Chris and I looked at Canadian climate policy bracketing the Paris agreement, added the PCF and looked to high ambition beyond. We used analysis and modelling to ask two questions:
Does Canada have the policy architecture to cost-effectively increase GHG ambition?
What are the priority opportunities to improve policy cohesion and efficiency?
Our analysis suggests that strengthening provincial policies and implementing the PCF could align Canada’s GHGs trajectory with the 2030 climate target. Yet, achieving Canada’s 2030 greenhouse gas (GHG) reduction goal is far from a fait accompli. Federal, provincial and territorial policymakers will need to overcome an array of implementation and coordination hurdles to bring home the prize.
Hurdles abound, of course. While elements of the PCF, such as Ottawa’s floor price for carbon, will help align sub-national systems, our modeling suggests that challenges lie ahead. Should governments increase policy ambition within the current patchwork, they may inadvertently increase costs by locking-in siloed provincial policies. This could, in turn, exacerbate competitiveness and household fairness impacts, and ultimately impede further ambition.
To avoid such an outcome, policymakers need to find ways to improve cohesion and efficiency by connecting provincial carbon policy silos—especially for large industrial emitters. National and sub-national governments will need to govern more collaboratively. This is, of course, what the PCF aims to enable.
While 2016 delivered new climate policy in virtually every jurisdiction in Canada, without continued and increased coordination across governments, overlap and additional regulatory requirements could jumble market signals, leading to unintended consequences.
While governments have announced, or implemented policies that increase Canada’s chances of achieving its 2030 NDC, that NDC is on the low side of ambition relative to the mid-century ambition of Canada’s commitment to the Paris Agreement. To align GHG abatement efforts with the NDC and achieve deeper decarbonization by mid-century, cooperative efforts need to continue to broaden and deepen policy signals.
For this reason, the “big story” of 2017 must be policy cohesion. Governments can tweak the knobs on all the policy instruments now in place to bring the whole carbon-pricing orchestra into tune. This will involve establishing mechanisms to routinely assess performance using carbon budgets and sectoral intensity trends, building out and aligning governance structures to work across jurisdictions, and efficiently ratcheting up ambition.
As a post script, it is tempting to see events south of the border through a grim lens for climate policy. But let’s not forget that climate policy is more regional and global than we usually recognize. Just a few years back, Canada’s federal inaction overshadowed considerable policy progress in many provinces and territories. Similarly, the real policy innovation in the United States is occurring in the West Coast states, the New England states, and even in red-state electricity systems.
Meanwhile, at the global level, China and India have dire air-quality issues and a seemingly insatiable appetite for clean electricity. Given the vast resources flowing to energy R&D, electricity-decarbonization innovation may move far more quickly than we expect.
We recommend Canadian governments, businesses, and households prepare to seize a new competitive advantage—one based on our continent-spanning capacity to generate bountiful, cost-effective clean energy and use it to produce decarbonized goods and services for growing global markets.
Note: Research supported by Climate Action Network Canada, Environmental Defence, Équiterre and the Pembina Institute. Special thanks to Catherine Abreu, Annie Berube, Louise Comeau, Erin Flanagan and Dale Marshall for comments on successive drafts. James Glave helped with editing.