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October might seem like a strange time of year for report cards, but when it comes to the federal election and the policies the four major parties have on climate change, it couldn’t be timelier.
The polls have repeatedly shown Canadians rank climate change at or near the top of their list of priorities, and many have indicated they’re going to vote on the basis of what a given party does — or doesn’t — do. But the details matter on climate policy. So I’ve dug into the specifics and graded the four major parties’ climate plans in three key areas: how effectively they reduce emissions, how they balance those reductions with economic growth and what that means for household budgets in Canada.
In order to avoid the worst effects of climate change, the world needs to limit global warming to 1.5 C, according to the Intergovernmental Panel on Climate Change. That means, at a minimum, global emissions must be roughly halved by 2030, and carbon neutrality must be achieved by 2050. This is a very ambitious goal — more ambitious than the targets in the Paris Accord that Canada agreed to in 2015 — but not necessarily impossible. The U.K. and Sweden have already passed legislation requiring them to achieve carbon neutrality by 2050, while dozens of other countries (and in America, states such as California) have pledged to hit this goal.
That said, we have a long way to go here in Canada. Our annual GHG emissions are currently at 712 megatonnes, and the Paris Accord requires us to get them down to 512 megatonnes by 2030. If we want to do our part to hold warming to 1.5 C, we’d need to drive those emissions down below 400 megatonnes. The question now is: can any of the parties get us there with their policies?
Green party: A
The Green party gets top marks here, since it has the only plan to hit those targets — and they want to go even further, reducing emissions by a staggering 60 per cent against 2005 levels by 2030. By 2050, their plan would require Canada’s economy to be fully carbon-neutral, and they would eliminate all subsidies to coal, oil and gas companies and their assets in the process. The Greens would raise the existing carbon tax by $10 each year, reaching $130 per tonne by 2030. If there’s a critique of their plan, it’s that the roadmap to get there is not fully spelled out, and the feasibility of some of their commitments have been called into question.
The NDP has also committed to the 1.5 C target, but its policies, which include a carbon tax, aggressive retrofitting of public buildings and investments in innovation, would only get Canada’s emissions down to 450 megatonnes, about three-quarters of the way to their stated 2030 goal. The NDP, though committed to a 1.5 C goal, has not explicitly endorsed a 2050 net-zero target.
The Liberals have so far maintained their commitment to the Paris targets they agreed to in 2015, and their current set of measures brings Canada roughly two-thirds of the way to that goal. That goal is less than what is needed to stay on a path to 1.5 C by 2030. And the Liberals have taken real heat for their support of a pipeline, despite those emissions being a very small share of the overall emissions pie. But, to their credit, the Liberals announced on Sept. 24 that they will target full carbon neutrality by 2050. If they can create a concrete plan to hit that target, they will get Canada back to that 1.5 C pathway.
The Conservatives have a plan to address climate change, but unfortunately, it’s one that lacks targets. And while they’ve said their plan gives Canada the best chance to meet its Paris Accord responsibilities, they’ve provided few details to back up that claim. And according to a report Clean Prosperity co-authored with EnviroEconomics back in July, the Conservative plan would actually raise emissions by 30 megatonnes relative to the status quo (an estimate that might be generous since a subsequent report found the plan might raise emissions by 100 megatonnes).
A climate plan doesn’t need to be a major drag on the economy. In fact, done right, climate action can create economic growth and accelerate the rise of clean energy and other so-called “green jobs.” From our perspective, a pro-growth policy is one that relies on the private sector and markets as much as possible, rather than using government regulation or subsidies. And the best way to incentivize the private sector is putting a price on carbon pollution and then letting businesses and entrepreneurs respond to that price signal.
On this front, the Liberals are at the top of the climate class. That’s because they introduced the carbon tax and rebate policy as the centrepiece of their climate plan, one that also includes more than 50 other initiatives, such as phasing out coal-fired electricity, regulating methane emissions and introducing the clean fuel standard. Environment and Climate Change Canada estimates the plan might reduce GDP growth by 0.1 per cent at most, and that’s before considering the effects of any technological innovation. The Liberal plan also includes an industrial pricing system that balances support for industry with the need to incentivize them to reduce emissions.
The biggest weakness in the current Liberal plan is it doesn’t commit to growing the carbon tax and corresponding rebate. Instead, they’ve said the program will be re-evaluated in 2022 in consultation with the provinces. To reduce emissions further, the Liberals have turned to a suite of policies more expensive than carbon pricing, such as electric-vehicle subsidies, which achieve emissions reductions at a costly $400 per tonne. They’ve also made several new promises on the campaign trail, such as planting two billion trees. Because each of these policies is a small component of the plan, the effects on the economy are expected to be quite small. Still, not relying more heavily on carbon pricing is a missed opportunity when it comes to minimizing economic effects of climate policy.
The Conservatives are vocal opponents of the carbon tax, saying they’ll dismantle it as their first act in office. But despite suggesting the Liberals’ industrial pricing program gives unfair tax breaks to large emitters, the Scheer plan has its own policy that sounds remarkably similar to a carbon price. Their plan lacks detail (what would be the threshold for emissions faced by each industry? How much will they have to pay?) and that makes it hard to say whether their proposed system will affect either emissions or the economy
Beyond industrial carbon pricing, the Scheer plan contains a litany of ideas — but most are either already in place or too vague to assess. Of the three ideas meaty enough to evaluate, the biggest is a green home tax credit, which is a riff on a program Stephen Harper’s government introduced to provide subsidies to homeowners who performed green retrofits. While retrofits are a good way to reduce emissions, this program is a very expensive way to generate those reductions. Clean Prosperity and EnviroEconomics found they would cost 10 times as much as a carbon tax and rebate program, in large part because it will pay people to do things they would have done anyway. That’s likely why Harper cancelled his version of the program early on: it was simply too expensive.
The Conservatives are missing an opportunity to take pro-growth climate action. But because their plan has so few meaningful measures, the bottom-line impact on the economy would not be severe.
While the NDP will maintain the carbon tax and rebate policy, it has opposed the industrial pricing system, claiming it gives undue breaks to industrial polluters. Unfortunately, this represents a significant misunderstanding of the industrial system, which balances the need to charge industrial polluters while also ensuring the charges are not so high they push industry to exit Canada. The NDP is proposing to significantly increase the costs of industrial polluters, which is well-intentioned, but in practice, could lead to job losses without reducing emissions. “The effects on industry would be significant,” said economist Dave Sawyer, who has modelled the effects of such a change.
The NDP’s most eye-popping proposal might be a commitment to net-zero emission electricity countrywide by 2030. Given the high dependence on fossil fuel-based electricity in parts of the country (Alberta is 85 per cent), the costs of such a rapid switch would almost surely raise energy costs (without compensating rebates).
The NDP has a series of other big-ticket government spending programs that would also be more expensive than letting a carbon price do the heavy lifting. For example, the NDP propose raising the EV subsidy to $15,000, allocating $3 billion to a climate bank that would invest in renewable energy and providing $6.5 billion to accelerate the transition to low-carbon transport.
Green party: C-
The Green climate plan, ironically, has both the most pro-market approach and the most interventionist policies. It uses a carbon tax as a key tool, proposing that it gradually rise to $130 per tonne by 2030. The Parliamentary Budget Officer has said increasing the carbon price beyond $100 per tonne will go a long way toward helping Canada meet its Paris targets.
Unfortunately, the Greens are like the NDP on steroids when it comes to regulation, as they have a number of heavily interventionist policies that would have significant economic effects. They have proposed removing the industrial pricing system, which could come with significant job losses if industrial plants move abroad (and continue to emit). But they have also proposed banning oil imports, fracking, pipeline construction and coal exports. Plus, the Greens want to ban gasoline-powered vehicle sales, convert the electrical grid to 100 per cent renewables and retrofit every building in Canada — all by 2030. Putting feasibility concerns aside, these policies would have major, and likely sudden, effects on the cost of energy. Banning oil imports, for example, “would give domestic oil refineries the ability to raise gas prices well above competitive levels,” says Sawyer. He points to the recent investigation in British Columbia that found refineries were able to charge an extra 13 cents per litre due to an uncompetitive market. The Green party’s aim to shift the economy away from fossil fuels is understandable — and noble — but the regulation-heavy approach they propose would have a negative impact on growth and pocketbooks, especially when they have an alternative — a higher carbon price.
Costs to Households
When they think of governments taking action on climate change or the environment, many Canadians think there’s a tradeoff that involves lightening their pocketbooks. But that doesn’t need to be the case — and hasn’t been, so far, in Canada. Putting a price on carbon pollution and sending the money back to households can be a financial winner for most families, and the Parliamentary Budget Officer has estimated 80 per cent of Ontarians are receiving more in rebates than they pay in taxes. And even those who do pay — typically the richest 20 per cent of Ontarians — will only pay approximately $50 per year.
So how will the climate plans affect your finances? While we don’t have a full picture of the costs, we assess what we do know below. Consistent with other reports, we calculate direct costs to households as well as indirect costs from increased government spending that will eventually have to be paid by households. We then divide that cost by the total number of households...
By relying on the carbon tax and rebate, the Liberal plan returns money back to all families in the provinces where their policy applies (Ontario, Saskatchewan, Manitoba, New Brunswick and Alberta in 2020). Thanks to the rebates, most people will come out slightly ahead financially, and while the Liberals do have other policies that could cost consumers, the price tags on those are modest (the clean fuel standard, for example, will cost the average household $3 per year).
By removing the carbon tax and rebate, and replacing it with more expensive subsidy programs, the Conservative plan would leave most families worse off relative to the status quo. The Conservatives are both taking away the rebates received by families and also adding expensive programs that will eventually be paid for by taxpayers without delivering much in the way of emissions reductions. All told, our research suggests households end up in the hole as much as $300 under the Scheer plan’s policies.
The NDP’s policies will leave households with a significant price tag — both directly and via higher government spending. While they have proposed realigning the carbon tax rebates so lower- and middle-income families get more of the proceeds, that’s unlikely to offset the heavy increase in energy costs from going to net-zero electricity countrywide, or the higher transport costs from fully electrifying public transit by 2030. There’s good reason to believe these policies would exceed the $200-plus per year we attribute to the pricier parts of the Conservative plan. Given the difficulty of accurately assessing the costs, we can only safely say their plan is likely to cost households more money than the Liberals and Conservatives, and likely less than the Greens.
Green party: C
By continuing to ramp up the carbon tax and the rebate, the Green party would deliver significant windfalls to the average household. For example, a carbon tax that rises to $130 per tonne by 2030 could mean a rebate of nearly $2,000 for a family of four in Ontario. But that gain is likely to be offset by significant increases in energy costs, given the sharp curtailment in new non-renewable energy development and the ban on any imported oil. Further, the spending proposed by the Green plan — for example, they aim to retrofit all government buildings faster than the NDP — means the cost to households is likely to be the priciest of all four parties. Of course, the major carbon reductions the Greens aim to achieve might make that palatable to some voters, but market-oriented policies, like an even higher carbon tax and rebate, would let the Greens reduce the household cost while still achieving similar reductions.
The Liberals get high marks for their reliance on a carbon tax and rebate, which is the most cost-effective and efficient way to reduce emissions. Their industrial emitter framework strikes an artful balance between environmental ambition and economic prosperity, and reduces emissions without leading to large-scale carbon leakage. And while their policies haven’t put Canada on track to meeting its Paris Accord targets, they have made significant progress in the past four years, and their commitment to a net-zero economy by 2050 suggests they remain serious about finding ways to get back to a 1.5 C pathway.
Their climate plan has a lot of good things going for it: a prominent carbon tax, ambitious timelines for the decarbonization of key parts of the economy and a commitment to leading by example through government procurement. But their antipathy toward the industrial emitter framework is short-sighted, and some of the programs they intend to fund (like the green retrofits and electrification of all public transit) could have considerable indirect costs for Canadians. There are also some concerns about the feasability of their plan.
Green party: B-
As expected, the Green party’s climate platform is the most ambitious and aggressive — setting bold targets for emissions reductions and using every measure at their disposal to get there. The question is whether the Canadian economy, or the households that depend on it, would be able to absorb the costs associated with doing that. And that assumes the plan could actually be implemented, an assumption called into question recently by noted economist Andrew Leach, who described the Green policies as “more of a wish list than a plan.”
Not surprisingly, given the absence of clear emissions reductions targets, the Conservative plan gets the poorest grade in this class. In our view, a party can’t get a better overall grade than what was score on emissions reductions, as that’s the start of any serious plan. The Conservative hostility toward the carbon tax, despite all the available evidence suggesting it’s the most cost-effective way to reduce emissions, makes it nearly impossible for them to build a credible plan. And while technology may be able to make important contributions to Canada’s efforts to meet its Paris targets, it is not nearly enough to rely on unproven technology that is not ready to use today.