Welcome to the third instalment of my climate change blog post series!
Congrats, you’ve made it to the final post in the series! It’s been a long journey full lot of information, so kudos to you for making it all the way here. If you haven’t read part one or part two yet, I strongly suggest that you do this now.
Before we get into the content for the post, a little life update. As the summer break nears the end (I can’t believe how quickly time flies…) I will be prepping for school and finishing up at the camp. While away at school I still plan on posting at least once every week or ten days. I know I had the same plan this time last year, but school got so busy that I just couldn’t manage the two things at once. This time I know what to expect, and I am planning on setting aside at least a few hours each week to do my own thing. Posts may not be as long or detailed, but they will still be filled with quality information, promise! I love blogging and sharing information with all of you, so I am determined to keep it up this year.
With that said, on to today’s topic: carbon pricing.
The basics on carbon pricing
What is carbon pricing? It is really as straightforward as it sounds. In an effort to reduce greenhouse gas emissions, governments put a “price” on the carbon that a company, country or industry can produce, or pollute. To price the carbon, the emissions are grouped into “units” to make it physically measurable. Two of the most common units include metric tonnes and cubic metres.
To control emissions, a country or industry will be given an emissions “cap.” For instance, the Alberta oil sands industry can produce up to 100 Megatons of carbon dioxide emissions in any year. They will be fined if they go over their cap. The goal of the “caps” or limit is to keep organizations in business while reducing their carbon footprint. In the grand scheme, all of these efforts are being made so that our country can reach its 2030 Paris Agreement emissions target.
This idea may sound a bit rigid to you. After all, how can an organization change their emission habits without losing profit? There’s a simple answer to that: cap and trade is known as something called a tradable permit system.
Analogy: trading cards
To describe this tradable permit system, let’s use the analogy of a trading card game (I’ve been around kids at camp with Pokemon and Yu Gi Oh! cards for too long). Each country starts with a specific amount of cards which they will distribute amongst their organizations. Overall, let’s say a country is allowed to have forty cards (forty permits) and can divide those up between sectors as they feel. Some sectors may get five cards, others may get ten cards; however many cards they have are equal to the number of “permits” or pollution “allowances” that they have. Each one of these cards, or permits, allows them to produce one unit of emissions (keep in mind, one unit can mean different amounts of carbon, depending on where you are. In Ontario, one unit is equivalent to one tonne of carbon). Got it so far?
Let’s say that between Country A and Country B, their total reduction goal is 100 units, or permits. Country A is required to reduce their emissions to 40 units and Country B to 60.
Within Country A, the 40 units are split up into different sectors: oil, forestry, food production and other smaller industries. Each one of these sectors are designated to reduce their emissions to a certain amount of units, which altogether will add up to the Country’s 40 unit goal. Now let’s get an even closer look.
Let’s say there are two companies within Country A’s forestry sector. In total, this forestry sector has 10 permits, or cards, of emissions to split up between the two companies. Company A and B both have 5 permits, or trading cards. Company A is a very large company, and are having a hard time keeping their pollution below the five units they have been given. Meanwhile, Company B is a relatively smaller company, and has no problem staying below their allowance. What do you think they can do? That’s right: they can trade their cards, or permits. Company B can give Company A one of their cards so now Company A has 6 cards and B has 4. This will allow Company A to produce one more unit of carbon emissions, and B one unit less. The net pollution is still ten units.
This system is designed to reduce permits as time goes on. Let’s go back to the card analogy: at the start of 2018, Country A is given 40 cards to distribute however they deem appropriate. Companies within Country A must trade and sell their permits as they see fit, reducing their emissions while supporting the economy as they do so. A few years later, let’s say in 2025, Country A is only given 35 cards. With this new allowance, they must distribute the cards more carefully. In another ten years, they will have twenty five cards. The cycle continues.
Cap and trade is a mandatory system only if your company produces over a certain amount of emissions annually; these emission caps are typically set by the government. For instance, in Ontario if your company produces between 10,000-25,000 tonnes of greenhouse gases a year, you are not mandated to participate in the provincial cap and trade system. However, you can voluntarily participate. In our province, mandatory participation is required if your company imports electricity, produces more than 25,000 tonnes of GHGs a year, or is a fuel supplier selling more than 200 litres of fuel each year.
The cap and trade system allows us to regulate our pollution in a feasible manner for all parties. It stimulates the economy as companies buy and sell their permits (cards). What’s great about cap and trade is that it is personalized to each country’s marginal abatement costs (MACs). A country’s MAC is equivalent to how much it would cost for one party to abate (or reduce) their pollution by one unit of carbon, whatever they deem as a unit. To abate one unit, it may cost Company A 10 dollars, while that same unit may cost Company B 100 dollars to abate. Depending on technology, company size and current pollution levels, marginal abatement costs can vary greatly.
Let’s make sure we’re all clear on this: If Country A’s forestry sector has two major companies, Company A and Company B, and each are given only 5 units of pollution, each country will face different costs to get to this goal. Like I said earlier, Company A is a larger company and finds it harder to get to this 5 permit mark. Their marginal abatement cost is therefore likely higher than Company B’s, since they would have to sacrifice more to get to this level. For companies with higher MACs, it costs more for them to pollute the same amount of emissions as a company with a lower MAC.
Cap and trade adjusts the amount of pollution each country must abate (or reduce) so that everyone has a reasonable, achievable goal to reach. If Country A’s total emission reduction goal is 100 units by 2025, and Company A’s MAC is 100 dollars per unit while Company B’s is 10 dollars per unit, Company B will be required to abate more units than Company A, since it costs less. In the end, they are both still meeting their goals while doing what is economically reasonable for each of them.
Cap and trade is great for reducing the amount of pollution we create, while allowing parties to adjust to new laws in a reasonable amount of time. As parties reach their emission reduction goals, the cap (or total allowed pollution) can be lowered, and more units can be traded to adjust to these changes. In comparison, carbon taxes set a strict date for the tax to be implemented, and if you pollute over the limit, you will be taxed. Companies are often scrambling to reduce their emissions with carbon taxes, because they are not given an efficient system that allows them to gradually reduce their GHGs. At the same time, very wealthy companies may not even try to reduce their emissions, because the impact of paying the fine for disobeying the law is negligible in comparison to their profit from their polluting practices.
The Canadian context
Compared to our past climate efforts (or rather, lack thereof), Canada has taken huge steps forward towards a cleaner future. Announced in 2016, the Pan-Canadian Framework on Clean Growth and Climate Change is a national plan that covers how our country will work to slow down climate change. One of the many areas it covers is carbon pricing.
The Framework required every province in Canada to have a carbon trading system. The system must involve pricing carbon units and developing a cap and trade scheme. This nation-wide policy was issued by Trudeau after his inauguration in 2015, and he gave provinces until 2018 to develop their trading system. If a province does not meet this deadline, the federal government will implement their own system in that province. As an example, Trudeau proposed that one unit of carbon (one tonne) should cost ten dollars in 2018, increasing by ten dollars every year; by 2022, it should cost fifty dollars for every tonne of emissions. Beyond 2022, the court will decide whether to continue increasing this price based on their emissions reduction trajectory at that time. This system is meant to be revenue neutral, which means that the federal government does not gain any profit from the money put into the system; it stays within the trading system of that particular province, for developing greener technology and supporting innovation.
To many, Trudeau is considered to have taken a “sledgehammer approach” with his nation-wide announcement, for the way he threw the policy on the provinces. In my opinion, Trudeau did the right thing. Based on our current trajectory, there really is no other way to achieve our Paris Agreement target by 2030 if we don’t take immediate action.
Some provinces are already ahead of the game and have no trouble with Trudeau’s ultimatum. Quebec introduced a carbon tax in 2007 and a cap and trade system in 2013. In 2017 they joined forces with California and then Ontario to create the very first trans-boundary cap and trade system, known as the Western Climate Initiative.
Despite the positive actions of some provinces, not everyone in our nation sees eye-to-eye on the issue. Saskatchewan’s new premier, Scott Moe, is very opposed to the carbon policy that Trudeau is implementing. He believes that forcing the provinces to reduce their emissions will hurt families and businesses by cutting jobs. He thinks that Saskatchewan is already doing enough to reduce their emissions, and to really tackle climate change we need to look at it from a global basis, not just a national one. Brad Wall, Saskatchewan’s premier prior to Moe, feels the same way, calling Trudeau’s plan an attack on their families and businesses.
Yes, Moe is correct: we do need to implement emission reduction techniques globally, but using one system for every single country simply cannot work. Every country is different: different demographic, economic status, social status, different everything. We need to use national systematic tools in order to make a global change. Trudeau is trying to do exactly that.
Moe is willing to take this issue to court, doing everything in his provincial power to fight the federal law. He states that his government has their own emissions reduction system that they will use, because using the same, “one-size-fits-all carbon tax fails to recognize the diverse nature of our great Canadian economy.”
Provincial approaches
Another province opposing the carbon tax is Nova Scotia, mainly because they feel they are also doing enough work towards mitigating climate change and have already met their 2030 target. They did, however, agree to become a cap and trade province, developing their own system to introduce it and implement it in January 2019.
Sadly, our very own province looks like they will be joining Saskatchewan in the fight against carbon pricing. After Doug Ford became the premier of Ontario this year, he promised to end Ontario’s emission reduction work if it relates to carbon pricing in any way. This includes resisting the system the Trudeau demands each province develop; Ontario’s original plan was to charge 20 dollars per tonne of carbon and increase that to 50 by 2022. This will be no more if Ford has his way. In addition, this announcement made in June will also cut our province’s ties from the WCI, leaving behind Quebec and California in the agreement.
By refusing to follow through with the federal Framework for climate change, our province is losing money. A lot of money. Provinces that comply with the policy are provided with funding to help them develop systems and technology to decrease their carbon emissions and introduce a cap and trade system. Refusing to comply with the law has put the 420 million dollars of funding for Ontario on hold. Any current emission reduction projects in the province are being cancelled, such as the Green Ontario Fund, which provides rebates to households and businesses that reduce their own emissions. Cancelling this project forgoes 100 million dollars in funding alone. This funding was received through carbon taxing, when organizations went over the carbon units they had purchased. Now that this system is being scrapped, there is no way to receive this funding.
Ford apparently doesn’t mind the loss, considering the fact that he calls the federal cap and trade system a “government cash grab.” In mid-July, Ford announced that he’d be joining Moe in filing a lawsuit against the federal government, and will devote 30 million dollars to this intense oncoming legal battle. This money, by the way, is coming out of taxpayer’s pockets (aka our pockets). Strange, Ford said that our wallets would be hurting because carbon pricing would take our money and jobs from us. Looks like it’s the other way around. Despite the leaders’ determination, the federal court does have the final say, and we can still be hopeful that things will end in a positive light. Minister of the Environment and Climate Change, Catherine McKenna, has refused to allow Saskatchewan to remove themselves from the carbon tax; they, just like every other province, have until September 1st to present their carbon pricing plan for the upcoming years. In her response to Moe’s appeal, she stated as follows:
“To be clear, we cannot accept your request not to price carbon in Saskatchewan. Among other reasons, it would be patently unfair for one jurisdiction to avoid participating in this important national effort to support clean growth and cut pollution.” In other words, if Moe and Ford don’t come up with their own system for emissions reduction, the federal court in Ottawa will force their own tax on them. You go, McKenna!
Greenpeace, one of the biggest international environmental organizations on the planet, made a statement by their representative Keith Stewart, which condemned Moe’s and Ford’s opposition: “Extreme weather fuelled by global warming is already hurting families and businesses right across the country and will get a lot worse if our elected officials ignore the threat. Attacking carbon pricing without an alternative plan to address climate change is nothing less than an unprovoked attack on our kids’ future.” Similarly, the leader of the Green Party, Mike Schreiner, says that Moe and Ford’s decision to fight the federal court is a “pointless legal battle” that “exposes the people of Ontario to more costs with little to gain.” Ironically, that’s what they claim to be avoiding by challenging the carbon tax.
As mentioned, Saskatchewan has a different idea of how they will tackle their emission reduction requirements. They claim to have many projects planned, all of which will support the community, First Nations and the environment. Such projects they propose include improving the access First Nations have to natural gas, installing more solar panels and encouraging the use of innovation in their oil and gas sector. All together, Saskatchewan’s Minister of the Environment, Dustin Duncan, proposed that their projects, 11 projects in total, would reduce emissions by 188 million tonnes. They have committed to a 40 percent reduction in greenhouse gas emissions by 2030. Despite the proposal, the federal government is hesitant about whether the province will follow through with all of their proposed projects and if they will actually work. As Duncan stated, “Our climate change strategy recognizes the investment and innovation that has taken place and sets out the road map for future actions. This is about protecting our people and communities as much as it is about working with industry and others to reduce emissions here in Saskatchewan.”
From this perspective, we can see that Saskatchewan is still trying to make an effort towards emissions reductions. But Ontario? Where’s our plan? Oh yeah, we don’t have one. Trudeau couldn’t have said it better in his 2016 announcing the introduction of the Pan-Canadian Framework: “I guess the question is: Why bother even trying? Well, I can think of a number of reasons. First of all, it goes without saying, if everybody took that view, nobody would do anything — and I don’t want to imagine what the planet would look like in the next century.” Couldn’t have said it better myself, Trudeau.
The question for Ontario is this: by withdrawing from the federal plan without a plan of our own to combat climate change, what are we trying to do? We aren’t looking to the future, despite what Ford thinks. We need climate change action now; while Moe is preparing to take his own course of action, what is Ford doing for our province? Ontario’s leading source of emissions is from transportation, and that does not come as a surprise with all the commuting we do here. We need to develop an emissions reduction system, or accept Ottawa’s immediately. There isn’t time to fight for our pride right now. There’s only time to save the planet, ourselves and the future generations.
What’s next?
After hearing so many concerned voices from Canadian citizens, the federal government decided at the beginning of August to be less rigid with their carbon tax by lowering the percent reduction companies must make. Back in January, it was set that companies must only produce 70 percent of their emissions from prior years; in other words, they were required to lower emissions by 30 percent or else face the tax. Now they are looking at 80 percent, and 90 percent for iron, steel, cement, lime and nitrogen fertilizer producers in the country. A big change, but it shows that the federal government isn’t just trying to take people’s money. They are willing to compromise to get the job done.
Our federal leaders, and many provincial ones, recognize the importance of carbon pricing for achieving our environmental and social goals for the future. Carbon pricing, and more specifically the cap and trade system, is a great tool for reducing our emissions while protecting the money in our pockets. It allows companies to develop their own ways of reducing emissions, encouraging innovation. It makes the law more personalized, not uniform across every country. Each country has to reduce what is appropriate for them, based on their current reduction costs. Additionally, if one company finds a new, compelling way to reduce emissions, perhaps that technology could be adapted elsewhere. Furthermore, cap and trade is easily adjustable. As we lower our emissions, the “acceptable” emissions rate can be made gradually stricter, continuously stimulating the economy as companies buy/sell carbon permits while giving them the time they need to adapt to the new regulations. We have this great system ready to implement, yet we are stalling because we are afraid of the outcome.
It’s clear from this that addressing climate change is a messy issue, and no matter what, not everyone is going to be happy with the decisions that are made. Our leaders all over the world have a lot to think about when making these type of decisions, so I understand why tensions are so high. However, it is essential that all of our leaders sit down and talk with one another. We need to understand every perspective on the issue, and how climate change is effecting each nation. The simple fact is that climate change is affecting everyone, everywhere. While we may feel the effects differently here in Ontario than someone in, say, Nunavut, where food prices are rapidly rising which employee wages plummet, or in Brazil where old-growth forests continue to be destroyed, everyone needs to take action, right now. If we don’t start now, the costs of dealing with climate change in the future will just continue to rise. These costs aren’t just monetary; I’m talking about the social implications of climate change, the environmental, everything. Everyone, whether they like it or not, will be impacted by climate change, and it is our responsibility to mitigate these changes as much as we possibly can.
If there’s one take-home message from this post series, it is that we need to take action, despite the fact that sometimes this action will make us uncomfortable. Harper muzzled our scientists and destroyed our country’s green initiatives because he felt uncomfortable with how it would impact our working industry, and wasn’t confident that our nation’s people could adapt to change. Ford is afraid of how our people will be impacted and does not think that we can be innovative enough to adapt. Trump is the same. Leaders all over the world are afraid of change, when really what we need is for everyone to embrace change. That’s the only way we can recover from this mess we have created. If you break something in a store, your moral values say you should pay for it, right? If you eat your friend’s food in their fridge, you replace it. So why can we destroy the planet and think that we don’t have to pay for it? We will be paying for it. We have already started to, and it will only get worse if we can’t band together to fight climate change.
Final thoughts
We can all make a change, each and every one of us. Write to your local leader. Sign a petition. Take part in a protest. Buy less plastic. Walk to school. Do something, no matter how small it is, because each and every one of these steps that you take are making a difference. We need these small changes made by everyone; it doesn’t matter how much political power you have. Especially in our democratic society, we influence our leaders. If enough of us demand change, it will happen. You just have to embrace the uncomfortable for a little while. Otherwise, the world will be a lot more uncomfortable very, very soon.
Thank you so much for reading as always. Every person that I can touch and inspire with these posts has the potential to make a difference in our world. Let’s make a change, right now.
Until next time.