Clarke on Carbon Pricing: Ready to Lead?

Cecil Clarke is not the only anti-carbon tax politician in the current landscape; in fact, he’s arguably just the homegrown version of a familiar figure on the political scene — the “Canadian conservative” who, as Dalhousie economist Lars Osberg puts it, has “successfully framed” the federal government’s carbon-pricing system as a “job-killing tax” whose implementation will “hurt the economy.” (So successfully, Osberg argues the government should forget about a carbon “tax” and instead introduce a carbon “fee and dividend” program. Elizabeth May said that’s basically what the new federal system is, but more about that later.)

Clarke is our Doug Ford. Our Scott Moe. And those are comparisons he’s actively courted:


But he’s also the mayor of the Cape Breton Regional Municipality (CBRM) and a candidate for the provincial PC leadership — and, if successful, the premiership of the province — so his views on emissions are worth examining, especially during a week when both the province and the feds have announced details of their carbon pricing plans.

 

Fun with Numbers

So what are Clarke’s views? Well, he started an online petition to stop the “job-killing carbon tax” (it had seven Facebook likes when I checked it this morning):

 

And he fleshed out his ideas somewhat in an undated “news release” from his campaign website:

Progressive Conservative leadership candidate Cecil Clarke says that as leader, he will join Premiers across Canada in the battle against Prime Minister Justin Trudeau’s bad carbon tax. 

Clarke says if Trudeau doesn’t listen, we’ll take him to court to protect taxpayers.

“Nova Scotians, and millions of Canadians, are saying no to this carbon tax — but Trudeau isn’t listening. It’s time for someone to fight back against this punishing new tax. And if Justin Trudeau won’t protect taxpayers, I’ll ask the courts to. It’s that simple.”

A new study shows that Nova Scotians will pay the most of all Canadians when Trudeau’s tax grab takes effect — an extra $1,120 per year for heating oil, gasoline and electricity.

Okay, stop.

First of all, Trudeau’s bad, punishing, job-killing carbon tax grab (which, for some reason, the prime minister prefers to call the “federal carbon-pollution-pricing backstop system”) would apply in Nova Scotia only if the Nova Scotia government had failed to introduce its own carbon-pricing system — which it said it would do in 2016 and which it did. Yesterday.

Moreover, that figure of “over $1,000/year” comes from a 2018 Financial Post article by Kenneth Green who, in turn, got it from a May 2017 blog post by Jennifer Winter of the University of Calgary.

In that post — which was a follow-up to her February 2017 presentation to the Senate Standing Committee on Energy, the Environment and Natural Resources — Winter first calculated how much (and what type) of energy was used by the average household in each province in 2013:

 

 

She then estimated the annual costs to those households of a carbon tax at $10, $20, $30, $40, $50 and $100 a tonne. Her numbers looked like this (the differences between provinces come down to what type of fuel they rely on predominantly for heating — Winter said Canadian households could be divided into three groups according to their chief source of home heating with Nova Scotia and PEI, where residents heat predominantly with oil, forming a group of two):

 

 

 

As you can see, the figure Clarke is using (he cites $1,120 precisely on his campaign website and “over $1000/year” in his platform) is what Winter calculated a $50 per tonne carbon tax would cost the typical Nova Scotian household (including electricity costs) annually.

But even if the federal system were going to apply in NS (which it’s not) Winter’s calculations were made over a year ago, before the federal government had announced the details of its carbon-pricing program. And she herself — in a follow-up to her follow-up entitled “Calculating Carbon Tax Costs is Challenging!” — noted that while her cost-of-carbon-tax numbers have been quoted quite extensively, “[o]ften when the numbers are quoted they are missing much of the nuance in my blog post.”

Winter then goes on to explain that her numbers were based on a number of assumptions, the biggest of which, in my opinion, is that the imposition of a carbon tax would not change the way people behave:

This means that I am assuming households use the same amount of energy (and produce the same amount of emissions) regardless of whether or not there is a carbon tax. This is clearly an over-simplification. We know people will respond to price changes (if not exactly by how much).

Since the whole point of a carbon tax is to cause people to change their behavior, Winter is basically assuming, for the sake of her calculations, that it will be a complete flop (not because she believes that, just because estimating changes in household behavior would be very difficult). She further notes:

We also know governments use some of the carbon tax revenue to fund energy efficiency enhancements by households and businesses; this should have some impact on energy consumption, particularly over the longer term. Because of these factors, my estimates can be thought of as an upper bound on potential costs to households.

And finally, she says that her calculations “didn’t incorporate policy actions taken by governments to reduce carbon costs to households.” Policy actions like those introduced by the governments of Alberta and British Columbia, in conjunction with their carbon-pricing mechanisms. And like the one introduced by the federal government on Tuesday. (About which, more below.)

Also worth noting is that while anti-carbon taxers like Clarke have used her numbers to argue against the “job-killing carbon tax,” Winter herself supports some form of emissions tax. During her presentation to the Senate Standing Committee she said:

Pricing mechanisms create the incentive for individuals and firms to change their behaviour and choose the lowest-cost emissions-reduction option. This may be choosing to not emit at all, or to invest in technology to reduce emissions. The lowest-cost way to reduce emissions is for everyone to face the same price.

Her presentation to the Senate Standing Committee was not about undoing the country’s various carbon-pricing schemes, but about the role of the federal government in ensuring “the price of emissions is harmonized across provinces.”

 

Backstop solution

As noted, the federal government on Tuesday released details of the backstop system it will impose on those provinces that have yet to implement their own carbon pricing systems.

The rate will begin at $20 per tonne in 2019 then rise by $10 a year until 2022, when it reaches $50 per tonne, at which point the government says it will review it.

But (also as noted) the plan includes “policy action…to reduce carbon costs to households” in the form of a Climate Action Incentive which, according to Trudeau, will be administered by the Canada Revenue Agency (CRA) and see 90% of the money Canadians pay as a result of the backstop system returned directly to them. The feds claim that “most households will get more back than they pay as a result of pollution pricing.” The government’s table looks like this:

As with Winter’s numbers, the variation between provinces is down to the predominant type of home heating used in each one. Unlike Winter’s numbers, they include the government’s planned rebate — and they don’t include Nova Scotia.

 

File under ‘Industries’

So why am I coming down like a ton of bricks on poor Cecil Clarke?

Frankly, because I think climate change is real, that it is caused by human beings and that controlling our greenhouse gas (GHG) emissions is our only chance of mitigating its effects. I think it is going to be one of the most important issues he would have to deal with if he were one day to become premier and therefore, I think he (and anyone else hoping to lead a party or a province) should be prepared to do something more than decry “job-killing carbon taxes.”

I also think he knows this — his second term as mayor of the CBRM began in the wreckage of the 2016 Thanksgiving floods, the result of one of those extreme weather events — a 225mm rainfall — we’ve been told will become more common as the planet warms. Clarke saw firsthand the millions of dollars in damage done to the municipality by the floods, particularly in the Southend of Sydney. And he was in the mayor’s chair when a consultant told CBRM council that flood mitigation work could cost as much as $24 million but could never completely solve the problem.

But the phrase “climate change” doesn’t appear anywhere in Clarke’s platform. Instead, under “Resource Development,” he makes five promises, four of which involve encouraging fossil fuel development.

And under “Environment” (which he includes, both tellingly and mystfyingly, in his “Foundation Industries” section) we find:

Embrace innovation and focus on initiatives that deliver results to ensure we leave a clean environment to future generations

Which could mean reducing emissions or could mean reducing roadside litter, and:

Continue to lead Canada on recycling, renewables and energy efficiency with industry and community-based programs

Which seems to suggest there is no role for government in his equation. Add to this his vow to oppose the carbon tax and it doesn’t exactly read like a recipe for holding global warming to 1.5 degrees C.

But enough picking on Clarke, what is the premier of this province — who recently gave the green light to a cement plant to burn rubber tires (I cannot believe I just wrote that sentence) – offering us?

 

Cap-and-trade

Nova Scotia announced in 2016 that it would adopt a cap-and trade system for carbon pricing (and if I had to guess why, I would say it was because Premier Stephen McNeil recognized the phrase “carbon tax” as electoral kryptonite from three provinces away.)

The job of explaining the Nova Scotian system to the press on Tuesday fell to a very patient civil servant named Jason Hollett whose unfortunate title, “chief executive of climate change” for the Department of Environment, makes it sound like what’s happening to the planet is all his fault.

(SIDE NOTE: I didn’t actually see Hollett, because I phoned into the press conference rather than driving to Halifax to attend it. I also didn’t see the charts and graphs he was citing because I hadn’t thought to ask for them ahead of time. It made for an interesting hour — him referencing the blue and green lines on his graphs, me trying to picture them in my mind’s eye. Luckily, after the call, I was able to obtain copies of his slide presentation and all became clear.)

To understand the difference between the federal and provincial approaches, I think a good place to start is Slide 4, which shows how much more a consumer will pay for electricity, gasoline, natural gas and heating oil in 2022 under each system:

Source: Government of Nova Scotia

Source: Government of Nova Scotia (Click to enlarge)

 

At first glance, the Nova Scotia numbers look spectacularly better — like, stick-out-your-tongue-at-New-Brunswick better — until you remember the feds have promised to return most of that extra cost to consumers under their system.

But if that slide didn’t fool you into thinking we have a much better deal than those poor fools who accepted a carbon tax, maybe this one will:

Source: Government of Nova Scotia

Source: Government of Nova Scotia (Click to enlarge)

Or this one:

Source: Government of Nova Scotia (Click to enlarge)

Source: Government of Nova Scotia (Click to enlarge)

 

Part of me thinks, “Are we really such children we’ll fall for this?” That part is very hard-nosed, believes in climate change and thinks she’ll just have to suck it up, pay more where necessary and change her behavior so as to pay less where possible. NDP leader Garry Burrill certainly didn’t fall for it, telling the Canadian Press:

It’s not at all the case, as the premier has suggested, that Nova Scotians will be in some financially better place in their pocket books.

It appears with the rebates under the federal program in the long run the majority of the people of Nova Scotia would be money in.

But part of me almost fell for it. That part believes in climate change but also pays the oil bills, wishes the house were more climate-friendly but can’t afford to swap out the oil furnace for something greener and doesn’t think she can turn the thermostat down any further without flirting with frostbite in the home office, no matter how many extra sweaters she dons. That part of me wants to think I can help save the planet without it costing me anything. That’s the part of me which, if she didn’t know better, might be susceptible to Cecil Clarke’s anti-carbon tax message:

“Our province has already done its part to reduce emissions and people have the power bills to prove it,” says Clarke. “Stephen McNeil has decided to give Trudeau what he wants, but as Premier, I won’t. I will stand up to Justin Trudeau – and fight on the behalf of Nova Scotian taxpayers.”

Lars Osberg, in that article cited earlier, explained this phenomenon nicely:

The movement to save the environment by putting a price on carbon has been deaf to the pocket book worries of financially squeezed middle class households – and Canadian conservatives have feasted on those anxieties.

 

Highlights

I checked Clarke’s social media feeds this morning to see if he’d responded to the carbon-pricing announcements, but he’s gone silent (he’s also left that misleading reference to “$1,120 per year” on his website). Clarke is apparently not interested in the new Nova Scotian cap-and-trade system, but I’m sure you are. So how will it work?

First of all, the goal of Nova Scotia’s cap-and-trade program is to cut emissions to 45-50% below 2005 levels by 2030 and the first step is to cut emissions by “at least” 650,000 tonnes between 2019 and 2022.

To do that, the cap-and-trade system will target companies that emit over 50,000 tonnes of greenhouse gases (GHG) each year, which means, first and foremost, Nova Scotia Power — the province’s biggest emitter — plus Northern Pulp,  that tire-burning cement plant I mentioned earlier (oh, give it a name, call it “LaFarge”) and the Goldboro Gas Plant.

Also included will be:

  • Petroleum product suppliers that first place 200 L of fuel or more per year for consumption in the Nova Scotia market
  • Natural gas distributors that deliver natural gas for consumption in Nova Scotia that, when combusted, produces 10,000 tonnes of greenhouse gas emissions or more per year
  • Electricity importers that generate 10,000 tonnes of greenhouse gas emissions from imported electricity or more per year for consumption in the province

In all, Hollett said the system will include 20-21 companies accounting for 80% of Nova Scotia’s emissions. The companies will be granted allowances allowing them to emit GHGs. In the case of the biggest emitters, the total allowance needed by each company will be determined based on the emissions data they have been required to submit to the government since last year.

Nova Scotia Power will be given 90% of its required allowances free of charge (in acknowledgement, the government said, of the strides it’s already taken to reduce emissions) while the other big emitters will be given 80% of their required allowances. A company can then either cut its emissions (maybe burn a few fewer tires?) or buy the additional allowances it needs — either from another private company or at a government-run auction.

Hollett says this largely explains the difference between the costs added under the federal program — which requires big emitters to purchase 100% of their required allowances — and the Nova Scotia system.

(Are you still with me?)

The government will hold these auctions two or three times a year (it hasn’t decided yet how often) and there will be a floor price of $20 per tonne in 2020 that will rise by 5% plus inflation each year. The government will also impose purchasing limits to ensure no one company can make like a scalper on Ticketmaster and buy up all the allowances.

The government will hold 3% of the allowances in reserve to allow for contingencies such as a company being unable to purchase additional allowances in the market (in these cases, the government will sell the allowance at a premium — $50 per tonne in 2020 increasing 5% each year plus inflation which, Hollett said, will put a “soft ceiling” on the market price). The reserve will also allow the government to accommodate “new entrants” (or as I prefer to think of them “start-up emitters”).

 

Effective?

The big question, of course, is whether either the federal or provincial systems will be effective in reducing emissions.

On the plus side, Nova Scotia did manage to cut its emissions by 6 megatonnes between 2005 and 2017 without benefit of a carbon-pricing mechanism — this province hit the federal government’s 2030 target of emissions 30% below 2005 levels in 2015. (Skeptics say it had less to do with our heroic greening efforts than with our relative dearth of large-scale emitters, but I’ll take it.)

In contrast to Clarke, whose position, as stated in that press release, is that “Our province has already done its part to reduce emissions and people have the power bills to prove it,” other observers feel yesterday’s announcements were positive, but leave lots of room for improvement.

Elizabeth May. (Source: Global News)

Elizabeth May. (Source: Global News)

Federal Green Party leader Elizabeth May congratulated the federal government, for example, congratulated the federal government for “adopting the Green Party’s approach” to pricing carbon, saying the system the government has introduced is “smart,” and is called a “fee and dividend” program (the type recommended by Dalhousie’s Osberg), which it does seem to be in all but name.

But she warned that the federal program which, combined with provincial programs like Nova Scotia’s, is expected to reduce GHG emissions by up to 60 million tonnes in 2022 (the equivalent of 8.3% of the country’s emissions in 2015) is not sufficient to meet Canada’s commitment under the Paris Climate Accord (to reduce emissions by 30% from 2005 levels by 2030) which itself is not sufficient to reach the Paris goal of holding global warming to 1.5 degrees Celcius.

Nova Scotia’s Ecology Action Centre (EAC) issued a press release on Tuesday that was cautiously optimistic. Meghan McMorris, ECA’s community energy coordinator, said the announcement was a step in the right direction:

“Nova Scotia is one of few provinces who have put forward a carbon pricing system,” McMorris says. “It’s a start.”

McMorris was particularly pleased by a part of the plan I haven’t told you about yet — the Green Fund.

Because allowances will be sold at auction, the system will be revenue producing, and those revenues will go to a fund to be used for “programs that further reduce GHG emissions, create jobs, and help mitigate higher energy costs,” said McMorris.

On the down side, McMorris, like May, says the cap-and-trade plan falls short of what is needed to address climate change:

“Today’s plan will not keep us within 1.5 degrees of warning,” she says.

But McMorris says Nova Scotia has shown leadership in the past and now “needs to be more ambitious and show that same leadership.”

Which brings me, quite neatly, back where I started — to Cecil Clarke, who keeps telling us he’s “Ready to Lead.”

Perhaps this is an opportunity for him to prove it. Maybe he could start by saying something about climate change and carbon pricing that’s actually true.

 

 

 

 

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