Report of the National Roundtable points the way to change

A report tabled by the National Roundtable on the Environment and the Economy (NRTEE), states Canada can achieve its greenhouse gas (GHG) reduction targets of 20% by 2020 and 65% by 2050 by Implement a strong, clear, consistent and certain GHG emission price signal across the entire Canadian economy as soon as possible.

The report, entitled Getting to 2050: Canada's Transition to a Low-emission Future, argues that the immediate introduction of market-based policy that takes the form of an emission tax or a cap-and-trade system or a combination of the two not only is economically feasible, but quite likely is the only way of achieving the federal government's stated emission reduction targets.

Corporate reactions to the NTREE report have been generally positive.

In November of 2006 NTREE, a federally-funded advisory panel was asked by then Environment Minister Rona Ambrose to report on how Canada could meet the government's 2050 targets to reduce air pollutants and green house gas emissions.

NRTEE set out to explore a wide range of possible scenarios for achieving deep, long-term GHG emission reduction targets (20% by 2020 and 60% to 70% by 2050 from 2006 levels).

The research was guided by three key criteria:• First, the overarching objective of Canada's climate change policy should be to contribute to the global goal of climate stabilization;

• Second, Canada's medium- and long-term emission reduction targets have been defined; and

• Third, Canada has national economic and environmental circumstances that need to be taken into account in the design and implementation of its climate change and clean air policies

Following extensive consultations with all major sectors of the economy, the advisory panel set out a comprehensive framework for how Canada could make the transition to a low-emission future and achieve long-term and stable emission reductions.

The central recommendation of the report is the establishment of an economy-wide price signal for carbon emissions as soon as possible.

NRTEE research shows the most effective and efficient policy approach would involve market-based instruments such as an emissions tax, a cap-and-trade system, or a combination of the two.

To achieve emission reduction targets, this policy would need to be complemented by sector-specific regulatory measures to force emission reductions from those parts of the economy that do not respond to these price signals.

"Our analysis shows that putting a price on emissions is the most effective tool to achieve deep GHG reductions over the long-term" said NRTEE Chair Glen Murray.

"An early and clear price signal is needed to influence the investment decisions by industry in the technology and innovation required to achieve deep reductions and also to influence consumer decisions and behaviour."

A carbon tax system would require industry to pay a fee for every tonne of harmful emissions released into the atmosphere.

A cap and trade system would allow companies to emit up to specific limits, and permits to emit above the cap would have to be purchased from companies that have lowered their emissions below their mandated cap.

Thomas d'Aquino, Chief Executive and President of the Canadian Council of Chief Executives (CCCE)., noted that the NRTEE Report provides Canadians with a sound and comprehensive policy blueprint to achieve significant long-term reductions in greenhouse gas (GHG) emissions.

"Canada's business leaders are committed to effective action on climate change, and in that spirit we strongly welcome the NRTEE's final Advisory Report on long-term reductions of greenhouse gases and air pollutants," said d'Aquino, whose organization represents 150 chief executives and leading entrepreneurs from all major sectors and regions of the country.

Environment Minister John Baird, speaking to reporters following the release of the NTREE report, appears to have rejected the idea of a carbon tax.

Tuesday's Globe and Mail reports Mr. Baird's rejection of a carbon tax, though he has embraced the report's general premise of making polluters pay.

"We think a new tax sounds like a Liberal idea," the Minister is quoted as saying.

The concept of a carbon tax is politically risky because it is perceived in some corners as being regionally divisive and consumer unfriendly.

In 2006 Prime Minister Stephen Harper rejected the idea, saying a carbon tax would be akin to the national energy program that penalized Western oil when it was introduced in the 1980s.

It is also likely that any tax imposed on domestic oil production would be transferred to consumers, escalating already high energy prices. "That is something this government will never do," Mr. Harper said in 2006.

Liberal Leader Stéphane Dion, a former minister of the environment, has also criticized the idea of a carbon tax in the past.

"I've always been against it. I will have other ways to get there," Mr. Dion said during the Liberal leadership race last year.

The Prime Minister's views may be shifting with respect to the imposition of a strong market-based price signal for carbon emissions. In a year end interview he noted that dealing with climate change will not be easy.

"There are going to be costs," he cautioned. Environment Minister Baird echoed these thoughts yesterday.

"We believe that we have to put a price on carbon and that's what our regulatory regime does," Mr. Baird said.

"We believe we can regulate emissions lower by the big polluters under a strong principle of polluter pays."

The NRTEE report also notes that the economic fallout from introducing a market based price on carbon emissions may be overestimated.

Further research on possible economic impacts will be undertaken over the next year. However, the Advisory body notes that any delay in action will result in greater economic losses in the long run.

"Delaying action comes with unnecessarily high economic and environmental risk." stated Murray. "Our research shows that a faster, deeper pathway to achieve the government's long-term GHG reduction targets of 20% by 2020 and 65% by 2050, has the least overall economic impact in the long-run, and better environmental outcomes resulting in the equivalent of 5 years of no GHG emissions into the atmosphere over this period as we meet our targets."

The report concludes that the government's medium and long-term targets are achievable with the equivalent impact on Canada's GDP of 1 to 2 "years of lost GDP" over the 44-year period from 2006 to 2050 if a tax is introduced.

The panel said it is too early to say exactly what the price on carbon emissions should be and pledged to explore the specifics of a carbon tax and cap and trade system in a future report.

The panel is urging government leaders to quickly put in place a "strong" market-based price signal on industrial emissions of greenhouse gases and air pollutants and says the sooner the better for both the economy and the environment.

This same point is echoed in the statement from the Canadian Council of Chief Executives.

It notes that regardless of the specific mechanism, the goal of any such system must be to make maximum use of market forces, to ensure transparency, and to avoid giving any one sector or region an unfair advantage. Of equal importance is the need to ensure that any new environmental tax is offset by reductions in other forms of taxation, to ensure revenue neutrality.

The federal government is currently proposing a cap and trade system based on intensity targets, meaning the emissions per unit of production is capped but not a company's absolute emissions. The panel suggests that if Canada is to implement a cap and trade system, it should follow the European model, where a company's emissions cap is measured in megatonnes. As the report points out, an intensity approach can allow to emissions to continue to grow as production increases.


For the complete report, Getting to 2050: Canada's Transition to a Low-emission Future, please visit here.

This article is reproduced with kind permission of The GLOBE Foundation of Canada.

It was originally published in GLOBE-Net, the On-line Guide to the Business of the Environment published by the GLOBE Foundation.

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