Laurier prof talks carbon pricing in light of Trudeau’s new plan

carbon pricing, Tracy Snoddon, Economics, Laurier University, carbon tax, cap and trade, environment, environmental policy, renewable energy, Partners in Research

**Update: The video of Snoddon’s PIR Live Event from Thursday, November 24 has been added to this post below.

When it comes to environmental policy—with Prime Minister Justin Trudeau’s new carbon pricing plan announced early October and the U.S. election early November—much remains to be seen.

However, Dr. Tracy Snoddon is hopeful.

“We have good, solid, basic economic analysis to argue that carbon pricing should be the foundation for efforts to reduce greenhouse gases,” says Snoddon, associate professor in Economics at Wilfrid Laurier University. “Carbon pricing is going to help both increase emissions reductions and help with improving cost effectiveness of those reductions.”

Snoddon will be fielding questions from Grades 5-10 students during a Partners in Research (PIR) Live Event this Thursday, November 24 about carbon pricing. PIR engages schools across Canada with researchers, stoking students’ natural curiosity and inciting a love of learning.

And with the Liberals’ announcement, the event couldn’t be more topical. Trudeau promised a national carbon floor price at $10 per tonne beginning in 2018. The figure will apply to all provinces without a strategy to price carbon pollution. Those provinces that have a plan will continue with their own initiatives. Money generated from these plans goes back to the provinces.

“I think [Trudeau’s plan] is a very helpful transition initiative,” says Snoddon, who penned a column in the Globe and Mail earlier this year. “Right now, when you have carbon prices of $30 per tonne in one province, and $0 in another, it’s a very ineffective way to reduce emissions. We can do better if we try to have it adopted everywhere.

“This method allows provinces flexibility, which is necessary in federal/provincial intergovernmental relations. It gives them a lot of lead time and provides a common foundation for us to move forward. A coordinated, central approach creates the most efficient and cost-effective system.”

There are two major ways a government implements carbon pricing: levying a carbon tax, or creating a cap-and-trade system. Alberta and B.C. have a carbon tax, which means companies pay a certain amount per every tonne emitted.

Quebec and Ontario are moving forward with a cap-and-trade system, which means the governments put a cap on the overall level of carbon pollution emitted. Those who exceed their emissions quota, or permits, can buy from companies with unused quota. This system creates further incentive for companies to reduce their emissions, so they can be able to sell permits, instead of have to buy them.

Both systems are cost-effective ways to reduce emissions and can be equally effective depending on the number of emitters covered, according to Snoddon. B.C.’s carbon tax, for example applies to 70% of emissions sources, as some emitters are exempt due to their size, sector, or other factors.

“In theory, they’re both equally effective in that they create a financial incentive for emitters to reduce emissions, but provide flexibility to emitters to decide how they are going to do this,” she says.

The national carbon floor price will increase every year until 2022. Provincial carbon taxes will also increase, while the cap for cap-and-trade provinces decreases.

“Companies will do what’s most cost-effective for them, but at the end of the day, you will see a reduction in emissions with carbon pricing,” says Snoddon. “It could be a matter of changing the type of fuel they use, or changing production and improving technology so the firm emits less. Or they could find buying permits or paying the tax is the most cost-effective option, until these prices reach a point where it no longer is.”

Competing on a global stage

One challenge Snoddon highlights is how policies within Canada can remain effective when placed on the global stage. Delaying climate change can only be truly successful if every country does their part, and Canada’s emissions are already relatively small, according to Snoddon.

“Hopefully we can work to improve the order of our own house and by doing so help to influence what the rest of the world is doing,” says Snoddon. “In putting a workable system in place within our own country, we create examples for others and allows us to think into the future on how we might link policies with others. It does depend on what everyone else is doing though.”

Before the U.S. election earlier this month, Canada and the U.S. were moving forward together on various climate change initiatives. However, with President-elect Donald Trump, it’s hard to predict where the U.S. will go with their policies.

“Media reports indicate Trump is not a climate change believer, so I don’t know,” says Snoddon. “However, there’s a lot of hope in the individual states. They continue to be big players. California, for example, has carved its own path with other environmental initiatives, and it’s usually pretty strong on that front. It’ll be interesting to see how it all plays out.”

PIR’s Live Event on Thursday is open to the public, but geared to Grades 5-10 students. To register as an individual or as a class for this event, visit the registration page.

Tagged: Environment & Sustainability, Natural Resources

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