Liberals grab FoE's proposal and run with it

Repeat after me - I love minority government. Sure, elections every year or two mean little gets actually done on climate change, but meanwhile the Liberals and Conservatives are one-upping each other to the point where radical environmental proposals transmogrify into mainstream policy!
In January, Friends of the Earth and Corporate Knights publicized a proposal to create an emissions tax at 30$/tonne CO2e for large emitters, with the catch that the tax revenues would actually be kept in special accounts for each emitter, who would have the option of getting the money back to spend on emissions reductions. Many, many orders of magnitude beyond any existing Canadian policy to date. I loved the idea but assumed it would be ignored within federal politics. (See my post for more details)
Last month, FoE and Corporate Knights released a more global proposal, with additional carbon taxes all over the place, tax shifting, the whole caboodle. Again, I thought, this is great, but we'll be lucky to get even absolute emissions limits for industry, let alone making them pay for every tonne emitted! (See my post for more details). Meanwhile, the Climate Action Network set out clear proposals for amending the Clean Air Act, including setting absolute targets for large emitters at our Kyoto target level ((1990 minus 6%). (Here's the post on that one)
NOW, the Liberals release their environmental plan, which first of all sets absolute targets for large emitters; even better, it sets them at our Kyoto target level. This is a much, much better idea than the intensity-based system that the Liberals built and the Conservatives are now recycling. (See this post for why). And on top of this, it brings in the FoE/CK idea of tax +emitter account, with a 20$/tonne tax with emitter accounts allowing emitters to reuse the money, with the tax rising to 30$/tonne in 2011. The key, unfortunate difference is that industry only pays for emissions beyond their targets, not for all emissions as per the FoE/CK plan. This is still an improvement over the old Liberal LFE system, which had a $15/tonne charge (much too low according to both environmentalists and economists). The Conservatives are rumoured to be sticking with the $15/tonne charge.

We'll have to see what the Conservatives come up with, but so far it looks like easy intensity-based targets starting in three years. If that's the case, the Liberal plan is much more effective, and fair (industry shoulders its share of the reductions burden). It'll be interesting to see how things go...

Meet Kyoto or Pay Up, Dion Tells Industry (Globe)
Liberal press release
Dymaxion World post on Liberal plan

Liberals eying absolute targets for large emitters?

Tiny story in today's online National Post - the Liberals are supposedly considering absolute targets for large final emitters as part of their election plan, as opposed to the intensity-based targets that the Conservatives (and previous Liberal governments) have been working on.

National Post story

My Comments: I'm very glad to see absolute targets being discussed for emissions trading, and I hope this is a bit more long lasting than Stephane Dion's brief endorsement of a carbon tax. I don't know if this is an issue that can grab the public's attention politically, and who knows at this point if the Liberals will make it back into power, but I am certain that absolute targets, even if extremely generous ones initially, are a better choice for Canada. They would provide more certainty in terms of our reductions achievements, and will make it much easier for our system to become integrated with the European Emissions Trading System and other eventual tradeable permit systems based on absolute targets.

the Clean Air Industrial Regulatory Agenda

The Globe and Mail has been analyzing leaked documents describing the Conservative plan for an emissions trading system for big industry. Basically, it looks like the Liberals' old Large Final Emitters (LFE) system, with slightly tougher targets and of course a brand new name. Unfortunately, this means that most of the flaws of the old LFE system could still be present:

• intensity targets - the biggest flaw - no guarantee that absolute emissions will decline. It also makes for a more complex system to set up (you need to set targets for all kinds of industrial products), and leaves a lot of room for industries to negotiate relatively soft targets without the general public noticing.
  
• free permits - the emitters in the system will (I am assuming here) once again get their permits free. Given international experience so far with emissions trading, this is a big transfer of wealth to industry, and will likely give many emitters a windfall profit, without necessarily rewarding good work.
• an offset system - again, I'm assuming the Conservative model will reflect the Liberal original, here. The LFE system included a complementary offset system, where farmers, landfill operators, etc. could sell credits to the big emitters based on carbon sequestration or methane capture. An offset system can in theory be a great market-based tool, but is very complex to set up and administer (lots of project evaluation methodologies) and creates opportunities for double-counting reductions and diluting the emissions trading system itself.
• a price cap on emissions - the Liberals promised industry that they would sell unlimited permits at 15$/tonne if the price rose that high. This amounted to a fairly low-set safety valve and would have eliminated a lot of emissions reductions from the market. If Canada's market had ever been linked to international carbon markets, then it could have also led to arbitrage (traders buying Canadian permits as a hedge against market volatility, etc.)

On top of these problems, the Conservative system won't go into effect until 2010. Back in 2004 when the LFE system was nearing completion, industry was already ready for a 2008 roll-out, so this seems like an unnecessary delay.

One plus of the draft Conservative system: long term, gradually tightening targets - it sets out targets for not only 201-2015, but stricter targets for 2015-2020. This gives predictability to industry, particularly for capital investment decisions.

So what would the ideal Canadian emissions trading system look like? Here are some key points:

• an absolute target - forget the intensity targets and replace them with an overall, absolute cap on emissions, to guarantee real reductions.
  
• auctioned permits - auctioning permits is more economically efficient, a lot simpler to set up and administer, and removes most opportunities to hide favouritism towards particular industries. It also creates revenue that can be used to run the program AND create a double dividend (see my post) by using it to reduce income taxes or what have you.
• simplicity and clarity - a simple system makes for more liquid markets, more participant confidence, and more transparency. Using an absolute target and permit auctioning would get rid of a lot of the unnecessary complexity of the LFE system. Eliminating the offset system would also help, but this would also remove a big incentive for offset-type reductions - the compromise solution would be to design as simple an offset system as possible.
• no/higher caps on permit price - the 15$/tonne permit price cap was too low and will stifle innovation if its reinstated. Either remove the cap altogether, or announce a much higher cap - 80-125$/tonne (I use these figures since they've been cited as approximating the true costs of CO2e emissions)
  
• long term, gradually tightening targets
  
• roll-out as soon as possible - 2008 if possible.
  

Link to Globe article
Link to further Globe coverage
Link to a US EPA Guide to desigining and operating a cap and trade program - a great resource covering all of the topics discussed above.

Clean Air Act Committee Meetings - Targets, Carbon Taxes and Emissions Trading

Just read over testimony from the February 6th meeting of the Clean Air Act Committee. The Committee heard from Bill Erasmus (Assembly of First Nations), Claude Villeneuve (Université du Québec À Chicoutimi prof), David R. Boyd (BC prof, author), and Mathieu Castonguay (Association québecoise de la lutte contre la pollution atmosphérique). There was a great deal of discussion on overall Canadian targets, the possibility of achieving our Kyoto targets, and the use of carbon taxes and emissions trading. In four sentences:

• Canada can't achieve our Kyoto targets even with international credits, nonetheless we can still work within the Kyoto protocol, and we need to set ourselves a binding target of 80% below 1990 levels by 2050.
  
• Carbon taxes are one of the most effective tools available, we need to use them, and they won't do us any harm; emissions trading can also be used but it is vulnerable to cheating by emitters.
• Emissions-intensity targets are a fraudulent approach, a trap to be avoided.
• The Clean Air Act is an unnecessary and risky piece of legislation.
  

Here is a more detailed summary. Remember that this is based on an unofficial transcript. If you would like a copy, email CC30 at parl.gc.ca

The Clean Air Act
The experts agreed, when asked, that the Clean Air Act achieved very little if anything from a climate change perspective and was unnecessary for addressing greenhouse gas emissions.

Achieving Kyoto Targets
Most of the discussion was from David Boyd. He pointed out that domestically, we would have to cut emissions by 7% a year for 5 years, which is too dramatic. He supports using verified international credits under the Clean Development Mechanism (CDM) but says that due to the long lead time on CDM there will never be enough projects available to cover our emissions. His diagnosis (supported by Villeneuve and others) - we will have to do our best and accept the penalties under Kyoto. Villeneuve proposed that an initial target of stabilizing emissions at 2003 levels for the 2008-2012 period would be feasible.

Emissions Intensity Targets

Both Boyd and Villeneuve criticized intensity targets extensively because they allow total emissions to increase. Boyd pointed out that, from an intensity perspective, Canada did quite well in the last 17 years: intensity was improved by 43% as measured by greenhouse gas emissions/GDP. Given our atrocious performance in terms of actual emissions, this underscores the weakness of using intensity targets.

Carbon Taxes
Again, a lot of discussion with Boyd and Villeneuve; carbon taxes were also supported by Castonguay. Boyd strongly advocated carbon taxes and pointed out that some of the most competitive countries in the world (the top four rated by the Davos World Economic Forum, for example) have carbon taxes. Advantages cited by Boyd and Villeneuve:

• comprehensive
• cover the entire economy
• widely regarded as the most efficient policy approach
• transparent
• administratively simple
• shows political will
• low government investment
• funds can be revenue neutral (tax shifting) and/or used for further reductions, R&D
• less likely to cause energy price volatility than a cap and trade
• proven track record in Europe

Why haven't carbon taxes been adopted? Pure political acceptability. Boyd recommends a revenue-neutral tax pushed by all parties together to mitigate this.

Emissions Trading

Again input from Boyd, Villeneuve. The main point was that despite some successes (US Acid Rain program), they are open to cheating. The recent European Union Emissions Trading System (EU ETS) price collapse demonstrates this. According to Boyd, emitters convinced governments that they needed more permits than they actually did. Since permits were given out freely, this led to many emitters making windfill profits as they sold extra permits, and then a price collapse.
According to Boyd, the Large Final Emitters emissions trading system the previous government was developing was on the brink of creating the same problem.

My comments:
Great to see this testimony. If only these experts and their arguments, particularly those on which they agreed, were listened to, we might be able to put something effective into place. Meanwhile, I'm (naively?) hopeful that the melee leading up to the 2007 election may lead one the opposition parties to start pushing a revenue-neutral carbon tax.

A side note: David Boyd was the expert cited by Minister Baird as comparing the emissions cuts needed to achieve Kyoto with the collapse of the Russian economy. Too bad Baird didn't go on to quote Boyd's bigger points that we need to continue to work within Kyoto, ditch intensity targets, and create a carbon tax...

Baird delays on industrial emissions, refuses carbon tax and international trading

Environment Minister Baird gave out more details on the Harper government's plans for industrial GHG emissions today, at a presentation to the House Committee studying the Clean Air Act. Highlights gleaned from the big media outlets:

Emissions trading
The big news - no emissions reductions targets for industry before 2010, but (as suspected), it will involve a carbon permit market. As CANet's John Bennett is quoted as saying, the delay is unnecessary since industry has been preparing to meet targets negotiated for the Large Final Emitters emissions trading system, which was set to take effect this January.

Carbon tax
Baird also reiterated the Conservatives' refusal to consider a carbon tax.

International Carbon Trading
The other interesting news from Baird today is that Canada will not take part in an international carbon trading market. Does this mean they are closing the door on Joint Implementation and Clean Developoment Mechanism projects as well?

Justifying the Conservative rejection of Kyoto
Meanwhile, Harper et al are defending their overall stalling on Kyoto with what I have to admit is a clever image"To achieve (the Kyoto target) would require a rate of emissions decline unmatched by any modern nation in the history of the world...except those who have suffered economic collapse, such as Russia".
Look for many, many comparisons between a Kyoto-compliant Canada and a collapsing Soviet Union from the Conservatives.

A quick look at the countries that have had success gives us Britain, who is on track to hit a 23.5% reduction in GHG emissions from 1990 levels by 2010. Admittedly this hasn't been accomplished in a five year period, but it is an example of dramatic domestic reductions.

Link to Globe article
Link to National Post article
Link to CBC coverage
Link re British emissions levels

Pembina Institute Op-Ed on Harper's response to Kyoto

Matthew Bramley of the Pembina Institute wrote an op-ed in La Presse Sunday entitled Les changements climatiques: rien a faire? ("Climate change: can nothing be done?"). It critiques the Harper government's assertion that its a "fantasy" to think that Kyoto targets can be achieved without spending billions on Russian hot-air credits. His main points:

a) reducing GHGs won't cause economic pain. The NRTEE's 2006 advice on a long-term strategy on energy and climate change demonstrates that long term reductions are achievable using today's technology with minimal economic disruption and significant economic benefits.
b) the 'hot air' argument is a red herring. Kyoto can be achieved by buying verified, real reductions credits from developing countries.
c) the government can act immediately. Regulating GHGs can be done without waiting for the Clean Air Act, because the government has already given itself the power it needs under CEPA (Canadian Environmental Protection Act).
d) the Conservatives are stalling. Bramley references John Ibbitson of the Globe and Mail in suggesting that the Conservatives want the public to believe that nothing can be done about climate change.

Link to the op-ed piece

My comments: I have to agree with everything Bramley says. The most interesting thing for me in reading this, however, is that its the first time I've seen one of the big ENGOs specifically say that Canada can't respect Kyoto targets using only domestic action.

Green Party position on carbon taxes and emissions trading

Just spent some time reviewing the Green Party website. The most relevant public documents are their fall 2006 Green Plan and 2006 policy platform. The two documents make some commitments re emissions trading:

1. increasing emissions targets for large industrial emitters to achieve at least 55 Mt CO2e of reductions above and beyond any other measures.
2. setting absolute targets ("cap and trade") instead of using emissions intensity targets
3. "expanding the proposed...system so that it will ensure real emissions reductions across sectors"
4. using revenue from permit sales to offset tax breaks that would be provided for energy efficiency and other reductions initiatives.

The Green Plan also commits the party to implementing a revenue-neutral carbon tax, but doesn't talk about the size of the tax or the emissions reductions targets they hope to achieve with it. They do say that by using an emission cap and trade permit system, they will "avoid having to set the carbon tax so high as to be economically dislocating" (from the Green Plan).

Link to Greens' 2006 policy platform
Link to Greens' September 2006 Green Plan
Link to Green Party news release advocating a revenue-neutral carbon tax

My comments:

As mentioned before, I am definitely happy to see anyone advocate absolute limits over emissions intensity targets. Their 55 Mt CO2e target doesn't seem particularly demanding, since that is actually what the Liberal's Large Final Emitters program was aiming for already. Re a revenue-neutral carbon tax, it makes sense as an idea to me, especially with the necessary compensation for lower income families, but I'd like to see a more detailed proposal. I'm also going to look into more economic research on carbon taxes - my understanding is still that environmental economists are for the idea, but I've heard reference to some convincing evidence from existing schemes elsewhere that carbon taxes inevitably get diluted by politicians' fear of unpopular taxation.

Baird's industry targets

Looks like the Conservatives are poised to resurrect the large final emitters emissions trading scheme. Yesterday, Environment Minister John Baird told reporters that he is preparing to impose emissions intensity targets on industry, apparently "among the most aggressive in the world." The LFE scheme was also based on emissions intensity targets, which, as CANet noted, have a big weakness - they don't provide an absolute limit on industry emissions. If industry grows faster than anticipated, then emissions can grow with the industry, wiping out any absolute reductions.

The one possibly positive thing in this announcement- talk of aggressive targets. Hopefully the Conservatives will want to announce that they've gone beyond the targets previously set under the Liberals...given their political base, though, I suspect that this won't happen. More likely is that they will delay mentioning sectoral targets and hope that the public can't be bothered to figure out the details.

Link to Globe article.

Liberal Party's Kyoto motion

The Globe and Mail covers the Liberal's motion yesterday calling on the government to "reconfirm Canada's commitment to honour the principles and targets of the Kyoto Protocol in their entirety". Followed of course by mutual name calling over Liberal inaction and Conservative insincerity. I just hope the public pressure keeps up long enough for the parties to throw up a few real policy initiatives in their quest to one-up each other. Witness the Liberal's call for the creation of a "cap and trade" emissions trading system in the same motion. Dion's previous discussion of emissions trading stuck to the old emissions-intensity system, which had no hard cap. Hopefully the cap and trade reference means that we might start discussing a more serious system.

Link to Globe article
Link to Liberal press release:
Link to previous post on Dion's emissions trading plan

NDP-Conservative alliance on Kyoto

Ahh, the good old National Post. Combining the bias of Fox News with the smarmy upper-class smugness of the likes of Conrad Black. Wednesday's coverage of Clean Air Act negotiations by John Ivison discusses a potential liaison between the NDP and the Conservatives to push an improved version of the Act through by March. The article itself covers signs of a rapprochement between the two parties, including the possibility that the NDP might even go along with the Conservative's abandonment of Kyoto targets. Ivison also asserts that the Liberals look to be stalling progress on the bill in hopes that it won't make it to an eventual election.

The bias I'm mentioning here - the NDP is "clinging to the comfort blanket of Kyoto, arguing with blind optimism that we can close the 'Kyoto gap' in the next five years." Meanwhile, "a five minute talk with anyone who really knows what it would take to meet Canada's Kyoto commitment...gives some sense of how deep in the hole we are. Three hundred of the largest polluters in Canada would have to reduce emissions by more than half, something that is not technically feasible without beggaring the economy."

I guess Mr. Ivison doesn't talk much with the staff of the Pembina Institute, the David Suzuki Foundation and the other climate change experts who have been modelling and planning for Kyoto from the beginning. Their most recent contribution to the debate, under the CANet umbrella, is a backgrounder on the Clean Air Act aimed at MPs. It asks for a commitment to Kyoto targets and to a long term target of 80% below 1990 levels to be set for 2050.

Link to CANet backgrounder
Personally, I wouldn't care about meeting Kyoto targets if I actually thought that we were setting ourselves the long term targets proposed by CANet, and acting immediately on them. I agree with Ivison that we are in a deep hole and that the Kyoto targets will be difficult to meet. The problem is, backing down on Kyoto in favour of long term targets only is an easy political cop-out and will lead to more 'study' and excuses about the need to wait until magical, painless technologies appear. The only way I could accept any kind of NDP-backed dropping of the Kyoto targets would be if they were replaced by a binding set of targets for reductions in 2010, 2012, and 2015 that led to below-Kyoto targets by 2015, targets low enough to compensate for any lost reductions now. Somehow, it doesn't seem likely the Conservatives will do this.