CARBON PRICING ROUNDUP: AUGUST 24, 2019

Carbon Markets Roundup: Summer 2019

What Role Should Carbon Pricing Play In Addressing Climate Change?

Emissions will rise under Conservative climate plan

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Top 15 Countries By Annual CO2 Emissions Since 1959

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Carbon Markets Roundup: Summer 2019

B&D’s Carbon Markets Roundup covers domestic and international developments related to carbon pricing and related regulatory programs aimed at regulating or reducing greenhouse gas emissions. This edition of Carbon Markets Roundup covers developments during the first half of 2019, which saw significant action in numerous U.S. states and regional programs. 

Notably, the Transportation Climate Initiative has gained momentum and appears poised to launch a new carbon pricing scheme for transportation fuels in the mid-Atlantic and Northeast. Washington state passed a suite of new climate measures, while Oregon failed to do the same thanks to some literal last-minute maneuvering by the legislation’s opponents. And as 2020 inexorably approaches, the Parties to the Paris Agreement are still working to develop offset and trading mechanisms under Article 6.

International

Canada Advances Federal Carbon Pricing

On June 14, 2018, Canada’s Senate passed a bill containing a new federal carbon pricing scheme, known as the Greenhouse Gas Pollution Pricing Act. That law became effective on January 1, 2019, establishing a national carbon price regime that will apply in provinces and territories that lack an equivalent carbon tax or cap-and-trade policy. The law set a price on GHG emissions from fossil fuels of $20 per ton beginning in 2019 and rising to $50 per ton by 2022.

In April 2019, the federal carbon tax was imposed on several provinces that failed to implement their own equivalent GHG pricing programs. Those provinces included Saskatchewan, Ontario, New Brunswick, and Manitoba. The Province of Saskatchewan challenged the federal carbon tax based on constitutional grounds. In a split 3-2 decision, Saskatchewan’s Court of Appeal ruled on May 3, 2019, that the Canadian federal government does have the constitutional authority to impose a carbon tax on provinces that fail to adopt their own equivalent program. The case is now headed to the Supreme Court of Canada, where it is likely to be decided later this year or in early 2020.

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Project Tundra – The Future of Carbon Capture

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What Role Should Carbon Pricing Play In Addressing Climate Change?

As the U.S. and Europe are in the midst of unprecedented summer heatwaves, forcing the toll that climate change and carbon emissions take to the forefront, a carbon tax is one of the few devices for dealing with climate change that shows any sign of garnering bipartisan U.S. support. This is the simple idea that putting a price on carbon emissions will illustrate the otherwise-intangible costs of carbon. But according to a new paper from the DC-based Center for Progressive Reform (CPR), market-driven approaches should not be the only tool for addressing climate change; the brief says that carbon pricing is essential for addressing the climate crisis, but alone, it is “insufficient.” 

This analysis comes at a time when even relatively mild climate measures are failing to pass muster with lawmakers. In June, a group of Oregon state senators fled the state until Democrats retreated on a cap and trade bill, and last fall, Washington State’s ballot question on a carbon tax failed, albeit narrowly. At the same time, the need for decisive action on the climate situation is increasingly urgent, as we approach the Intergovernmental Panel on Climate Change’s 2030 deadline for slashing global emissions by 45% in order to avoid irreversible environmental harms.

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Emissions will rise under Conservative climate plan

A leading climate expert’s modelling of the Conservative climate plan shows emissions will rise, as the proposed tools are not proven to work.

or over two decades I have evaluated promises by Canadian politicians to reduce greenhouse gas emissions. My work would be straightforward if a politician committed to a rising carbon price or to technology regulations of increasing stringency. Either of these policy approaches would transparently reduce GHG emissions by an amount we evaluators could reliably estimate, based on longstanding research showing how firms and individuals respond to changes in relative energy prices and emerging technological options for adopting low-GHG energy in buildings, transportation and the production of goods and services.

Unfortunately, Canadian politicians have rarely implemented the essential carbon pricing and/or regulatory policies. Instead, they offer lists of activities and programs that are either silent on policy or suggest that non-compulsory policies, like information campaigns or subsidies, will cause significant reductions – which is not the case. The Conservative Party’s proposed climate plan fits this pattern, and my modelling suggests it would ultimately result in increased GHG emissions between 2020 and 2030.

Ottawa’s current GHG forecast

In several past evaluations, I and my research associates have correctly forecast when government policies would have negligible effect, even though governments at the time claimed they would have a significant effect.

Chronic ineffectiveness at the Canadian federal level finally changed in the period 2015-2019, when the government of Prime Minister Justin Trudeau made precise commitments on carbon pricing levels and regulatory stringency, and then implemented GHG-reducing legislation and regulations. Canadian federal policies implemented or under development include:

  • the backstop carbon price, at $20 (per tonne of CO2 emitted) in 2019 and scheduled to reach $50 in 2022. (The carbon price is called a backstop carbon price because the federal government only applies it to provinces and territories that do not have their own equivalent carbon pricing policy.)
  • the coal plant phase-out regulation,
  • methane emission regulations,
  • the clean fuel standard,
  • the output-based pricing system that applies the backstop carbon price to a portion of the emissions from trade-exposed industries like steel, cement, aluminum, chemicals, oil and gas, metals, and pulp and paper.

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