A Carbon Pricing Plan that…

A Carbon Pricing Plan that Works for Ontario’s PC Government

There were two events with big implications for government climate policy on Thanksgiving Monday.

Firstly, the UN Intergovernmental Panel on Climate Change – comprising hundreds of scientists from 195 member countries – announced that global temperature will reach 1.5 degrees above pre-industrial levels by 2030 without significant changes in society. At that temperature (we’re already one degree above pre-industrial levels), the frequency and intensity of extreme drought and extreme rainfall or flooding will increase. That is just 12 years from now – a time when many alive today will still be alive and when our children are just reaching adulthood.

Secondly, it was announced that American economist William Nordhaus would share the 2018 Nobel Prize for Economics for pioneering the assessment of the economic impact of climate change, including his advocacy for governments to tax carbon emissions.

We are running out of time to act and the nature of the best action to take is clear: Put a price on carbon. In this submission, I will 1.) argue that a revenue-neutral carbon fee and dividend policy would be the most equitable and effective way to price carbon, 2.) show evidence that business favours such an approach and 3.) appeal to the common sense and morality of our government decision makers in asking them to embrace such an approach.

Carbon Fee and Dividend – An equitable, effective approach

Since 2010, Citizens’ Climate Lobby Canada (of which I am a member) has been advocating for carbon fee and dividend: an incrementally rising price on carbon pollution where 100% of the fees collected are returned to citizens. In Canada, carbon fee and dividend is also championed by Clean Prosperity and has been endorsed by the PostMedia Editorial board in September 2017 in their syndicated editorial “Here’s how to make carbon pricing honest”. In September 2018, Clean Prosperity released a study that found the vast majority of Ontarians would come out ahead under a carbon fee and dividend policy.

Carbon fee and dividend in Ontario would work as follows:

• A fee is placed on carbon-based fuels at the source (well, mine or port of entry)

• The fee is increased at a pace that motivates the emissions reductions necessary to avoid catastrophic consequences

• Protect low and middle income households from increased energy costs associated with the carbon fee by returning 100% of the dividends collected back to Ontarians.

• A predictably increasing carbon price will send a clear market signal which will unleash entrepreneurs and investors in the new clean-energy economy.

• To prevent offshoring of carbon emissions, especially as the carbon fee rises, Canada’s federation of provinces and territories would work with the federal government to enact border carbon adjustments.

This is not just a shell game with money. The higher cost of carbon-based fuels incents people to switch to other, non-carbon-based sources of energy. Consumers will also be encouraged to buy other products with fewer carbon inputs. As the carbon charge makes carbon-based energy, or products where carbon-based energy is an input cost, less competitive, it encourages carbon fuel producers and manufacturers of those products to switch away from carbon-based energy sources. It makes products with lower carbon inputs more competitive.

Every year, each citizen gets an equal share of the money the government collected from carbon fuel producers. People can choose what they do with that money. People who wish to continue driving sport-utility or other fuel-inefficient vehicles can use the cheque to offset their higher carbon costs. Or they can reduce their carbon consumption and keep more of the cheque for other things.

People who use fewer carbon inputs – e.g., who take public transit or own smaller homes – will find that the amount they get from the government each year exceeds the total added cost they pay due to the push-through of the carbon fee by carbon producers.

Carbon fee and dividend is a policy where all sides win. It will appeal to a broad spectrum of people in Ontario, whether they support small government, free markets, strong environmental policy, or expanded government benefits. Thus, carbon fee and dividend has built-in policy persistence.

Provides transparency, consistency for business

For Ontario to be truly open for business, we need such policy persistence for dealing with climate change. What business and industry requires for long-term business planning is clarity of purpose as to the future direction of climate policies. With a growing sense of the reality of climate change and the inevitability of policies that will respond to it, a growing swathe of industry is becoming vocal about just that need. In the US, Shell Oil, General Motors and other big corporations are the founding corporate members of the Climate Leadership Council. They are a policy institute that is actively lobbying Congress in the USA to pass carbon fee and dividend legislation. A June 2018 study found that their Carbon Dividends Plan would achieve more than triple the emissions reductions in the U.S. of all Obama-era climate regulations, and could exceed the high end of the U.S. Paris Commitment. The Carbon Dividends Plan also has a well-funded political action committee. These companies don’t oppose – much less fear – carbon pricing; they are lobbying for it because they want clarity and certainty in climate policy.

Review your conscience – it’s the right thing to do

When people dump garbage in the environment, governments fine them. Some corporations seek out jurisdictions with weaker laws so they can dump sewage or other waste directly into the environment. But for the most part, in the industrialized world, citizens and governments no longer tolerate such behaviour.

The carbon dioxide (CO2) released into the atmosphere as a result of our heavy reliance on carbon fuels is garbage. Globally, 20% of CO2 emissions are now covered by a carbon price - including 45 national carbon pricing policies. Do we want Ontario to be one of those jurisdictions that companies locate in because they can dump their garbage here?

The Intergovernmental Panel on Climate Change is telling us that rising temperatures due to excess atmospheric CO2 is choking off life on our planet – just as effectively as river pollution kills the fish. We have to act now to prevent average global temperatures from hitting 1.5 degree above pre-industrial levels in the next 12 years. My daughter will be 34 then – a young adult starting her life. Do you have children or other young people you care about? This is people’s lives you’re deciding about – not just livelihoods.

Look to your faith:

Christianity:
"And the LORD God took the man, and put him into the Garden of Eden to dress it and to keep it." (Genesis 2:15)

Judaism:
"In the hour when the Holy one, blessed be He,
created the first man,
He took him and let him pass before all the trees of
the Garden of Eden and said to him:
"See my works, how fine and excellent they are!
Now all that I have created, for you have I created.
Think upon this and do not corrupt and desolate My World,
For if you corrupt it, there is no one to set it
right after you."
(Midrash)

Islam:
“It is He who has appointed you viceroys in the earth … that He may try you in what He has given you.”
(Surah 6:165)

A smart political choice

The first compliance period for Ontario’s cap and trade programme ends December 2020. This a logical time to end the programme and bring in carbon fee and dividend. Phasing out cap and trade – rather than abruptly ending it – will save the Ontario government millions of dollars in litigation costs and possibly billions of dollars in damages awarded to holders of contractually binding carbon credits under that programme that are rendered useless by an abrupt cancellation.

There are many flaws with the federal government’s carbon pricing plan. But the Feds won’t impose their carbon price if a province has its own carbon-pricing scheme. The Ontario government could be the one cutting the cheque for each citizen of Ontario, rather than the federal government. Everyone living in Ontario (every voter) would get this cheque. A carbon fee and dividend programme is a politically, economically and environmentally smart move for Ontario. The Ontario Progressive Conservative government has the legislative strength and the political capital to take such a bold direction.