Carbon Pricing – Supplementary Details
To ensure the OBPS is most effective, the GBC recommends:
- Targeting the OBPS only to those sectors that can demonstrate a material competitiveness impact and need for the program (i.e., those that are both emissions intensive and trade exposed). Doing otherwise would be unfair to other parties within the system and to all parties participating in climate programs more broadly. Carbon competitiveness pressures come from carbon price differentials between trading partners. Hence also:
- Revising sectoral competitiveness analyses as additional jurisdictions apply a carbon price.
- Revising standards to account for technological innovation that will deliver emissions reductions in different sectors.
- Focusing a sector evaluation specifically on competitiveness issues that arise from Canada’s adoption of stronger climate policy compared to specific competitor jurisdictions and exclude the pressures caused by the array of other economic and policy factors that influence firm performance, including corporate income-tax rates, foreign-exchange rates, the prices of locally supplied inputs, and wage rates. If the OBPS is misused to address any other regional, market, resource quality, or technological issue, its success may be constrained.
As it stands, the threshold analysis calculates emission intensity as a factor of direct carbon cost and gross value added, and trade exposure as a factor of imports, exports and sales without accounting for carbon pricing differentials between foreign competitor jurisdictions. Accordingly, the GBC recommends that resources be allocated towards:
- Ensuring that ECCC can appropriately assess the appropriateness of standards for each regulated sector by assessing sectors’ economic and environmental performance
- Enhancing ECCC’s competitiveness risk analysis framework based on evolving academic work to exclude non pollution pricing pressures that influence firm performance and isolate for carbon pricing differentials between Canadian and foreign jurisdictions.
Increasing the scope of coverage
To date the federal carbon price has applied to combustion and industrial process emissions only. However, there is increasing proof that emissions due to actions that impact our lands and oceans are also resulting in significant emissions. For example, a 2018 paper estimates that 1100 km2 seismic line and winter road impacts on peatlands in Alberta represents about 2 Mt of CO2 eq emissions a year, and that those emissions may easily continue for more than a decade.1Another paper found that surface mining and in-situ production GHG impacts on peatland and forests in Alberta between 2012 and 2030 will release an additional 107–182 million tonnes of CO2 from land use impacts alone.2 One approach for addressing these emissions is to expand the Greenhouse Gas Pollution Pricing Act to include actors with significant emissions from land use change and ecosystem degradation.
Putting a price on these emissions will also have a positive impact for promoting biodiversity conservation and nature-based solutions by requiring those that impact Canada’s lands to reduce their footprint on the land or pay for that footprint.
To effectively address this situation, the Green Budget Coalition recommends funding:
a) An expert working group to assess the major land use emissions and the development of an ecosystem GHG emissions pricing scheme(s).
Canada’s national GHG inventory already tracks many of the land use changes and activities generating ecosystem emissions, and in some cases which sectors are responsible at a national scale. However, the inventory does not identify the specific actors responsible for these emissions around the country, nor their scale on a case by case basis. To promote emission reductions, the GBC recommends that the federal government categorize individual sources, such as companies or public sector agencies, by volume of ecosystem GHG emissions. Environment and Climate Change Canada’s existing system for categorizing major emitters of fossil fuel emissions could serve as a model. This would help policymakers to set emission thresholds from land use change and management which would form a basis for discussions with emitters and identifying appropriate regulatory tools. Cross agency coordination and discussion will be needed as land use change impacts occur in different sectors and may cross several agencies, such as Agriculture Canada, Canadian Forest Service, and Infrastructure Canada.
b) Federal funding, e.g., from Grants and Contributions, for academics working on a) assessing how human activities on our ecosystems impact lands and estimation methodologies, especially for wetlands and peatlands; b) accounting methodologies and policy choices focused on ecosystem carbon emission questions, such as permanence.
Although there has been significant progress in quantifying the emissions from different human activities on our ecosystems and accounting for them in policy, there is a continued need for new science to further understand the impact of our activities and how to estimate and account for them correctly. In addition, there needs to be work on the policy solutions to address some of the estimation and accounting questions regarding specific ecosystem GHGs, such as permanence.
- Maria Strack et al., “Impact of Winter Roads on Boreal Peatland Carbon Exchange,” Global Change Biology 24, no. 1 (January 2018): e201–12, https://doi.org/10.1111/gcb.13844.
- Yeh, S., Zhao, A., Hogan, S., Brandt, A.R., Englander, J.G., Beilman, D.W., & Wang, M.Q. (2015). Past and Future Land Use Impacts of Canadian Oil Sands and Greenhouse Gas Emissions. Davis, CA. UC Davis, Institute of Transportation Studies.