Newly elected New Brunswick Premier Susan Holt and Nova Scotia Liberal Leader Zach Churchill are talking about pitching a viable replacement for the federal carbon pricing system that would take the price off at the pump for consumers.
This week, Churchill said he and Holt are discussing a cap-and-trade model to replace the province’s existing carbon tax.
Churchill is currently campaigning for the N.S. election on Nov. 26. If he wins, he says his government has a “clear plan to eliminate the carbon tax,” and will work with the Liberal government next door to create a “made-in-Atlantic-Canada solution to carbon pricing” that meets federal requirements.
If done correctly, swapping out the existing carbon tax for a cap-and-trade model would still cut emissions at least the same amount, but likely more, said Moe Qureshi, director of climate research and policy with the Conservation Council of New Brunswick.
The federal carbon tax has been a point of political contention across Canada, particularly in Atlantic Canada, where premiers have been vocally opposed to the climate policy. Conservative Leader Pierre Poilievre has hosted “Axe the Tax” rallies across the country, and vowed to eliminate the consumer carbon tax if elected. Even the B.C. NDP government has suggested it will ditch the tax if the federal backstop goes away.
In a statement to Canada’s National Observer, Environment and Climate Change Canada said the federal government “stands ready to support any province or territory in its consideration of how best to price pollution for its circumstances.” The federal government has criteria that provinces and territories must follow, which includes measures such as “reporting on carbon pricing policies should be consistent, regular, transparent and verifiable.”
The model could take after a nearby province. Quebec has had a cap-and-trade system, which includes a limit on the overall carbon emissions from big industry, with reductions in place each year to reach emission-reduction targets. If a polluting company goes over its emissions level, it is required to buy credits from other polluters that didn’t reach the emission quota. Quebec trades carbon credits with California, and also swapped with Ontario until the Doug Ford government scrapped it from the province’s climate plan.
To be a viable swap, any alternative model must be transparent, have a thorough monitoring structure, and exist within a carbon market that has ample trade options, he stressed. Qureshi said it’s also essential that the money produced from the carbon market can only be used to further reduce emissions.
The federal government has required all provinces and territories to have a carbon price system in place since 2023. However, provinces were allowed to pitch their own systems as an alternative to the federal model. Both N.S. and N.B did so, but failed to meet the federal requirements.
“All provinces, including Nova Scotia, are welcome to explore and develop other models of pricing pollution including through a cap-and-trade system as Quebec has had in place for many years, so long as it meets the minimum standards established by the federal benchmark,” said department spokesperson, Cecelia Parsons.
Details are still hazy on what a an alternative carbon price would look like for either province, but Churchill said both he and Holt agree on a cap-and-trade system similar to Quebec, and that they “think we can convince other provinces to work with us on a made-in-Atlantic-Canada solution.”
Early in October when Holt was on the campaign trail, she didn’t specify a cap-and-trade system, but said that she is planning to “go to Ottawa with a clear ask of what we want our industrial price to be.”
Neither Holt nor Churchill responded to media requests from Canada’s National Observer asking for more information on their plan. Nor did Holt say whether she would propose a plan independent of N.S. if Churchill, who is currently behind in the polls, fails to get elected.
Ultimately, a cap-and-trade system accepted by the federal government would benefit Atlantic Canada in its efforts to reduce emissions, said Tim Gray, Executive Director of Environmental Defence. Cap-and-trade has a “greater assurance of actual emissions reductions if designed properly” because an emissions cap is set and lowered over time “so you actually have a very clear path to achieving emissions reductions that you want as a government.”
The other aspect of a cap-and-trade system is the credits borne from it. With the federal carbon tax model currently used in N.B. and N.S., the money collected is given back to consumers through rebate cheques. In a cap-and-trade system, the money collected from polluters can be used by polluting industries to further reduce emissions, or can be funneled to a more general program, explained Gray.
When a cap-and-trade model was operating in Ontario, the province collected the money and used it to invest in energy-efficient windows for schools, electric vehicle rebates, and more. Atlantic Canada could do likewise if it adopts a similar system.
Cap-and-trade models have the advantage of putting the onus on industry to reduce emissions, rather than charging consumers a tax in an effort to change their behaviour, said Gray. There is still an “indirect price on carbon across the economy” with a cap-and-trade model that ultimately encourages “businesses and consumers to make more climate-friendly choices,” notes the David Suzuki Foundation.
An Atlantic Canada Carbon Market
Ideally, a cap-and-trade model would be adopted by all the Atlantic provinces, noted Qureshi, who said the region could build a carbon market for inter-provincial trading. And while the mostly Conservative provinces in the region have so far failed to propose an alternative to the tax, this could be the moment for them to “sit down, work together, and come up with their own cap and trade system. It's on them to put in that legwork to flesh out a system that is solid enough,” he said.
Having a bigger compliance pool in the Atlantic region would be ideal, said Gray, while explaining that there’s also no reason why another province couldn’t join in on the existing Quebec-California market.
Ultimately, a cap-and-trade model for N.B. or N.S. “makes good sense,” said Gray.
“It's basically been our preferred mechanism to do so because you get those guaranteed reductions right at the beginning,” he said, noting that the first few years of a cap-and-trade system contains “low hanging fruit” before the cap begins to reduce.
“I think it's a preferential mechanism to do it, and I do think it removes some of the controversy around it. But we want to go into this in a clear headed way, and remember that we all need to contribute to this. And there needs to be a price on carbon and it needs to be incorporated into the economy.”
Comments
Cap-and-trade could be construed as bait-and-switch from the perspective that changing horses in mid-stream to realize an arguably incremental improvement over the "carbon tax" approach basically translates to lost time in reducing emissions as the levels of government play in the margins of the existential threat posed by emissions. Why not focus on significantly reducing GHG emissions vice playing politics? Here's the kicker: if emissions reductions to save ourselves and our children was really the point, the price of everything we buy that is manufactured using fossil fuels, directly or indirectly, would be high enough to dissuade the consumer, you and me, from buying the items and thereby further imperiling all of us. Instead, all hail the god we call "The Economy".