Why Saskatchewan should join the carbon-pricing club

[chuckChuck]

Why Saskatchewan should join the carbon-pricing club

CHRISTOPHER RAGAN

Special to The Globe and Mail

Published Monday, Feb. 29, 2016 6:00AM EST

Last updated Friday, Feb. 26, 2016 6:36PM EST
Christopher Ragan is an associate professor of economics at McGill University and chair of Canada’s Ecofiscal Commission

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Saskatchewan Premier Brad Wall agrees that all provinces need to do more to reduce greenhouse gas emissions. Yet he argues that carbon prices should not be used because they would hobble an already weak economy. He also argues that a better approach is to invest in the development of low-emissions technologies.

Mr. Wall is right to be concerned about the weakness of the economy, especially in Saskatchewan where low resource prices are causing serious pain. Done well, however, carbon pricing need not weaken the economy, and can actually improve it over the longer term. Several aspects about these policies may lead him to rethink his position.

It is a bad idea to increase taxes when an economy is weak. But carbon pricing need not lead to higher taxes overall and a larger government; instead, it can be an instrument of a smarter government that collects its revenues in a way more conducive to economic growth.

As in British Columbia, a carbon price can be revenue neutral, with every dollar of revenue returned to the economy through reductions in personal and corporate income taxes. Since 2008, the province has reduced its per-capita GHG emissions and its economic growth has outperformed that of the rest of Canada.

Mr. Wall might also be concerned about how carbon pricing would affect Saskatchewan’s households and the competitiveness of its businesses. These are commonly heard challenges, and for good reason. But careful use of carbon-pricing revenues can address them directly.

Saskatchewan’s electricity comes largely from coal-fired facilities. If carbon pricing drives up the price of electricity, won’t the policy be unfair to low-income households? The answer is no. A small share of the revenues from carbon pricing could be given back to the most vulnerable households. By doing so, all households still have an incentive to reduce their emissions, but the policy protects the purchasing power of the most vulnerable ones.

The same basic principle applies to business competitiveness. By returning some of the carbon-pricing revenues back to the most emissions-intensive companies, as is being planned with new policies in Ontario and Alberta, they won’t lose market share to their out-of-province rivals. Yet the carbon price still provides these businesses with a clear incentive to reduce GHG emissions.

A well-designed carbon price is actually a balanced policy, providing strong incentives to cut GHG emissions while also protecting household consumers and the competitiveness of companies in the emissions-heavy resource sector.

Mr. Wall prefers clean-tech investments, such as in SaskPower’s carbon capture and storage facility at Boundary Dam. And such projects are certainly worth supporting: With an economical and scalable method of capturing GHG emissions, we could make a huge advance in addressing the problem of climate change. Such investments raise three important points, however.

First, investing in new technologies requires the use of public funds, most of which come from personal and corporate income taxes. It would be better to raise the funds with a carbon price, thus preventing the economic drag that comes from higher taxes.

Second, public investments in the development of new technologies are invariably risky; some will work well, others will fail miserably. A prudent investment portfolio includes a range of promising low-emissions technologies.

Third, investments in low-emissions technologies make the most sense as a complement to a carbon price, rather than as a substitute for it. A carbon price generates powerful incentives for both business and consumers, while science-minded entrepreneurs are induced to develop the better technologies that firms and households can then employ. If the goal is to develop clean technologies, a carbon price should be a core part of the policy framework.

GHG emissions in Saskatchewan are the fourth-largest among Canadian provinces, but in per-capita terms they are the highest in the country. The economy is heavily reliant on natural resources and is currently suffering. That’s why a well-designed policy that balances environmental and economic concerns is badly needed.

[blackpowder]

Using a carbon tax is an acceptance of its validity. Like catching wild hogs. I dont know Mr Walls' opinion.

[chuckChuck]

Wall and SaskPower spent a lot on Carbon capture and storage which is in effect a form of tax on consumers. I am not sure it was good investment as it would be cheaper to use natural gas or wind to build capacity.

[mustardman]

Carbon capture costs 1.25 BILLION to capture 625000 tonnes of carbon. So only $ 2000 per tonne !!
And Brad doesn't like Justins idea of $15 /tonne but he's okay with $2 thousand/ tonne

[bucket]

Yup in 100 years it will be affordable

[Hamloc]

Chuck2, why do new technologies require government investment? In Alberta up until now new power generation including wind power was privately financed. Now that we forcing change to happen quicker it will be subsidized by government and our power bills will go up to boot. Two other realities it is not wind or Nat gas, it is wind and Nat gas because wind requires natural gas back up for calm days. The other reality it will require a carbon price of well over 100$ a tonne to create a large enough change in consumption to do any good, 20 to 30$ a tonne tax is just a money grab by government. Look at the Alberta NDP plan, if everything goes perfect, we will still be emitting as much carbon in 2030 as we are today.

[chuckChuck]

B.C.’s carbon tax shift works

Stewart Elgie and Richard Lipsey, Special to Financial Post | January 22, 2015 | Last Updated: Jan 22 2:07 PM ET
More from Special to Financial Post
Starting July 1, 2008, B.C. put a tax on fossil fuels.
Starting July 1, 2008, B.C. put a tax on fossil fuels.

B.C. brought in a carbon tax, fuel use dropped 16% while it rose 3% in the rest of Canada

We Canadians hesitate to pat ourselves on the back, even when we do something well. Like B.C.’s carbon tax shift. Around the world, prominent economic authorities, like the World Bank and OECD, and business and environmental leaders have called it one of the world’s best climate policies: an environmental and economic success.

Terence Corcoran (a climate change skeptic) and Philip Cross don’t agree. But their articles in the Financial Post provide an inaccurate picture of the effects of B.C.’s policy. Controlling carbon emissions is a critical issue. Canadians deserve a full and accurate picture of the facts, so they can draw their own conclusions.

First some background. Starting July 1, 2008, B.C. put a tax on fossil fuels (which cause greenhouse gas emissions). It started low and rose annually, reaching today’s $30/tonne (about 7 cents a litre of gas) in 2012. Revenue neutral by law, the proceeds from the carbon tax are matched by cuts in other taxes (like income tax). Now to the results.

B.C.’s personal and corporate income tax rates are now among the lowest in Canada

The tax covers most types of fossil fuels. Since it came in, B.C.’s total use of those fuels has dropped by 16.1% (2008-13). By contrast, in the rest of Canada fuel use went up by 3% over that time. B.C.’s dramatic drop since the tax marks a big change from the previous eight years (2000-2008), when its fuel use was actually rising slightly compared to the rest of Canada’s. (These results reflect the latest available Statistics Canada data, and were published in a leading research journal.)

Cross and Corcoran don’t dispute these powerful overall results. But they suggest that a big explanation was B.C. motorists buying gas in Washington State. While cross border shopping did increase after 2008, mainly due to the rising Canadian dollar, this explains only about 1% of the 16% decline in B.C.’s fuel use since the carbon tax, according to two different researchers. (It’s common sense; only a small fraction of all B.C.ers would endure the time and cost of a border-crossing to save a few dollars on gas.)

Even if you look just at one type of fuel, motor gas (which is all that Cross and Corcoran do), you see a similar pattern. From July 1, 2008 to June 30, 2014, B.C.’s per capita use of motor gas fell by 0.5%, while in the rest of Canada it rose by 1.6%. (Cross and Corcoran give different figures, probably because they look at B.C. gas use since January 1, 2008 – six months before the tax even started.)
Related

Terence Corcoran: No B.C. carbon tax miracle on 120th St.
Philip Cross: Carbon tax ‘magic’ is sleight of hand

Moreover, B.C. significantly outperformed the rest of Canada on each of the fuels covered by the carbon tax, including home heating oil and natural gas. This consistent result across all fuel types is strong evidence that the policy is working well. And it further debunks the cross-border shopping argument (people aren’t hauling their home-heating oil tanks to Washington).

As for the economy, B.C.’s GDP has slightly outperformed the rest of Canada’s since the carbon tax began. This makes sense. BC simply raised taxes on pollution and lowered them on income. Since 2008, the province has cut income taxes by almost $1 billion more than it has taken in carbon revenues – so taxpayers are ahead overall. B.C.’s personal and corporate income tax rates are now among the lowest in Canada, making it an attractive place to do business.

Yet Cross argues (without evidence) that it is “a fantasy” to think we can reduce fossil fuel use (and greenhouse gases) without harming the economy. This is a bizarre claim. Canadians know from everyday experience in their homes and businesses that there are many economically sensible ways to conserve energy and reduce fuel use – like switching to fluorescent light bulbs, or fuel efficient cars and furnaces.

If putting a price on carbon is such an economically bad idea, why is it being recommended by the Canadian Council of Chief Executives, the World Bank, and the CEOs of major oil companies?”

Certainly, more analysis can be done to better understand how much of B.C.’s big drop in fuel use has been due to the carbon tax (so far, the evidence suggests most of it). But that it has helped the environment, without harming the economy, seems pretty clear. So let’s move on.

While carbon pricing alone won’t solve climate change, it is an excellent beginning. The real debate is no longer about whether to price carbon, but how to do so most effectively. What price (or emission target) to set? How to buffer the effects on vulnerable households and businesses? And how to use the revenues to maximize environmental and economic benefits? These are the real questions to discuss if we’re serious about making progress on climate policy, and building a clean, prosperous economic future.

Stewart Elgie is a professor at University of Ottawa and Chair of Sustainable Prosperity. Richard Lipsey is professor emeritus of economics at Simon Fraser University and a member of Statistics Canada’s National Accounts Advisory Committee.

[chuckChuck]

Chronology of Peter Lougheed's achievements as Alberta premier
By The Canadian Press
Published September 14, 2012 10:05 am

EDMONTON - Peter Lougheed served as Alberta's premier from Sept. 10, 1971, until Nov. 1, 1985. He passed away the evening of September 13, 2012. Some of the highlights of his political career:

1965: Elected leader of the Progressive Conservatives. Party has never formed government in Alberta and doesn't have a single seat in the legislature.

1967: Lougheed wins his seat of Calgary West in the provincial election. Five other Tories are elected as well. Party becomes official Opposition to the governing Social Credit party.

1971: Tories defeat the government of Harry Strom in provincial election. They take 49 of 70 seats to end a 36-year Social Credit dynasty. One of Lougheed's first acts is to increase royalties paid by oil companies.

1975: Tories win second election with 69 of 75 seats and 62 per cent of popular vote.

1976: Lougheed creates Alberta Heritage Savings Trust Fund as a nest egg for future generations. It is funded by a portion of royalties deposited into long-term investments.

1978: Syncrude Canada oilsands project completed with provincial financial support. Tories also establish Alberta Oilsands Technology and Research Authority to develop technology for non-conventional oil production.

1979: Although their popular vote dips to 57 per cent, Tories win third election with 74 of 79 seats.

1980: A $300-million endowment establishes the Alberta Heritage Foundation for Medical Research.

1980: Lougheed's battles with Ottawa over control of energy resources culminate with Liberal Prime Minister Pierre Trudeau's national energy program that unilaterally sets prices and taxes for the province's oil. Albertans are outraged. Lougheed vows to go to court. He goes on TV to say province will cut its oil production to 85 per cent of capacity. Bumper stickers appear saying: "Let the eastern bastards freeze in the dark!"

1981: Lougheed and Trudeau reach an energy pricing agreement that ensures the federal government negotiates oil and natural gas prices with Alberta.

1982: Supreme Court of Canada rules Ottawa can't legally tax provincially owned oil and gas wells. Federal Energy Minister Marc Lalonde amends the national energy program.

1982: Lougheed works to, in his words, "defend the provinces against ... steamroller tactics" during talks to patriate the Constitution. He is most against an amending formula he feels gives too much power to Ontario and Quebec. It is eventually changed to give no province a veto, but which allows provinces to opt out of amendments that would reduce their powers.

1982: Lougheed's Tories win their fourth straight majority with 75 of 79 seats and 62 per cent of popular vote.

1985: "The Canadian Encyclopedia" is launched to celebrate Alberta's 75th anniversary. Lougheed's government funds its research and donates a copy to every school and library in Canada.

1985: Resigns as premier effective Nov. 1.

1986: Steps down as the legislature member for Calgary West on Feb. 28. Named a companion of the Order of Canada.

1989: Named to the Alberta Order of Excellence.

2012: Institute for Research on Public Policy names Lougheed the best Canadian premier in the last 40 years. L. Ian MacDonald, editor in chief of the institute's magazine Policy Options, says: "It wasn't even close. It was like watching Secretariat win the Belmont by 31 lengths."

For more from The Canadian Press, click here or scroll down The Tyee's main page.
- See more at: http://thetyee.ca/Blogs/TheHook/Federal-Politics/2012/09/14/Peter-Lougheed/#sthash.B9FX3Y8H.dpuf

[chuckChuck]

Hamloc Why did the oil sands require government assistance?

"1978: Syncrude Canada oilsands project completed with provincial financial support. Tories also establish Alberta Oilsands Technology and Research Authority to develop technology for non-conventional oil production." from the previous post on Peter L.

It was and is probably to kick start and build an industry.

I have wondered whether $30 a tonne would lower consumption as well. B.C.'s experience suggest it does. But fuel demand seems to handle much bigger market price changes than we will see with a $30 carbon price.

More than likely better technology will come along that will speed up change.

As I mentioned before, Toyota announced that it plans to be emissions free by 2050 with fuel cell technology. That seems very ambitious but would be a radical change.

Who knows?

[perfecho]

Ralph was a big supporter of giving the oil sands all kinds of tax concessions and royalty forgiveness....

[riders2010]

Fuel was what 1.20 a litre at one time and that didn't spark a big dash to buy ship sails and have them mounted on cars did it?

The option to do something else has to be there in in order for people to do something else.

People spend more on fuel just spend less on food etc.

If you want to move to alternate energy you have everyone pay for it. Here I. This country and in all countries that way it is a level playing field for all businesses to survive.

[ado089]

Set up 4th gen fast reactors next to the existing nuclear plants. Carbon free energy that uses up existing waste bringing it's radioactive life down from thousands of years to a couple of hundred. It's base load and reliable. Oh wait it's too scary and doesn't fit the windmill and solar narrative. Including higher cancer rates following Chernobyl about 9000 deaths can be attributed to nuclear, the numbers for coal are close to 250,000. www.newscientist.com/article/mg20928053.600-fossil-fuels-are-far-deadlier-than-nuclear-power/ It's time for the greenies to get their shit together and figure what exactly their goals are.