Carbon tax think-tank makes for strange bedfellows

Ecofiscal Commission includes environmentalist, oil and gas industry heavyweights as factions from both sides of the energy divide push for national carbon-pricing plan

Preston Manning, founder of the populist conservative Reform Party, says Canada needs to put a price on carbon emissions. | Manning Centre

With a board of directors that includes David Suzuki Foundation CEO Peter Robinson and former NDP politicians Mike Harcourt and Bob Rae, few might register surprise over a new think-tank called Canada’s Ecofiscal Commission calling for a national carbon tax.

But when Preston Manning, the father of modern Canadian populist conservatism, recently threw his weight behind a national carbon-pricing scheme, it shocked some conservatives.

Canadian business leaders, particularly in the oil and gas industry, might be less surprised, however. Suncor Energy (TSX:SU) CEO Steve Williams is an Ecofiscal Commission member – as is Manning.

Oil and gas companies expect Canada will eventually put a price on carbon, said Chris Ragan, chairman of the new economic think-tank.

“They are building shadow carbon prices into their investment decisions,” he said. “They know something’s coming. They would prefer to see, for the most part, a transparent, broad-based carbon price [rather] than complex, prescriptive, sometimes heavy-handed regulations.”

Jock Finlayson, chief policy officer for the Business Council of BC, agreed.

“If one wants to have a carbon-pricing policy, it would work better to have it at the national level rather than have individual provinces running off doing their own thing,” Finlayson said.

In the 2008 election campaign, the Conservatives promised a cap-and-trade system, and then reversed that stance in 2011. Earlier this month, Prime Minister Stephen Harper dismissed calls to put new limits on Canadian oil producers as “crazy.”

Stockwell Day, who beat out Manning for the leadership of the Canadian Alliance in 2000, spoke to the Vancouver Board of Trade December 10 about a new oil refinery proposal for Prince Rupert. Asked his reaction to Manning’s support for a carbon tax proposal, he said, “I completely disagree.

“Raising taxes or bringing in new taxes, I’ve always said, is a no-brainer. We hope governments don’t do that.”

In the meantime, three provinces – B.C., Alberta and Quebec – have all introduced their own variations on carbon pricing, and earlier this month B.C. Premier Christy Clark lobbied her Ontario counterpart to look at B.C.’s carbon tax as a model for capping emissions without putting curbs on economic growth.

B.C. is the only jurisdiction in North America with a carbon tax, Quebec has a cap-and-trade system and Alberta has a $15-per-tonne carbon levy that applies only to the largest polluters.

And that’s a problem, said Finlayson. Canadian industry would prefer one national pricing mechanism to a patchwork of provincial regulations.

“What we have in Canada right now is clearly suboptimal,” he said.

Not only do the pricing mechanisms differ in B.C., Alberta and Quebec, so do the emissions inventories and reporting.

“In an ideal scenario, you wouldn’t have individual provinces running off in all different directions, which is what we have at the moment,” Finlayson said. “We would have a single national carbon-pricing scheme. I think most of the business community would rather see more of this pushed up to the national level and less of it being done by sub-national jurisdictions.”

Ragan said the Ecofiscal Commission has yet to come up with a preferred carbon-pricing mechanism, but pointed to B.C.’s carbon tax as a good model. The fact that it’s revenue-neutral is a big selling point for business, he said, because if business is worried about new taxes, a national carbon tax could be offset with equal reductions in corporate and income taxes.

“You can use the revenues to reduce the most growth-retarding taxes we have,” he said.

Finlayson said he also prefers the B.C. carbon tax model.

“My view, as an economist, would be leaning more toward the simplest possible policy, which is carbon pricing – a broadly applied carbon levy of some sort that affects both households and business. So something more like what B.C. has done rather than what Quebec has done.”

Now that China and the U.S. have agreed to a new protocol on climate change, Canada – a major oil producer – has come under increasing international pressure to do more to tackle its greenhouse gas (GHG) emissions.

United Nations Secretary General Ban Ki-moon recently urged Canada to take a leadership role on climate change, and in a series of unflattering articles in The Guardian newspaper, Canada has been portrayed as a climate change freeloader, with the Alberta oilsands in particular getting most of the attention.

In 2009, when it signed the Copenhagen Accord, Canada agreed to reduce its GHG emissions to 17% below 2005 levels by 2020.

That would require Canada getting its GHGs down to 612 tonnes by 2020. But Environment Canada’s Sixth National Report on Climate Change recently projected GHGs will hit 734 tonnes by 2020 – a 122-tonne shortfall. Nor does the report give Canada much hope for meeting its Copenhagen targets.

“In light of strong economic growth this could be challenging,” the report states.

With 0.5% of the world’s population, Canada produces 2% of global carbon dioxide. Alberta’s oilsands account for 8.7% of Canada’s GHGs and 0.13% of the world’s carbon, according to the Canadian Association of Petroleum Producers.

Given Canada’s small share of the world’s greenhouse gas emissions, it could be argued that doing nothing would have a negligible impact anyway.

“Canadians could choose to be free riders, if they wanted,” Ragan said. “But I don’t think that’s who we are.”