Diana Carney

Getting beyond the carbon impasse: response to the Financial Post

May 17, 2013

Canada 2020’s primary objective is to ‘inform and influence debate’ on the most compelling policy issues facing Canada. With climate change and carbon pricing we picked the right issue and the debate has begun.

Earlier this month a response to our paper Why would Canadians buy carbon pricing?’ was published in the Financial Post. The article, ‘Carbon pricing doesn’t work’, was written by Aldyen Donnelly, President of WDA consulting and also President of the Greenhouse Emissions Management Consortium, a not-for profit Canadian corporation formed by companies involved in the oil and gas business that wish to demonstrate industry leadership in developing voluntary and market-based approaches to greenhouse gas emissions management. I note this as Ms. Donnelly’s affiliation is not immaterial to the arguments made in the article and the ‘confirmation bias’ charge leveled our way.

I am guessing that Ms. Donnelly agrees that carbon management is a key strategic issue. But she clearly disagrees with our analysis and also our tone.

The over-riding objective of our paper, and packed event which it supported, was to ‘identify a refreshed mode of discussion… [in order to]… develop a constructive and positive course of action’ to address climate change. Yes, we chose to look at carbon pricing, though were deliberately non-committal between a carbon tax and cap and trade. Our main message was that we must move on and take positive steps to move beyond the climate impasse that is currently plaguing us.

Far from ‘slamm(ing) the door’ on any policy proposals that offer a realistic change of making serious progress on carbon – of which we stand accused – the open debate format and variety of speakers allowed for all options to be brought forward. This includes using performance standards to reduce carbon emissions.

Indeed, our paper credits the federal government for making at least some progress in reducing emissions through regulating vehicles. But we also point to the fact – as many analyses show – that the current government’s sector-by-sector regulatory approach to reducing greenhouse gases will not achieve more than half of our (already inadequate) Copenhagen targets by 2020. It is for this reason that we need a step-change in action in this space. The regulatory approach is, as we note in our paper, ‘complex and slow’. It should form part of the solution but, on its own, it falls way short of being adequate in the short term.

We would certainly welcome a more fulsome explanation from Ms. Donnelly of how product standards are going to enable us to meet our Copenhagen targets, especially in a cost-effective way. It is not that this is a technical impossibility; it is just that there is no credibility to such a claim in the Canada of 2013 (when the 2020 Copenhagen deadline is just around the corner for the purposes of designing and implementing regulation). Tellingly, even Environment Canada has not made this claim.

There are grounds to question some of the finer points of the studies around the fuel-demand effects of carbon pricing in BC and other jurisdictions. But the general correlation between higher costs and reduced demand is intuitive, well-established and underpins the whole of economic theory (as even the first year students, whom Ms. Donnelly recommends should study our paper not for content but for ‘confirmation bias’, would agree).

Yes, demand for fuel is relatively inelastic, but that is in the short term. When prices increase, and further increases are expected, consumers look for more energy-efficient products and companies go to great lengths to supply them. The 1973–1978 oil shock marked the beginning of serious efforts to improve vehicle fleet efficiency in the U.S. and elsewhere.

Technology is key to delivering on Canada’s and the world’s climate change goals. Industry is key to leading the way to a more sustainable future. Carbon pricing will help change the incentives so companies invest in and profit from that future. Many companies get that. Just look at the inspiring presentation by the World Business Council for Sustainable Development on its Vision 2050.

Canada has made progress in fighting climate change, but not nearly enough to make good on our commitments or to make a real difference to our planet’s climate future. We must move on from the current carbon impasse in Canada. If we indeed share the same goals, as Ms. Donnelly suggests, a constructive dialogue is the best way to proceed. That’s exactly what Canada 2020 is promoting and, judging by the attendance at and engagement with our April event, that’s exactly what large numbers of Canadians want.

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