Carbon Tax

The National Round Table on the Environment and Economy released a report today advising on Canada's response to climate change. The reactions among people whose opinions should be respected have been quite favourable. They strongly advised either a carbon tax, a cap-and-trade system, or both:

Implement a strong, clear, consistent and certain GHG emission price signal across the entire Canadian economy as soon as possible in order to successfully shift Canada to a lower GHG emissions pathway, achieve the targeted reductions for 2020 and 2050, avoid higher emission prices that a delay would entail and reduce cumulative emissions released to the atmosphere.

Institute a market-based policy that takes the form of an emission tax or a cap-and-trade system or a combination of the two.

Develop complementary regulatory policies, in conjunction with the emission price signal, to address sectors of the Canadian economy that do not respond effectively to such a price signal or where market failures exist. Complementary policies should also provide support for research, development and demonstration of technologies, as well as strategic investments in infrastructure.

Establish a Canada-wide plan, in the earliest possible time frame, that leads to better coordination of complementary federal, provincial and territorial GHG emission reduction policies aimed at common or shared targets, time frames and actions.

Apply GHG emission reduction policies that incorporate adaptive management practices and have built-in monitoring and assessment mechanisms to allow for regular reviews to ensure efficiency and effectiveness. This approach will ensure that progress is monitored, compliance issues are addressed, and policies are adjusted to match the required level of abatement effort, and will minimize and mitigate unanticipated adverse outcomes.

Significantly, they also said that there would be little harm to the economy if such measures were implemented. And this group consists mainly of industry representatives. Contrast this analysis with John Baird's hysterical rantings on the consequences of implementing Kyoto:

The Government's analysis, broadly endorsed by some of Canada's leading economists, indicates that Canadian Gross Domestic Product (GDP) would decline by more than 6.5% relative to current projections in 2008 as a result of strict adherence to the Kyoto Protocol's emission reduction target for Canada. This would imply a deep recession in 2008, with a one-year net loss of national economic activity in the range of $51 billion relative to 2007 levels. By way of comparison, the most severe recession in the post-World War II period for Canada, as measured by the fall in real GDP, was in 1981-1982. Real GDP fell 4.9% between the second quarter of 1981 and the fourth quarter of 1982.

The current government's climate change plan includes an intensity-based cap-and-trade plan, or alternatively a $15-20 contribution to a Clean Technology fund per tonne of GHG emitted. In order to really make the desired reduction to GHG emission, we need to move to an absolute cap-and-trade system, or a carbon tax in the neighbourhood of $100 per tonne (which could easily be established as dedicated revenue for clean energy development).