Putting a price on carbon

The federal government provides background on this issue and questions to consider as part of the consultation, on its new Canada’s Approach to Climate Change website, available here.

Citizen Climate Lobby’s Carbon Pricing Primer

Citizens’ Climate Lobby developed this graphic to show the key features of the five carbon pricing options available to our federal government.

Both a carbon tax and carbon fee & dividend are highly effective at reducing emissions. This is because people and investors react to price signals. As the cost of carbon intensive energy increases, people and investors look to reduce consumption by conservation, or by switching to new technologies that reduce the use of fossil fuels. Carbon taxes need to be at a high enough price to phase out the use of fossil fuels in a timely manner. In order to work best, the price should be predictable and steadily increasing. The predictability of the price helps businesses plan and gives them an incentive to create alternatives that people will want to buy in order to save money.

When a carbon tax is implemented, choices need to be made as to what to do with the revenue. There are many options, including:
• Reduce the debt
• Reduce other taxes
• Build infrastructure for a low-carbon economy.

The Ecofiscal Commission wrote a good report describing the options facing each Province, called Choose Wisely. You might ask how the provincial pricing mechanisms would interact with Federal Policy. One idea that seems to make sense is for the Federal Government to set a carbon price which will apply across the country, and would be levied in each Province to the extent that that Province’s price was below the Federal Price. For example, the Federal Price could be set at $30 a tonne initially. If a Province had a price that was at $20 per tonne, then the Federal Government would collect the extra $10 a tonne. This gives the Provinces an incentive to have a carbon price that is at least equal to the Federal Price. In order to maintain the competitiveness of business, the Federal government could enact border carbon tax adjustments.
Size Matters

The size of the carbon price is important. The higher the price, the more that emissions will reduce. Economic modelling by Navius Research shows that a price of $100/tonne by 2030 is not enough to meet the current target of 524 Mt CO2e in 2030, suggesting a larger carbon price is necessary, especially since the current target is inadequate for Canada’s fair-share contribution to the Paris agreement. (See figure 7 in the Ecofiscal Commission’s report. Citizens’ Climate Lobby Canada suggests a price of $30 a tonne in 2018, rising by 10 a tonne per year, which will reach $150 in 2030.
Carbon Fee and Dividend

Carbon Fee and Dividend is the policy proposal created by Citizens’ Climate Lobby (CCL) to internalize the costs of burning carbon-based fuels. It’s the policy that climate scientists and economists alike say is the best first-step to reduce the likelihood of catastrophic climate change from global warming.

Citizens’ Climate Lobby volunteers pride themselves in being FOR something rather than AGAINST things. So Carbon Fee and Dividend is the policy our citizen volunteers around the world are advocating FOR.

Citizens’ Climate Lobby (CCL) put together a list of guidelines for carbon pricing policy in Canada. To put together the list, a group of volunteers who lead CCL groups met over a period of two months, and discussed and debated what we thought were essential elements of sound carbon pricing policy in Canada. The guidelines are the consensus that was reached by the group. This infographic shows the essential elements of carbon fee & dividend.