…environmental economics and the implications of environmental policy

With Soft Cap and Rule, Equivalency Looks oh so Much Brighter

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I had the good fortune of being briefed on the details of the federal government’s climate plan this week. What is interesting is that the briefing occurred during a break in discussions of how a carbon tax might be applied nationally and might complement cap and trade. As I sat listening to the government official, and all the complexity of the new federal plan was revealed, all I could think about was the equivalency clause. Simply, equivalency allows the provinces to implement their own plan if it is somehow equivalent to the federal program. While this will need some sorting out, the comparisons between the elegance of the BC climate plan based primarily on a carbon tax shift and the sheer complexity of the “soft cap and rule” federal plan led me to think of equivalency as the great hope for Canadian climate policy. That is, provinces and their industries will look to the federal plan, try to get their head around all it entails and I suspect instead will start planning their own simplified approach.

The other big observation is that of cumulative emissions, where the latest additions, and especially the focus on Carbon Capture and Storage (CCS) and the technology fund extension called “certified projects” will result in a step change in reductions around 2018 or 2020. And this points to a problem with targets in a GHG setting – target attainment says nothing about cumulative emissions. One can emit like crazy and then hit a target with a step change reduction in a single year, and voila the target is attained. But total emissions over the proceeding period will be high, which is why early and sustained action reduces total emissions and hence the climate risk. And modelling also shows early and sustained action is cheaper since technology decisions that are not influenced today are expensive to deal with later.

Which is why equivalency could be good for Canadian climate policy. In the face of a soft cap and rule regime, a carbon tax shift looks oh so much brighter.

Written by Dave Sawyer

March 15th, 2008 at 4:13 pm

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    30 Jul 14 at 4:28 pm

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