Climate policy misinformation: Pity the voter

By Mark Jaccard
Originally published in the Vancouver Sun April 20, 2009

A recent BC NDP press release states that Canada’s National Roundtable on the Environment and the Economy (on which I serve) “clearly supports” the NDP’s climate policy proposal to scrap the carbon tax and that I am Premier Campbell’s “top advisor” on BC’s carbon tax. Neither of these statements is true.

I have never met or communicated with Premier Campbell and did not advise the BC government as it rolled out its key climate policies in 2007 and early 2008, including the carbon tax. My only recent advisory role in BC was for the Climate Action Team, a committee of citizens and experts proposing future climate policy for BC in the period 2012 to 2020. In the first half of 2008, I attended six meetings as the team prepared the report it publicly released in July, long after the carbon tax had been implemented in the February 2008 budget. Ironically, my role advising a citizen’s committee (rather than politicians) was identical to the function I performed in 1998 for the Greenhouse Gas Forum, a citizen advisory committee created by BC’s NDP government.

Of course, the NDP did not call me Gordon Campbell’s “top advisor” from 2001 to 2006 when I repeatedly criticized his ineffective climate policies of that period. But now that I am applauding his recent climate policies and sharply criticizing the NDP’s alternatives, their strategy is to claim I am no longer independent.

Had I been Campbell’s policy advisor in 2007, when he finally got serious about the climate risk, I would have counseled him against implementing the carbon tax. This is the recommendation I gave, when asked, to Rona Ambrose as Canada’s Conservative environment minister in 2006, to Michael Ignatieff during his campaign for Liberal leader in the same year, and to Stephane Dion in May 2008. I would have told Campbell that while a carbon tax is the most economically efficient and effective way of reducing greenhouse gas emissions, it would be politically safer to implement an equivalent cap-and-trade system instead.

With cap-and-trade, the government allocates tradable emissions permits that add up to a fixed cap – which would decline over time in order to reduce emissions. As the cap declines, the value of the smaller number of permits starts to rise, which in turn increases the price of fossil fuels like natural gas, gasoline and home heating oil. Thus, an “economy-wide” cap-and-trade system has the same effect on the price of gasoline as the carbon tax. But when comparing the two, political optics favours cap-and-trade.I know this sounds cynical. But politicians implementing a carbon tax face a great risk that unscrupulous political opponents will mislead the public by claiming we can reduce emissions without taxing gasoline, conveniently failing to mention that their cap-and-trade alternative should have the same upward effect on its price for the same emissions reductions. The NDP have taken the game one step further. They are promising British Columbians that their cap-and-trade “alternative” would only apply to industrial emissions, meaning that the price of gasoline would not increase. Yet, they claim they can match Campbell’s promise to reduce emissions 33% by 2020.

Think of that. The current carbon tax in BC covers 75% of emissions, which makes it a leading policy in terms of its coverage. (Not-yet-taxed emissions sources include municipal landfills, agriculture and a few unique industrial process emissions, although the government is apparently working on this.) The NDP alternative would role this coverage back to about 35% of emissions, yet it promises to achieve the same reductions in 2020. In a recent study, I estimated that major emissions reductions from a cap-and-trade that applied only to industry (with accompanying regulations in transportation and other sectors) would lead to dramatic increases in industrial production costs, forcing cutbacks and even plant closures. Direct and indirect job losses in BC would be at least 60,000 from the NDP policy.

This is one of the reasons why we members of the National Roundtable say repeatedly in our report that the important issue is not cap-and-trade versus carbon tax, but rather emissions coverage. The report and its technical background documents are full of quotes like “Good design is more important than instrument choice. Either carbon taxes or cap-and-trade systems could be designed to be cost-effective.” Instead, it is emissions coverage that is the key feature to look for, “the carbon pricing policy must be able to implement a unified carbon price across all emissions.” Note the emphasis on “all” emissions.

The important message from the Roundtable’s new report is to ignore the debate on cap-and-trade versus carbon tax and instead focus on emissions coverage. For a given level of emissions reduction, the fairer, more effective and more efficient policy is one that covers more emissions. In BC, it is a choice between 75% and 35%.