Troy Media – by Jock Finlayson and Mike Cleland
With the winding up of another round of inconclusive climate change discussions involving close to 200 countries, it’s clear the world remains a long way from having a coherent international accord to limit greenhouse gas (GHG) emissions.
As the Secretary General of the United Nations glumly observed before the talks in Durban, South Africa ended, “It may be true, as many say (that) the ultimate goal of a comprehensive and binding climate change agreement is beyond our reach – for now.”
Faced with a faltering global economy and a continued financial crisis in some countries, it’s not surprising that political leaders failed to agree on a program of substantive action.
The go-slow approach evident in Durban was consistent with the two previous climate policy jamborees held in Copenhagen (2009) and Cancun (2010). But while a cohesive and widely agreed global framework for addressing climate change is proving elusive, this does not spell paralysis across the board. Indeed, an increasing number of national and sub-national governments have adopted laws, policies, and plans aimed at mitigating greenhouse gas emissions within their jurisdictions.
An interesting trend in many countries is that sub-national governments are moving faster than national authorities to tackle GHG emissions. In recent years, one of the most active sub-national jurisdictions has been the province of British Columbia. Led by its former Liberal Premier Gordon Campbell, from 2007 to 2010 B.C. enshrined into law a number of far-reaching commitments to reduce its carbon footprint and accelerate the shift to a low-carbon economy:
First, B.C. pledged to reduce overall GHG emissions by one-third from 2007 to 2020, despite its growing economy and population and expanding natural gas industry.
Borrowing from California, B.C. adopted an aggressive low-carbon fuel standard that raises the required renewable fuel content of all transportation fuel blends.
B.C. has established a legal framework to enable the province to participate in a regional cap and trade program developed through the multi-jurisdictional Western Climate Initiative (WCI) process led by California. At one time, 11 provinces and states were part of the WCI. But the WCI has stalled over the past year, with California now the only participant fully committed to commencing with cap and trade in 2013.
Another law passed in B.C. sets pre-determined tailpipe emission standards for automobile fleets, again largely based on California’s standards.
The province promised to make its own operations “carbon neutral” by 2010, a goal that appears to have been achieved (albeit at a cost to provincial taxpayers).
Finally, but by no means least important, in 2008 B.C. became the first North American jurisdiction to legislate a broadly-based carbon tax that captures the combustion of essentially all fossil fuels consumed by businesses and households. Initially set at $10 per ton of carbon dioxide emissions, the tax has been rising in $5 increments and now stands at $25 (under current law, it is supposed to climb to $30 by July 2012). Now generating about $1 billion per year, the revenue from the B.C. carbon tax is re-cycled back into the economy by way of cuts in personal and business income taxes and a new carbon tax credit for low-income families. Due to this revenue recycling feature, the carbon tax did not result in an expansion in the size of government or an increase in the total tax burden in the province.
Looking to the future, the B.C. experience bears some reflection. The province has been nothing if not bold and its leadership position is secure, certainly when compared to the tepid actions of many other jurisdictions. But as B.C. policy makers think about where next, a few questions might be worth examining.
Start with the target adopted by the province – a one-third reduction in emissions by 2020. Much of the world (including the United States) made bold pledges in Kyoto and little in the way of results has followed. Changing the fundamental nature of our energy economies has proved difficult, and as we look to future commitments it may be wise to better calibrate them to economic, social and political realities. Time will tell, but B.C. may well have overreached in 2007-08, despite its willingness to act with considerable political courage.
On the subject of political courage, the B.C. carbon tax is an interesting case in point. Introduced just ahead of former federal Liberal leader Stephane Dion’s disastrous stumble on a similar initiative in the 2008 election, the tax has become a part of B.C.’s energy realities. Allowing the rest of the world to catch up would be sound in both environmental and economic terms; in the meantime, much can be learned about the effectiveness of the approach taken to pricing carbon in B.C.
Careful analysis would almost certainly show that it affects both investor and consumer behavior in ways that reduce carbon in the economy and, unlike other approaches, it has proved administratively simple. But it’s difficult to continue increasing the B.C. carbon tax when no other provinces or U.S. states appear inclined to follow the same path.
The cap and trade approach under WCI looks to be – at best – on life support. Whether it is advisable or necessary to have such a program on top of a carbon tax is a fair question. For industry it could provide useful flexibility but whether its administrative cost would be worth it, even in a large trading area, is not entirely clear.
Time to run cost-benefits ratios
Finally, other measures, while possibly effective with respect to carbon, do bring net costs to the economy at a time when all economies in the world are struggling. New or stronger initiatives in this regard should be subject to careful scrutiny before going forward, with an emphasis placed on the sorts of measures that actually reduce net costs such as energy efficiency or smarter urban development.
British Columbia has proved itself a global leader on climate policy, and has no apologies to make to anyone who attended the meeting in Durban. The world should look to catch up and in the meantime, the province can use the breathing space to learn the lessons – good and bad – from the policies it has enacted since 2007.
Jock Finlayson is Executive Vice President of the Business Council of British Columbia. Mike Cleland is Executive in Residence with the Canada West Foundation.