Last night Justin Trudeau’s beleaguered Liberal Party government survived a non-confidence vote in the Canadian parliament. Conservative Party leader Pierre Poilievre had been campaigning for a vote all summer on the premise that Canadians can’t afford to pay Canada’s carbon tax. Despite the lack of substance in Poilievre’s message, his campaign has had an impact. It seems inevitable that there will be an election fought on the issue of climate policy within the next year.
Andrew Coyne’s editorial earlier this week points out the delicious irony of Poilievre (as a nominal conservative) opposing market force mechanisms to achieve Canada’s greenhouse gas reduction targets. Not only is carbon pricing the most conservative policy choice, it is also the most efficient and fairest way to reduce emissions.
There are a range of ways for Poilievre’s “government in waiting” to reduce emissions, however. The question Canadians should be asking Poilievre is which does he support? What will his policy be, if not a carbon pricing mechanism? How will a Conservative Party government make good on Canada’s international commitments?
Here are some approaches that he could choose.
1. Emissions Pricing: Proven & Effective
Poilievre hates it, but one of the most effective ways to reduce emissions is by putting a price on them, either through a carbon tax or a cap-and-trade system. Both mechanisms create a financial incentive to reduce pollution. Carbon taxes tax emissions directly, while cap-and-trade systems operate auctions allowing large emitters to bid on carbon allowances in accordance with their needs.
- Carbon Tax Success: Sweden introduced a carbon tax in 1991, and the results speak for themselves. Since then, Sweden has reduced its emissions by 80%, all while growing real GDP by 100%. By contrast, Canada has grown real GDP by 107% over the same period which tells you that carbon pricing can be implemented without impacting economic growth. (src: World Bank)
- Cap-and-Trade in Action: The European Union’s Emissions Trading System (EU ETS), established in 2005, has contributed to a 47% reduction in emissions across covered sectors. The U.S. Regional Greenhouse Gas Initiative (RGGI) has also been highly effective, reducing power sector emissions by 50% between 2009 and 2020, while the region’s economy grew by nearly the same margin.
Carbon pricing is not only an effective emissions reducer, but it can also generate revenue for governments to reinvest in clean technologies.
2. Subsidies and Incentives: Accelerating the Clean Energy Transition
While carbon pricing penalizes pollution, subsidies and incentives reward clean energy solutions. Clean energy solutions have higher up-front costs than fossil solutions, but dramatically lower usage costs and emissions impact. Countries that support renewable energy projects, electric vehicles (EVs), and energy efficiency programs are seeing rapid reductions in emissions as a result.
- Renewable Energy Growth: Electricity generation accounts for about 9% of all emissions in Canada. Incentives to drive emissions out of electricity generation, and to build out infrastructure to handle greater demand due to the electrification of the rest of the economy make sense and can have a big impact. Electricity generated from natural gas is responsible for 450 to 550 grams of CO2e/kWh over the lifetime of the plant, versus 20 to 60 grams for solar, and 10 to 20 grams for wind. Fortunately, solar and wind are very affordable now. According to the International Renewable Energy Association (IRENA), since 2021, the weighted average LCOE (levelized cost of energy) for new solar installations in Canada has been lower than the weighted average LCOE of added fossil fuel generation capacity. Onshore wind passed natural gas and goal in 2015 in the Canadian market. Today the LCOE for natural gas-fired power plants in Canada is between $0.07 and $0.14 CAD per kWh, versus $0.03 to $0.06 per kWh for wind and $0.05 and $0.10 for solar.
- EV Adoption: In the U.S., tax credits for electric vehicles have been instrumental in increasing EV sales by 50%. This shift toward electric mobility is a key factor in reducing transportation-related emissions. In Canada, transportation is the second largest source of emissions, responsible for 24% of greenhouse gas emissions. Incentives to encourage the electrification of the transportation sector make sense when you consider that total product lifecycle emissions for gasoline powered vehicles are 250 to 300 grams for CO2e per kilometer, versus 50 to 150 grams for electric vehicles.
Subsidies and incentives help buyers overcome cost barriers, making it easier for businesses and consumers to transition to a low-carbon future.
3. Regulatory: Setting Standards for a Cleaner Future
Market mechanisms like emissions pricing and subsidies are powerful, but regulations can enforce emissions reductions at scale. Governments can implement standards for energy production, transportation, and construction to ensure that businesses and individuals meet specific emissions targets.
- Renewable Portfolio Standards (RPS): In the U.S., states with RPS policies have seen far greater renewable energy deployment than those without, leading to substantial emissions reductions. Nationwide, Canada performs well, with over 80% of electricity coming from non-emitting sources. However three provinces account for the bulk of emissions from electricity generation — Alberta (41%), Saskatchewan (28%) and Nova Scotia (8.5%). Alberta has a stated goal of 30% of generation from renewables, Saskatchewan 50%, and Nova Scotia 80%, all by 2030.
- Fuel Efficiency Standards: Data for Canada are not available, but data from the U.S. Environmental Protection Agency (EPA) reveals that fuel efficiency standards have prevented an estimated emission of 6 billion metric tons of CO₂ since 1975, highlighting the long-term benefits of such policies. The transition to a Zero Emissions Vehicle economy will continue this trend.
- Building Codes: Countries that enforce strict energy-efficient building codes, such as Germany, have significantly lowered energy consumption in homes and offices, contributing to nationwide emissions reductions. Canada has energy efficiency measures built into the building code, but not with the same teeth that German regulations have. Given that buildings contribute 13% of Canada’s emissions footprint, strong regulations to drive construction of new low / zero emissions buildings combined with rigorous retrofit requirements for existing buildings could be a possible solution.
Regulations ensure that emissions reductions happen across industries, even in sectors where market forces alone may not be enough to drive change.
4. Public Investment: Building a Sustainable Infrastructure
Governments also play a crucial role in directly investing in public infrastructure and green technologies. Strategic investments can help shift national economies away from fossil fuels and toward renewable energy and electrification.
- Renewable Energy Investment: In addition to the investments Canada is making in renewable generation, Canada’s grid is estimated to need a minimum of $400B in upgrades (some estimates are over $1T) to support the country’s 2050 goal. The grid itself is owned by a mixture of public and private entities, varying from province to province. Investment to accelerate the update of the national grid is an important step.
- Public Transport: Electrifying public transport can make a significant dent in urban emissions. According to Translink Vancouver, each electric bus in the Vancouver fleet reduces emissions by 100 tons of CO2e annually. Nationally, electrifying public transport would account for 1% to 2% of emissions country-wide.
Public investment in infrastructure is a win-win—it not only reduces emissions but also creates jobs and stimulates economic growth.
5. Phasing Out Fossil Fuel Subsidies
Despite the global push toward clean energy, and Canada’s own 2050 net zero targets, the country still provides between $5B and $20B (depending on what you count as a subsidy) in annual subsidies to the fossil fuel industry. However, phasing out these subsidies can lead to emissions reductions as prices will increase for consumers. Estimates from the International Institute for Sustainable Development (IISD) suggest that prices might rise by 5 to 10 cents per liter.
A 2021 study by IISD found that removing fossil fuel subsidies could reduce emissions by 10% by 2030. By leveling the playing field, governments can help renewables compete more fairly with fossil fuels.
In addition, redirecting subsidies from fossil fuels to clean energy initiatives might accelerate the transition to a low-carbon economy.
Poilievre could consider many other policies as well. For example:
- Incentives to encourage regenerative agriculture. The agriculture sector is responsible for 10% of Canadian emissions.
- Incentives and regulations to drive more circularity into the Canadian economy. Waste accounts for about 3% of Canadian emissions.
- Incentives to decarbonize heavy industry. The cement, steel, chemical and mining industries are responsible for 14% of Canadian emissions.
The key point, however, is that the member from Carleton needs to put some flesh on the bones. “Axe the tax” just isn’t enough.