An op-ed in The Globe last week, by Christopher Ragan and Andrew Potter of McGill’s Max Bell School of Public Policy, got the attention of a lot of people in my world.
It’s very much worth a read as a counter-argument to the big continuing push for the federal government to invest heavily in a “green recovery” plan that would use stimulus spending to try to breathe life back into the economy in the short term, and reduce Canada’s GHG emissions in the long run.
The authors’ proposed alternative – treating the current pandemic and concurrent collapse in oil prices as an “excellent opportunity to substantially increase the federal carbon tax,” rather than trying to pick climate-change winners through government spending – also struck a chord with some advocates of market-based climate policy.
But the article struck me as example of the sort of ideological puritanism that can get in the way of realistic and comprehensive strategies to transition to a lower-emissions economy in time to compete with other countries doing likewise.
As a matter of politics, it’s hard to imagine any government deciding to immediately “double or triple" a carbon price in the middle of the worst economic crisis since the Great Depression. And that’s just the consumer-facing fuel tax, which sees most of the money returned to taxpayers.
Presumably, the government would also have to dramatically increase the output-based carbon price for large industry, which doesn’t have the same rebate system. Ottawa would then be accused of imposing huge costs on businesses already on the brink of failure.
And as a matter of policy, treating carbon pricing as a cure-all for the climate would leave all sorts of gaps in an emissions-reduction strategy, which is why that mentality has lost momentum even among many self-branded clean capitalists in recent years.
A much higher carbon price might indeed negate the case for some forms of relief spending that Mr. Ragan and Mr. Potter want to avoid. There might be less need to subsidize building retrofits and electric vehicle purchases, two of the most obvious potential stimulus measures, if consumers had more of a neutral incentive to reduce their fossil fuel use.
But EVs are also a good example of where there are obstacles beyond price that government might need to address. No matter how much consumers might save on fuel, they aren’t going to buy them if there isn’t enough charging infrastructure, which won’t just pop up the moment the carbon price rises.
Carbon pricing is an even less all-encompassing solution when it comes to public infrastructure. Municipal transit systems that have seen their ridership crater, for instance, won’t soon be in position to buy lots of electric buses to replace their diesel ones. But Ottawa could directly help finance those purchases, and create some manufacturing jobs in the process.
If it’s a policy priority to accelerate the end of coal-fired power in provinces that still rely on it, and avoid a looming ramp-up of gas-fired energy generation in Ontario, taxation alone probably won’t cut it there, either. But infrastructure investments such as better grid connections with provinces that have clean-energy surpluses might.
There’s also the matter of trying to grow domestic clean-tech sectors, particularly when it comes to building off Alberta’s oil and gas expertise toward a more sustainable resource sector.
When it comes to potential long-term plays – such as hydrogen, geothermal, carbon capture and storage, and non-combustion bitumen products – one of the biggest challenges is access to capital. The carbon price paid by consumers is unlikely to do much about that; the industrial price should help, by encouraging industry players to invest in new technologies, but probably still needs to be paired with mechanisms to attract more private investment, possibly by leveraging public dollars. And that’s not to mention new sectors’ infrastructure and work force needs.
None of this is to disagree with Mr. Ragan’s and Mr. Potter’s point that Ottawa should avoid rushing into traditional, mostly infrastructure-based stimulus spending, given the extremely unusual nature of the current economic situation.
Indeed, Prime Minister Justin Trudeau’s government now seems to be taking its time, after initially raising expectations among environmental groups that it would roll out a big green recovery package this summer. The Liberals are still trying to get a handle on COVID-19′s trajectory, and whether it will lead to a deep and protracted recession or more of the V-shaped recovery Mr. Ragan and Potter seem to expect.
But whatever the more imminent stimulus needs prove to be, if the goal coming out of this massive disruption is to accelerate the shift to the economy of the future, it’s going to require much more than a single policy tool.
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Adam Radwanski