Analysis of an analysis of Canada's Federal Carbon Pricing System

“Fiscal and Distributional Analysis of the Federal Carbon Pricing System” is a product of the The Parliamentary Budget Officer (PBO). The PBO’s analyses are, in general, performed, “for the purposes of raising the quality of parliamentary debate.” This analysis of the PBO document is intended to raise the quality of debate everywhere.

The Canadian government’s policy on pricing greenhouse gas emissions is to enforce provincial government’s have a policy on pricing greenhouse gas emissions - and where they don’t to impose a “federal backstop” policy. The PBO’s analysis is looking at the impact of the provinces where the federal backstop will be imposed - here I’ll analyse the analysis for only one of them (Ontario) to avoid bombarding the reader with too many figures.

Ignoring the other provinces will only be a portion of what’s ignored. The PBO’s analysis notes there are “two components” of the backstop policy empowered by the Greenhouse Gas Pollution Pricing Act.

• A charge on fossil fuels, or “fuel charge”... and
• A regulatory system for large industry, known as the “output-based pricing system” (OBPS)

The OBPS is glossed over for a few reasons: it’s expected to be a small portion of total revenue (less than 4% for Ontario), it’s not finalized (despite being expected to apply back to the start of the year), and therefore it’s not known which provinces will have satisfactory pricing already in place for large emitters and which the federal backstop will be imposed on.

So... in the PBO analysis, and here, the hundreds of large emitters that emit over one-third of the country’s greenhouse gas emissions aren’t considered.

Image captured from my presentation of data from Canada’s GHG Emissions Reporting Program

We’ll all focus on the millions of residential households instead.

Saving TransAlta: a demonstration of Canada's Clumsy Carbon Pricing

Canada’s Prime Minister announced aspects of a carbon pricing policy again last week. This time there were some details on how much more people in four provinces would pay for fossil fuels, the estimated revenues from those charges, and what is to be done with those revenues. Subsequently there’s much commentary on the content of announcement, and I’ll offer some more, but my attention was returned to a topic I prepared to write on quite some time ago: the impact of government actions in Alberta on a company owning much of the coal-fired generation in its province. I’ll use that company to demonstrate why I refer to the allegedly national policy as Canada’s Clumsy Carbon Pricing (CCCP).

The government’s website contains a section on “Ontario and pollution pricing” [sic] that describes the two main aspects of CCCP:

The federal carbon-pollution [sic] pricing system will be implemented in Ontario, under the federal Greenhouse Gas Pollution Pricing Act with the following features:

• For larger industrial facilities, an output-based pricing system for emissions-intensive trade-exposed industries will start applying in January 2019....
• A charge applied to fossil fuels, generally paid by registered distributors (fuel producers and distributors), as set out in the Greenhouse Gas Pollution Pricing Act, Part 1, will start applying in April 2019…

Because the 2019 pricing for provinces not deemed to have met federal pricing requirements is only now being finalized it will not be effective January 1st, but April 1st, while the Output Based Allocations (OBAs) that are still not finalized are still to be effective four months prior to that - on January 1st.

Clumsy - at best.

Carbon Con: It's only economics

part 2 in a series imagining the participants at a 'Comic Con' like convention for reducing greenhouse gas emissions. The first post was ECO communication

"Assume I'm an economist..."

Way back when I began the second post to this blog with that ask. Over seven subsequent years of research, data analysis and communicating on electricity supply, emissions, and markets, I've since revised my perspective.

A man walks into a Doctor's office and says, "Doc, it hurts all over when I do this."
The doctor prescribes of a Pigouvian tax.

graph from Wikipedia 

In an April blog post I hinted at my envy of those utilizing richer media tools - from richer graphics to audio/podcasts to video. At that time a group called the EcoFiscal Commission had just released, on their attractive website, "Clearing the Air: How carbon pricing helps Canada fight climate change." A beautifully formatted .pdf provided more depth than the web page, and all were accompanied by short video explainers. The work features 3 case studies of jurisdictions with pricing of greenhouse gas emissions - only 1 of which has significantly reduced emissions. I was going to focus on these case studies but they're really a footnote to addressing a bigger issue, enunciated by in a video clip Ecofiscal Chair Chris Ragan:

"Canadians do care about climate change but they also care about the economy... until Canadians are presented with a solution that makes sense for both the environment and the economy they are not going to put this at the top of their list.

Carbon pricing is that solution."

As they say outside the hallowed halls, "to a hammer everything looks like a nail."

I am going to rebut the evidence supporting the "Carbon pricing is that solution" claim, while recognizing why there could be roles for economists to play following the introduction of The Paris Agreement.

I realize a credibility gap probably exists as the Ecofiscal Commission is stacked with prominent names whereas I am known by far fewer and often as an opponent of "green" energy - and/or a proponent of nuclear energy. To encourage reading on I'll note Ontario has greatly lowered its emissions since I began blogging - a fact which need not be credited to me to any extent, but it also has much less generating capacity from "green" energy, and more from nuclear, than was planned at when I started arguing for retaining nuclear and halting the wind and solar subsidies.[1] Certainly many names from Ecofiscal are recognizable, but I recognized none as being active and influential where emissions have been significantly reduced.