Nori's Director of Carbon Economics Aldyen Donnelly shares her thoughts on what's happening with Canada's carbon tax and federal backstop. https://www.linkedin.com/feed/update/urn:li:activity:6517432688209727488 https://nori.com/podcasts/reversing-climate-change/31-aldyen-donnelly-on-why-carbon-pricing-hasnt-worked-so-far
Full Transcript
Ross Kenyon: Hello and welcome to Carbon Removal Newsroom. I am Ross Kenyon. I’m the lead strategist with Nori’s Carbon Removal Marketplace. Today I have with me the Director of Carbon Economics at Nori, Aldyen Donnelly, also our house Canadian, which is not a type of dressing. Actually, that was a very dumb joke. Here to talk about, I saw a video about Justin Trudeau announcing something going on with the carbon tax in Canada. I was wondering, Aldyen, if you could give us a little background on what’s happening with the carbon tax up with our friendly neighbors to the north.
Aldyen Donnelly: Well, our federal government launched what they call a federal carbon tax backstop. And the federal carbon tax backstop was in full effect on April 1st, just last week, this year in 2019. And it involved the federal government saying to the 10 provinces and three territories that we want you and the governments of each of those provinces and territories to adopt their own form of carbon tax. And in that context, that term carbon tax is very, very widely defined. So it includes cap and trade or other options. Then the federal government said, and if we don’t approve the form of carbon tax or a set of policies that we consider carbon tax equivalent that you adopt, we as the federal government will intervene and impose the federal carbon tax backstop on you.
And which they did for five provinces on April 1st. So what happened on April 1st is the Fed said seven provinces, three territories were comfortable with whatever very different and diverse policies you adopted and for five of you were not. And the federal carbon tax starts at $20 a ton going up to $50 a ton by 2022. It does not cover all All of the greenhouse gas emissions in any jurisdiction, some of them, indirectly most large industrial emitters, most of their emissions are effectively carbon tax exempt. The federal government then committed to return as rebates all of the carbon tax money back to the provinces.
There are three major issues with the federal carbon tax backstop. One is there was no transparent or predictable process. For determining or understanding what the federal government considers equivalent to an acceptable CO2 tax. So for example, if you just divide Alberta’s carbon tax and industrial emitter program revenues by total provincial emissions, their effective carbon tax is $7 a ton. British Columbia’s effective carbon tax is $30 a ton. There’s another province that I would argue has an effective carbon tax that is closer to $12 a ton. And the federal government determined that Alberta’s provincial set of policies was acceptable, met their standard.
But the province whose policies are effectively $12 a ton did not meet their standard. And there isn’t some, you know, Equivalency methodology you can go to debate that question on the basis of an analysis. The second thing is a constitutional issue and the carbon tax is just in the early stages of the federal backstop.
Ross Kenyon: I thought there was a lawsuit or the states were suing?
Aldyen Donnelly: The provinces. Oh, my American was showing. I’m sorry. And it’s going through a process. It started with a reference case. The decision hasn’t been made, but it’ll go to the Supreme Court. And the complication, to oversimplify it, is that constitutionally Canada is very much a federation and within the federation there are Somewhat more limits to federal powers relative to the next level of government down the provinces compared to, say, United States. And there are five provinces that have sworn to take this federal imposition of this tax on the provinces through the Supreme Court.
And I am not a lawyer, and I am much in the minority, but...
Unknown speaker: Write it down here.
Aldyen Donnelly: I am confident the provinces are going to win that court challenge. Now, what am I? I’m somebody who believes climate change is a real existential threat. We should be taking this seriously. So my opinion that the federal backstop carbon tax is not going to survive the Supreme Court challenge disappoints me. I’d rather us move on to a set of policies that And measures that I perceive are going to be effective, efficient, and sustainable. And I don’t believe we’re there right now. So that’s my source of disappointment.
Ross Kenyon: Was there a third one? A third item too that you mentioned?
Aldyen Donnelly: I do not believe the actual publicly available data even barely suggests that a point of retail sale or end use carbon tax on energy consumption So it drives me crazy that we’re spending this much time debating a measure that is not going to be effective as opposed to getting into a serious debate about what are the measures that are going to be effective.
Ross Kenyon: This is an Aldyen Donnelly classic and we will link to a longer podcast about this objection in the show notes if you’re interested, fair listener. Aldyen, is there a place inside of Canada’s carbon tax regime for carbon removal? Was this included at all in this policy? Is there a future where it might be or is carbon removal not in the mix at all?
Aldyen Donnelly: At a federal level and in most provinces, carbon removal is not in the mix. The Alberta government has had a very customized form of industrial cap and trade since 2005 that does create some financial incentives for limited forms of carbon removal.
Ross Kenyon: Is that because oil and gas is so big in Alberta?
Aldyen Donnelly: No, it’s actually agricultural project, carbon removal. It’s the right kind of project. I don’t think the protocols are perfect, but it’s a right start. But the bottom line is at the national level, it is technically impossible. Two things are true. It’s technically impossible for Canada to comply with its 2030 and later year net greenhouse gas reduction commitments without carbon removal, not only being on the table, but being the major play in the nation’s emission reduction management strategy. So it’s essential. More importantly, if you look at cropland food production per capita in Canada, the greatest opportunity at a nation level worldwide is in Canada, much more significant than the opportunity per capita in the United States.
To not have carbon removal in play in Canada is irrational.
Ross Kenyon: Why is the opportunity so great in Canada?
Aldyen Donnelly: We have way more cropland and soil organic carbon per person to work with than anybody else. Russia has more area than us, but close to the same per capita. We’ve got way more per capita, so way more to work with.
Ross Kenyon: Aldyen, thank you so much for being here with us. Really appreciate your insight. If you like the show, please rate and review it in iTunes. It helps a lot more than you might expect, as I’m fond of saying. And thank you so much for listening.
