Canadians soon will learn something Europeans already know and Americans should heed: Once they're imposed, the costs of climate precaution only rise.
European governments jumped ahead of the world with initiatives aimed at mitigating climate change that have delivered punishingly high electricity prices, deterioration of industrial competitiveness, and a creaky emissions-trading system. Early zeal among European populations for climate leadership has faded. Under political pressure, several European governments have cut subsidies for renewable energy. Still, officials know most current programs won't achieve commitments made under a major climate agreement signed Apr. 22 in New York. The politics will be interesting.
So it goes with governmental regulation of the climate. Sacrifices political elites demand of energy consumers never are enough.
Painful lesson
The Canadian government underscored this painful lesson the day before Prime Minister Justin Trudeau joined other leaders of the world to sign the agreement, product of the COP21 climate summit late last year in Paris. A report from the Parliamentary Budget Office (PBO) noted problems meeting the government's commitment to cut greenhouse gas emissions in 2030 from a 2005 baseline. "The 30% target means removing more than the equivalent of all emissions from today's cars and trucks (including off-road vehicles)," it said. "The actions undertaken so far by various levels of government, though substantial, will not be sufficient to achieve the target."
Canadian provinces have acted independently and with varying fervor on GHG emissions. Although provincial premiers met with Trudeau in March to discuss harmonization of the effort, no national plan yet is at hand. Trudeau is known to want, among other things, a national carbon price.
The PBO report indicates that price will have to exceed what provincial governments have in mind. British Columbia has a carbon tax on fuels of $30/tonne of carbon dioxide-equivalent (CO2e). Alberta will start taxing fuels next year at rates reaching that level in 2018. British Columbia, Quebec, Ontario, and Manitoba participate with California in the Western Climate Initiative cap-and-trade system. The price of emissions credits in the most recent auction there was about $17/tonne.
These carbon values-which are costs energy consumers or taxpayers somehow must absorb-aren't high enough, according to the PBO report. The report cites a 2009 study that estimated cuts in GHG emissions sufficient to meet the 30% target would require a carbon price of $100/tonne of CO2e. If that estimate is correct, the cost of achieving national targets for GHG cuts is more than three times that of the most aggressive provincial program now proposed or in effect.
The PBO report suggests the challenge might not be that daunting. It estimates CO2 prices "that would provide sufficient incentive" to achieve needed emission reductions within specific economic sectors. Among sectors with the greatest potentials for emission cuts, the cost ranges still exceed provincial programs: $60-100/tonne of CO2e for transportation, $12-57/tonne for electricity, and $43-100/tonne for oil and gas extraction, refining, and distribution. Together, those sectors would account for an estimated 159 million tonnes of the 208 million tonnes of CO2e cuts needed by 2030 to meet the government's targets.
More sacrifice
Canadians can expect to be asked to sacrifice much more than is promised by any of the emission-reduction programs adopted so far at the provincial level. Trudeau believes election gave him a mandate to amplify economic pain in service to a climate payoff that even the PDO report encrusts with uncertainty. "The cost to Canada's economy of allowing a temperature of 2° C. or more could be substantial-if not directly then indirectly from elsewhere," it says. Political responses in the provinces-where people drive vehicles and heat homes-will be instructive.
The US loiters in early stages of this cycle, during which costs are rationalized away from serious attention. Whether from others' mistakes or painful experience of its own, however, it also will learn two lessons increasingly clear Europe and Canada: Affordability matters, and politics makes blank-check regulation unsustainable.
