{"id":292579,"date":"2015-11-23T23:04:31","date_gmt":"2015-11-24T04:04:31","guid":{"rendered":"https:\/\/policyoptions.irpp.org\/2015\/11\/how-b-c-can-get-back-in-the-business-of-being-a-climate-leader\/"},"modified":"2025-08-28T15:23:53","modified_gmt":"2025-08-28T19:23:53","slug":"how-b-c-can-get-back-in-the-business-of-being-a-climate-leader","status":"publish","type":"post","link":"https:\/\/policyoptions.irpp.org\/fr\/2015\/11\/how-b-c-can-get-back-in-the-business-of-being-a-climate-leader\/","title":{"rendered":"How B.C. can get back in the business of being a climate leader"},"content":{"rendered":"

As B.C. was busy dotting the i\u2019s and crossing the t\u2019s on its draft Climate Leadership Plan, some good news arrived from Canada\u2019s Ecofiscal Commission. The commission released a new report<\/a> examining how carbon pricing can impact the competitiveness\u00a0of Canada\u2019s economy. This is an important issue because many people believe that impact could be significant, so it represents a significant barrier to progress on climate change.<\/p>\n

The good news can be summarized as follows: 1) the portion of the B.C. economy where carbon pricing could represent a material competitiveness\u00a0concern is relatively small, and 2) in sectors where there is a material concern, it can be addressed in ways that maintain the incentive to reduce carbon pollution. In other words, B.C. can move ahead with next steps on the carbon tax and other climate policies with confidence that the economy will remain strong.<\/p>\n

Carbon pricing impacts competitiveness\u00a0in a small portion of the economy<\/h2>\n

Two percent. That\u2019s the percentage of B.C.\u2019s economy that the commission found to be both emissions-intensive and trade-exposed at a $30 per tonne carbon price. It’s the combination of these characteristics that means a sector\u2019s competitiveness\u00a0could be at risk from carbon pricing. While the other 98 per cent may not like the carbon tax (or any tax for that matter), the commission\u2019s analysis shows that $30 per tonne does not materially impact their competitiveness.<\/p>\n

But what if the carbon tax increased? As noted in its submission<\/a> on the province\u2019s Climate Leadership Plan, the B.C. Business Council argues against increasing the carbon tax because of competitiveness\u00a0concerns. According to the commission, an increase to $120 per tonne would increase the portion of the economy at risk from two per cent to nine per cent. There\u2019s every reason to better understand and address concerns in that nine per cent (see the next bit of good news), but it\u2019s great news that it doesn\u2019t look to be a material concern for 91 per cent of the economy \u2014 even with much stronger climate policies.<\/p>\n

If B.C. moves to that $120 per tonne, the nine per cent of the economy where there are concerns includes portions of the aluminum, cement, coal mining, natural gas, and paper sectors. The commission also expects that liquefied natural gas would be included in that list if projects did proceed, but they couldn\u2019t make a definitive assessment in the absence of actual data. These percentages shouldn\u2019t be treated as absolutes, and they will depend on the thresholds used to determine if a sector is emissions-intensive and trade-exposed. The thresholds used by the commission were that a given carbon price needed to represent at least five per cent of a sector\u2019s GDP and at least 15 per cent of their GDP needed to be exposed to competition from other jurisdictions.<\/p>\n

It\u2019s also worthwhile to note that, for a few reasons, the two per cent to nine percent should be viewed as an upper bound:<\/p>\n

    \n
  1. The commission doesn\u2019t consider opportunities to reduce carbon pollution within a sector, which would reduce the amount they pay in carbon tax and therefore reduce any impacts on competitiveness. The commission\u2019s analysis assumes that companies do nothing to reduce carbon and therefore continue paying the full carbon price. We know from B.C.\u2019s carbon tax experience and other examples, companies will innovate to reduce carbon and minimize their costs. For example, there are low cost opportunities<\/a> to reduce methane emissions from the natural gas sector \u2014 taking advantage of these opportunities would improve the sector\u2019s competitiveness.<\/li>\n
  2. They don\u2019t assume any climate policy in other jurisdictions \u2014 i.e. a world where B.C. has a carbon price and no one else does. We know that not to be the case, and progress in Ontario, Quebec, California and Alberta demonstrates how carbon pricing is moving in North America. There are more positive examples<\/a> if we look globally. And there\u2019s no need to limit this to carbon pricing \u2014 policies like Obama\u2019s clean power plan aren\u2019t an explicit carbon price, but the plan will drive the same shift to renewable energy that a carbon price would.<\/li>\n
  3. They don\u2019t account for how government will use the carbon pricing revenue and don\u2019t account for any of the revenue being used to reduce other taxes in the way B.C. reduced income taxes in the first phase of the carbon tax. If a portion of new carbon tax revenue were used to reduce corporate taxes or help businesses and industry reduce their carbon pollution, it would reduce any impacts on competitiveness.<\/li>\n<\/ol>\n

    So if B.C. were to increase the carbon tax to $120 per tonne over the next decade (a path that would be similar to the Pembina Institute\u2019s recommendations<\/a> to the B.C. government), it could impose competitiveness\u00a0concerns on up to nine percent of the economy. If those sectors take action to reduce their carbon pollution, the government uses carbon tax revenues to reduce other costs, other jurisdictions continue to implement new actions, or all of the above, the percentage will be lower.<\/p>\n

    Competitiveness\u00a0concerns can be managed while meeting climate objectives<\/h2>\n

    Even though it\u2019s encouraging that we don\u2019t need to be pay special attention to more than 90 per cent of the economy, that shouldn\u2019t give the impression that the up to nine percent doesn\u2019t matter. I wouldn\u2019t want to see economic activity from those sectors moving to another jurisdiction because of climate policy \u2014 that would undermine economic performance at home and serve no global environmental benefit.<\/p>\n

    Thankfully, there\u2019s no reason why the province can\u2019t provide targeted support in the sectors where it\u2019s justified until the jurisdictions they\u2019re competing with have comparable policies in place. The approach B.C. took in this year\u2019s budget for the cement sector is a good example: they provided targeted support to a sector that would qualify as \u2018more exposed\u2019 according to the commission\u2019s research, and they did so in a way that actually enhanced the incentive to reduce carbon pollution because the funding is intended to help the sector transition to cleaner energy sources.<\/p>\n

    A less positive example (also in B.C.) is the approach used for greenhouse growers, where the government chose to exempt them from the carbon tax<\/a>. This was bad economic and environmental policy on two fronts. To start with, the approach eliminated the incentive for the sector to reduce carbon. If governments take this approach, making progress on climate becomes increasingly difficult. For example the two percent of B.C.\u2019s GDP that is \u2018more exposed\u2019 at $30 per tonne accounts for 22 per cent of the province\u2019s carbon pollution.<\/p>\n

    The second problem is that in the case of greenhouse growers, there wasn\u2019t a strong rationale for any sort of compensation. The sector is not a \u2018more-exposed\u2019 sector in the commission\u2019s analysis, and earlier analysis<\/a> from the Pacific Institute for Climate Solutions found no evidence that the carbon tax had negatively impacted the agriculture sector\u2019s competitiveness. This case highlights the responsibility of governments to set transparent thresholds that they apply consistently across sectors and regularly assess. All sectors can be expected to make the case that they are concerned about competitiveness\u00a0and that they deserve compensation. Those concerns shouldn\u2019t be ignored, but nor should they be accepted without scrutiny.<\/p>\n

    For governments looking to find a path forward to meet climate and economic objectives, this report should be a huge boost of momentum. For B.C., hopefully it helps to give the province the confidence it needs to come forward with an ambitious draft Climate Leadership Plan that includes a new schedule of carbon tax increases. Putting an end to the carbon tax freeze would put B.C. back in the business of being a climate leader.<\/p>\n","protected":false},"excerpt":{"rendered":"

    As B.C. was busy dotting the i\u2019s and crossing the t\u2019s on its draft Climate Leadership Plan, some good news arrived from Canada\u2019s Ecofiscal Commission. The commission released a new report examining how carbon pricing can impact the competitiveness\u00a0of Canada\u2019s economy. This is an important issue because many people believe that impact could be significant, […]<\/p>\n","protected":false},"author":913,"featured_media":292433,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","ep_exclude_from_search":false,"footnotes":""},"categories":[],"tags":[8638,8367,8408,8409],"article-status":[],"irpp-category":[],"section":[],"irpp-tag":[],"class_list":["post-292579","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","tag-changements-climatiques","tag-british-columbia-fr","tag-energy-policy-fr","tag-carbon-fr"],"acf":[],"yoast_head":"\nHow B.C. can get back in the business of being a climate leader<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/policyoptions.irpp.org\/fr\/2015\/11\/how-b-c-can-get-back-in-the-business-of-being-a-climate-leader\/\" \/>\n<meta property=\"og:locale\" content=\"fr_FR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How B.C. can get back in the business of being a climate leader\" \/>\n<meta property=\"og:description\" content=\"As B.C. was busy dotting the i\u2019s and crossing the t\u2019s on its draft Climate Leadership Plan, some good news arrived from Canada\u2019s Ecofiscal Commission. The commission released a new report examining how carbon pricing can impact the competitiveness\u00a0of Canada\u2019s economy. 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