Carbon Pricing: Canadian Attitudes and the Canadian Economy

February 23, 2011

Making markets work for the environment.

Who We Are

• Sustainable Prosperity is a national think tank and network – based at the University of Ottawa - made up of business, environment, policy and academic leaders

• We harness leading-edge thinking to develop and promote innovation in policy and markets, in the pursuit of a stronger and greener Canadian economy

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Making markets work for the environment.

Outline of Presentation• Canadian attitudes:

– Canadian overwhelmingly believe climate change is a serious issue

– Canadians believe all governments need to be involved in solutions, in particular federal gov’t

– Canadians believe that use of carbon pricing is a key part of necessary policy framework

• Economic evidence of positive role of carbon pricing is growing:

– SP’s program on low carbon economy has highlighted relationship between investment, innovation, etc.

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Making markets work for the environment.

Evidence of climate change

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There is Solid Evidence of Global

Warming80%

There is Not Solid Evidence of Global

Warming14%

Not Sure6%

Canadian Beliefs

Making markets work for the environment.

Survey: Role of federal government on climate change

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0%

10%

20%

30%

40%

50%

60%

70%

A Great Deal of Responsibility Some Responsibility

No Responsibility

Not Sure/Refused

Making markets work for the environment.

Survey: Support for carbon pricing

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0%

10%

20%

30%

40%

50%

60%

70%

No Cost Specified $15 Per month $50 Per month

Cap and Trade

Making markets work for the environment.

Survey: Support for carbon pricing

7

0%

10%

20%

30%

40%

50%

60%

No Cost Specified $15 Per month $50 Per month

Carbon Tax

Policy Brief on Business Preferences on Carbon Pricing

• Recent SP policy brief summarized survey of Canadian businesses and business associations

• Survey, carried out by UBC PhD, found very strong support for carbon pricing policy

• Motivation was risk management and desire for policy certainty

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Making markets work for the environment.

SP and carbon pricing• Exploring carbon pricing as vehicle for

transitioning to low carbon economy is major part of SP’s current mandate

• Work focuses on building economic case for carbon pricing, based on understanding of economic instruments as most cost-effective way to achieve environmental objectives.

• Also exploring positive relationship b/w carbon pricing and key economic policy issues

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Carbon pricing and investment• Investment in low-carbon

economy is becoming matter of global competitive advantage

• Carbon pricing policies can stimulate such investment, particularly from private sector sources

• Complementary policies that provide long term certainty and address “public goods” also required.

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Carbon pricing, innovation, and productivity

• Canada’s poor innovation and productivity records are major challenge to our prosperity

• Pricing carbon can help drive innovation (in tech or business models) that promotes resource efficiency and productivity

• Carbon pricing - as policy tool – should be considered as part of any discussion of Canadian productivity

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Carbon pricing and fiscal sustainability• Canadian governments at all

levels are facing serious fiscal challenges

• At same time, addressing climate change remains pressing policy imperative

• A carbon pricing policy can help Canada on both fronts, by raising revenues that can be used to (i) address climate change and (ii) provide new fiscal space to address long-term fiscal policy challenges

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Implicit carbon prices

• Canadians already pay “implicit” carbon tax, through other taxes applied to fossil fuels

• These implicit taxes – imposed for other reasons – tend not to reflect carbon intensity of the energy source. Coal is clearest example.

• There is scope for considering aligning Canada’s relatively low implicit carbon taxes with climate objectives without imposing undue competitiveness burden

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