

Integrated Emission Approach - An integrated approach to climate change and air pollution should be pursued, to reduce costs and improve health outcomes. A key finding of the research is that an integrated approach may result in lower prices associated with GHG emission reductions and greater air pollutant reductions.

The report also stresses the importance of a Canada-wide plan, arguing that coordination of federal, provincial and territorial GHG emission reduction policies is crucial to success.

The recommendations made in the report will raise a number of questions; specifically, if a market-based carbon price is is imposed, who would collect the revenue, and how much would a tonne of carbon be worth?

The NTREE does not have answers to these and many other questions and has undertaken to conduct more research both on the implications of a carbon tax and possible cap and trade systems.

While industry leaders appear to have accepted the inevitability of some form of financial penalty associated with carbon emissions, it is clear the federal government is unlikely to pursue the concept of a flat tax. The government does appear firm in its resolve to stay the course to lower GHG emissions and is open to the many other recommendations of the NTREE report pertaining to the promotion of emission reducing technologies.

"Our Government recognizes that climate change is one of the greatest challenges facing the world today and we have demonstrated leadership by taking real action to tackle this issue - many of which have been now recommended in the NRTEE’s report," said Minister Baird in his response to the report.

"We agree that we must work in concert with the world, that policy certainty beyond the short-term is central, that technology deployment is imperative, and that an integrated approach to climate change and air pollution should be pursued."

Minister Baird added that the Government is taking action to regulate industry, has delivered programs to encourage Canadians to drive more fuel-efficient vehicles or use public transit, and invested in clean energy technology such as carbon capture and storage, hydrogen, and tidal power. He also noted that the Government is working with its provincial and territorial counterparts and that $1.5 billion was delivered to the provinces for projects that produce real reductions in greenhouse gas emissions and air pollution.

"As we continue the process of setting out the detailed regulations that are part of our integrated Turning the Corner Plan to cut greenhouse gases and industrial air pollution, we will consider the roundtable’s recommendations" concluded the Minister.

The big question that remains is what is the best price mechanism to use to achieve the desired results in terms of emissions reductions? The NTREE has proposed that further research be undertaken, specifically to examine such issues as:

• further analysis of data gaps and modelling;

• policy design issues on our proposed market-based instruments;

• a "bottom-up" analysis of sectoral and regional implications of policy design;

• governance issues related to federal-provincial-territorial coordination of climate change policies, linkages to international frameworks and approaches; and

• consideration of potential benefits of addressing climate change

The NTREE report has provided and excellent first cut at defining the solution, but more work is clearly required. Nonetheless, this should not delay the government’s efforts to achieve a broad base consensus on a national climate change plan using the NTREE report as a basis for discussion.

For the complete report, Getting to 2050: Canada’s Transition to a Low-emission Future, please visit here.

For More Information: NRTEE
Source 2: Canada News Wire (CNW)

You can return to the main Market News page, or press the Back button on your browser.