In 2007, former Liberal premier Gordon Campbell decided British Columbia would possess the most advanced, most stringent climate policies in the world.
A year later, BC was the first place in North America to adopt a carbon tax. Only a handful of countries had introduced such a policy, and here, the tax was initially set at a low but rising level. BC’s tax started at $10 per tonne and increased by $5 each year up to the current rate of $30, covering about 70 percent of the province’s greenhouse gas (GHG) emissions. Although Christy Clark froze it from 2012 to 2017, the new BC government will increase the tax to $35 in April in anticipation of the Trudeau government’s target of $50 by 2022.
It was also revenue-neutral, balanced out by income and corporate tax breaks elsewhere, and direct payments for low-income earners.
In short, it embraced almost every aspect of the design of a carbon tax that energy economists had been advocating for two decades. As a result, BC has been bombarded ever since with journalists, policymakers and economists from around the world who wanted to know more about this pioneering jurisdiction and how it had made it work.
A great many figures were involved in the design of the province’s then pioneering carbon tax, and one of them was Mark Jaccard, an energy economist and professor at Simon Fraser University, whose research has since convinced him that the policy, as is, faces some serious political limits. The Climate Examiner spoke to him about this “political acceptability barrier.”
How do you see your role in furthering climate policy efforts?
Increasingly I explore how we can design policies that are regulatory, but designed in a way to mimic the economic efficiency of the carbon tax by being very flexible. Each person, each firm can decide how it will respond to the regulation, just as they can with the carbon tax. But evidence from many jurisdictions that have reduced emissions suggests that more reductions are politically possible with flexible regulations.
So, what is the problem?
The real question is can we ramp up the stringency. Some 30 years of GHG reduction efforts globally shows that carbon prices still are not anywhere near levels needed to achieve the internationally agreed climate targets of staying within 2C of warming above pre-industrial times. Regulations are generally not stringent enough either. But the evidence is clear that a government requiring the closure of coal-fired power plants, as Ontario did, is more effective than any attempts thus far at emissions pricing. Likewise, regulations that force low-carbon fuels have done much more than the carbon tax to reduce transport emissions. All of this suggests that we have to start paying more attention to political limitations.
How do you describe the way citizens may view carbon taxes?
This is an ephemeral or abstract issue for most people. It’s never going to be an easily judged political objective like a promise to reduce hip replacement waiting times. You can tell everyone that your carbon tax is revenue-neutral till you’re blue in the face, and few will believe you. Worse still, they will believe the Trumps of the world who say, in spite of the clear evidence, that it is a tax grab pure and simple.
It seems the carbon tax evokes strong emotions…
Look at Alberta’s example. Some political opinion research suggests that Alberta’s carbon tax will be a key contributor to the defeat of [NDP Premier Rachel] Notley in 2019. Her rapid decline in popularity set in shortly after the introduction of the tax. Yet my research team has calculated that around 95 percent of the GHG reduction in the province between now and 2030 will be a result of her government’s phase-out of coal-fired power plants, energy efficiency regulations, industry performance standards, and so on, not by this tax. In BC, Campbell’s Liberals went on to lose a 20 percent lead in six months after the introduction of the tax. The federal Liberal leader at the time, Stéphane Dion, embraced a carbon tax and went down to defeat to Conservative Prime Minister Stephen Harper who denounced it as a job-killer.
What’s the right balance?
We should not ignore the value of flexible regulations: policies that set a target such as a low-carbon fuel standard, but do not impose rules about which technologies, such as batteries, hydrogen, biofuels, synfuels, or natural gas, must be used to achieve the standard. All that matters is that the standard is met, possibly with some form of credit trading to reduce costs and difficulty of compliance.
What do you reckon is the root of inaction?
The reality is that fossil fuels are a little too wonderful. Energy density, portability, dispatchability, you name it. Apart from this climate change thing, they’re great for energy systems. Which means that they are never going to be ceded without some sort of compulsory policy, namely emissions pricing or regulations. But it is easier to miss targets than to implement such policies.
Do you favour one approach? Carbon pricing or regulation?
I’m not arguing for one approach or the other. Really. If a jurisdiction can successfully impose a tough carbon tax, fine. I don’t care. What matters is the stringency, and stringency means we have to pay attention to political viability. That’s why saying that one approach must be followed because it is the most economically efficient, is actually being almost dumb. Small differences in economic efficiency just don’t matter when it comes to avoiding devastating climate change.
Energy economist Mark Jaccard helped design BC’s carbon tax, and he still supports it. But he questions just how politically viable a stringent tax—at the level needed to meet climate targets—can really be. So he also continues to explore how other policies that the public find more acceptable could work.