Policy brief backs Wall’s carbon pricing stand
Pricing plan could lead to economic hardship, policy document suggests
A recently released policy brief by the Johnson-Shoyama Graduate School of Public Policy appears to support Premier Brad Wall’s contention that any carbon pricing scheme — whether it’s a carbon tax, cap and trade or stricter emissions regulations — is likely to cause economic hardship to the province.
“Carbon tax, cap and trade or implicit carbon pricing operating alone are likely to be insufficient to meet Paris Agreement carbon levels because they each have their faults,’’ said the brief written by Peter Phillips and Victoria Taras of the JSGS at the University of Saskatchewan in Saskatoon.
“When two or all three are used to together, along with perhaps other carbon management options, there is great potential for mitigating carbon emissions. However, it risks destabilizing mining, which is one of Saskatchewan and Canada’s most competitive and important revenue-generating industries,” the brief said.
The study concludes that a “partnership between Canada’s federal and provincial jurisdictions, that includes consultations with the minerals and mining sector, offers real hope for discussion grounded in facts and realities.’’
The issue of carbon pricing has been in the news lately, as federal Environment Minister Catherine McKenna confirmed over the weekend that Ottawa will impose some form of carbon pricing system on provinces that won’t adopt either a carbon tax, cap and trade or similar mechanism. Her statement drew criticism from Wall, who said forcing the provinces into climate change policy compliance could strain the relationship between provincial and federal governments.
“It’s not the collaborative approach that the prime minister promised when he was elected,” said Wall.
The premier said his province already has a price on carbon — through its $1.5-billion carbon capture and storage (CCS) project at Boundary Dam power station — and any further action by Ottawa could hurt Western provinces already under stress because of falling oil prices.
“If it’s some sort of a universal price that will ... manifest itself as a tax, and be disproportionately impacting the energy sector, which is already reeling, then we have a big problem in Saskatchewan with that kind of unilateral action,” he told CTV News.
While conceding Alberta and Saskatchewan “each contribute proportionally more to national emissions that any province,’’ the policy brief argues that a carbon tax is not the best solution for Saskatchewan. “Carbon tax is promoted as a way to plug a policy gap that might exist in certain jurisdictions, but it might not be the optimal strategy for Saskatchewan’s resource-based, export-dependent economy.’’
A carbon tax would cause producer ‘net backs’ to fall, which would lower profits and production of fossil fuels, “reducing the tax base for Saskatchewan and Canada,’’ while encouraging companies to relocate to other jurisdictions, thereby “raising the carbon footprint of the sector globally, while impeding efficient and profitable operation in Canada.’’
Other carbon pricing mechanisms, like cap and trade, pose similar problems and are not likely to be entire solution for Saskatchewan’s GHG emissions, which at 75 million tonnes per year account for 10 per cent of Canada’s GHG emissions and are fourth-highest among the provinces.
Phillips, an London School of Economics-trained economist with more than a decade of experience in public policy, said he agrees with Wall that there’s no single solution to the problem of GHG emissions — especially for an energy-intensive economy like Saskatchewan, where most of the GHG emissions are generated by the oil and gas, agriculture and electricity sectors.
“For part of the economy (carbon taxes) might perfectly be OK, but some parts of the economy ... are simply going to have a lower net income,’’ Phillips said. “It’s not like you can choose to walk, rather than drive, if you’re a farmer or a miner.’’
Phillips added that carbon taxes work best when they’re applied to consumers who live in the jurisdiction where the carbon is produced. But most Saskatchewan products, like oil and gas, are exported offshore where the carbon tax can’t be applied or passed on. “It’s not necessarily the best way to reduce our carbon footprint.’’
But Phillips said the Wall government shouldn’t put all of its eggs into the CCS basket, either. “If one fixates on any industrial strategy, like carbon capture, that’s part of the solution, but it’s highly unlikely that any single (strategy) will do the trick.’’
Despite the current slanging match between Wall and the Trudeau government, Phillips believes an agreement can be reached on how to reach our climate change targets. “We all have the same goal. We have different references and starting points.’’