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ASSIGNMENT 2: Analysis of “The Way Forward” by the Ecofiscal Commission

The Canadian Ecofiscal Commission’s report “The Way Forward” starts off by addressing the highly important issue of greenhouse gas emissions and their adverse effects on the environment in terms of global warming and climate change. It stresses that there is no ambiguity in this statement and offers evidence for the same. The evidence provided by the author is as follows:

1. There is more than a 95% probability that human activity is responsible for climate change. [1] 2. A survey of climate science research finds that 97% of scientific studies supports the hypothesis

that climate change is driven by human actions. [2]

These references provided by the author convincingly show the correlation between human activities and their role in climate change.

Once this main problem is stated, the author describes the need for immediate action in terms of release of greenhouse emissions to the atmosphere. Furthermore, to validate this point, the author states that greenhouse gases need to be monitored, reduced and stabilized throughout the world [3] [4]. Furthermore, the author states that damages to the Canadian economy are estimated to rise from around 5 billion dollars annually in 2020 to between 21 and 43 billion dollars annually in 2050 [5]. These references effectively portray a sense of urgency on the entire “greenhouse emission reduction” issue and the annual cost to Canada signify a massive threat to Canada and makes it apparent that a change in global greenhouse gas emission policies is in order.

Once the author establishes the greenhouse gas emissions and climate change to be a global issue, evidence is provided on how the Canadian economy would be affected if effective and stringent greenhouse gas emission policies are not implemented. The author effectively describes the potential threats to Canada’s economic sectors including mining, fisheries and forestry products. In terms of total global greenhouse emissions, the author does not provide sufficient information on how and to what extent does Canada’s greenhouse emissions contribute to this value.

The central claim made by the author revolves around the fact that Canada is unlikely to achieve its 2020 greenhouse gas emission target with the existing policies. This is validated via the graphical representation of the projected emissions via the targeted emissions for every Canadian province for 2020 [6] [7] [8] [9]. The graph effectively shows that most of the provinces with the exception of Nova Scotia and Newfoundland and Labrador will be unable to meet the target.

The author describes the need for new carbon policies in Canada. There is a big emphasis placed on government and market co-ordination to develop effective carbon policies. The author starts off by describing the different policy approaches that can be adopted by the Canadian government. Policy instruments such as regulations and subsidies are examined and evidence is provided to support each of their individual strengths and weaknesses. The author stresses on the need to implement a carbon policy that reduces emissions at lowest cost. Carbon pricing, according to the author is the answer to the problem as it stimulates greater innovation than other regulatory approaches. The author, in my opinion

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does not adequately describe the effect of regulations and subsidies in the market. A brief model on these policy tools would make for a fair comparison between these tools and the recommended carbon pricing system.

Section 2 of the report talks about the need for new carbon pricing policies. The author states that carbon pricing has been successfully implemented in countries all over the world and provides evidence for the same. Evidence is provided which states that 39 national and 23 sub-national jurisdictions have put a price on greenhouse gas emissions or have stated to do so in the future [10]. In my opinion, use of such statistics give the reader a good insight on the popularity of the carbon pricing system across the globe.

The author then proceeds on to state the benefits of the carbon pricing system and discuss potential areas of improvement to the system. A potential improvement according to the author would be to implement revenue recycling within the same province along with carbon pricing in order to generate revenue which could be in turn used for reduction in taxes, development of green technologies, investment in infrastructure and other such economic benefits. Evidence is provided which states that the “possibility of generating revenue that can be used to advance economic and environmental goals is an important part of ecofiscal policies” [11] [12]. Although the author provides evidence for this claim, it would be more effective if the report were to reference the benefits observed by provinces currently employing the revenue recycling to further augment the benefits from using carbon pricing policies.

The author states that carbon pricing effectively reduces greenhouse gas emissions without negatively affecting the economy. The author provides British Columbia’s carbon tax data as an example to validate this statement. British Columbia’s fuel usage per capita reduced sixteen percent, while simultaneously outperforming the rest of the country in GDP growth [13]. The author further supports the claim by discussing the benefits of carbon pricing experienced in the European Union and the United States without any impact on the GDP growth in each of these economies. The use of these examples makes the authors claim believable especially since it is not very intuitive and can easily be interpreted the other way.

Section 3 of the report, in summary, states that carbon pricing is much more effective when implemented at the provincial level as compared to the federal level. This is due to each province having a unique sub economy with different emission profiles and economic structures. The author then proceeds to describe the types on carbon pricing systems already in place in certain provinces such as British Columbia and Quebec. In my opinion, this part of the report has a lot of graphical representation of data which makes it easy to understand follow the content. The use of graphical representation of trends such as change in population, GDP and greenhouse emissions for each province, breakdown of greenhouse emissions by industrial sector in each province and more such representations helps the reader develop a sophisticated insight into the industrial make up of each province along with its emission profile.

Furthermore, the author acknowledges the fact that although the provinces have the flexibility to design their own carbon pricing policies, there has to be an overall coordination between all policies employed by the provinces via linkage. This would ensure that there would be an overall carbon price preventing companies from taking advantage of provinces with lower carbon prices to release more emissions. This in my opinion is extremely important since a unified carbon price would mean that the price would be

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determined solely by market forces and government intervention which is signifies an ideal balance between economy and the environment.

The federal coordination would need to gradually ramp up stringency to ensure greenhouse emission reduction targets are met while simultaneously preventing major shocks to the economy. The author mentions that although the federal government would have to regulate stringency of the carbon pricing policies, the revenue recycling would have to be decentralized and managed by individual provinces so as to prevent flow of revenue out of the province. This is an interesting and valid point. It makes sense to retain the revenue within a province and use it to further improve research and development or lower taxes within the same province.

Section 4 of the report focuses on how carbon pricing policies stack up against other policy approaches. The author effectively makes use of a model that compares GHG emissions reduction for each policy versus the economic factors. This is my opinion is extremely crucial as a prospective policy needs to tackle greenhouse emissions while simultaneously keeping abatement costs as low as reasonably possible. The model is pretty simplistic however, and would not necessarily represent how the policies being examined would actually fare in the real world. Perhaps a better way of comparing possible policy choices could be achieved by picking provinces where some of these policies are in effect and then comparing them in terms of greenhouse gas emissions and economic factors.

Section 5 of the report focuses on the various pricing tools available with the carbon pricing system. The key examples being the cap and trade system and the carbon tax system. The author’s comparison of British Columbia’s carbon tax system versus the cap and trade system being currently employed in Quebec and California is satisfactory and gives the reader good insight into the key differences between these tools.

The final section of the report effectively concludes the document by providing recommendations based on the carbon pricing issues discussed throughout the report. Overall, in my opinion, the report successfully demonstrates that a carbon pricing is the way forward and certain tweaks/improvements to the policy such as revenue recycling, coordination and stringency manipulation over time could help Canada achieve its greenhouse gas emission reduction targets.

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References[1] Intergovernmental Panel on Climate Change (IPCC). (2014a). Climate change 2014: Synthesis report. Retrieved from: http://www.ipcc.ch/report/ar5/syr/

[2] Cook, J., Nuccitelli, D., Green, S. A., Richardson, M., Winkler, B., Painting, R., ... Skuce, A. (2013). Quantifying the consensus on anthropogenic global warming in the scientific literature. Environmental Research Letters, 8(2), 024024.

Cook, J., Nuccitelli, D., Skuce, A., Jacobs, P., Painting, R., Honeycutt, R., ... Way, R. G. (2014). Reply to ‘Quantifying the consensus on anthropogenic global warming in the scientific literature: A re-analysis’. Energy Policy, 73, 706-708.

[3] Hoffert, M. I., Caldeira, K., Jain, A. K., Haites, E. F., Harvey, L. D., Potter, S. D., ... Wuebbles, D. J. (1998). Energy implications of future stabilization of atmospheric CO2 content. Nature, 395(6705), 881-884.

[4] Peters, G. P., Andrew, R. M., Boden, T., Canadell, J. G., Ciais, P., Le Quéré, C., ... Wilson, C. (2013). The challenge to keep global warming below 2°C. Nature Climate Change, 3(1), 4-6

[5] National Round Table on the Environment and the Economy (NRTEE). (2011). Paying the price: The economic impacts of climate change in Canada. Report 04. Retrieved from http://collectionscanada.gc.ca/webarchives2/20130322143132/http:/nrtee-trnee.ca/wp-content/uploads/2011/09/paying-the-price.pdf

[6] Auditor General of Alberta. (2014). Report of the Auditor General of Alberta. Retrieved from http://www.oag.ab.ca/webfiles/reports/AGJuly2014Report.pdf

[7] Environment Canada. (2014a). National inventory report. Retrieved from http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/8108.php

[8] Environment Canada. (2014b). Greenhouse gas emissions data. Retrieved from https://www.ec.gc.ca/indicateurs-indicators/default.asp?lang=en&n=BFB1B398-1#ghg4

[9] Alberta Environment. (2014). Alberta’s climate change strategy and regulations: A review of the first six years of the Specified Gas Emitters Regulation. Retrieved from http://cmcghg.com/wp-content/uploads/2014/01/J_Wheler-CMC-Workshop-SGER-Renewal-2014_01_27_v2.pdf

[10] World Bank. (2014b). Carbon pricing supporters list. Retrieved from http://siteresources.worldbank.org/EXTSDNET/Resources/carbon-pricingsupporters-list-092114.pdf

[11] Jorgenson, D. W., Goettle, R. J., Ho, M. S., & Wilcoxen, P. J. (2013). Double dividend: Environmental taxes and fiscal reform in the United States. MIT Press.

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[12] Carbone, J., Morgenstern, R. D., Williams, R. C., III, & Burtraw, D. (2013). Deficit reduction and carbon taxes: Budgetary, economic, and distributional impacts. (Resources for the Future Report). Retrieved from: http://www.weathervane.rff.org/RFF/Documents/RFF-Rpt-arbone.etal.CarbonTaxes.pdf

[13] Elgie, S. (2014). Just the facts: What’s behind B.C.’s whopping fuel use drop? Ottawa: Sustainable Prosperity. Retrieved from http://www.sustainableprosperity.ca/blogpost97

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