January 24, 2017

Pricing Carbon: Lessons from Canada

past event

Recap

On January 24th, Kleinman Center for Energy Policy, the Canadian Consulate of New York, and Penn IUR co-hosted a panel, “Pricing Carbon: Lessons from Canada”, to discuss the recent adoption of a carbon tax by the Canadian province of Alberta, an unprecedented move for a top oil and gas producer in North America. Panelists included Gitane DeSilva, Alberta's Senior Representative to the United States, Canadian Embassy; Jon Mitchell, Vice President Environment & Sustainability, Cenovus; and Dr. Jim Hines, Professor of Law, Co-director of the Law and Economics Program, University of Michigan.

Penn IUR Faculty Fellow Mark Alan Hughes, Professor of Practice, Penn Design, Director, Kleinman Center for Energy Policy, kicked off the event by welcoming the panel and audience members, and Heidi Kutz, Deputy Consul General, Canadian Consulate General, set the stage for the evening’s discussion by describing the strong Canada-US energy relationship and the role Alberta has begun to play in developing policies to protect our shared planet.

DeSilva focused the conversation on Alberta by introducing the province’s emissions profile, highlighting that Alberta contributes 37% of the country’s greenhouse gas (GHG) emissions despite housing only 11% of the population. Aiming to lower their emissions in the wake of 2015 Paris Climate Conference, Alberta took advantage of a newly elected democratic government to develop and implement a Climate Leadership Plan. Key to the plan is the implementation of a new carbon price on GHG emissions. The revenue from the tax, DeSilva explained, is then reinvested in the economy with one-third returning to households and businesses through rebates and the remaining two-thirds helping to diversify the energy industry and support job growth.

Mitchell brought a private sector perspective to the table, presenting on the collaborative process that led to the development of Alberta’s Climate Leadership Plan. As Vice President at Cenovus Energy, a leading provider of oil sands in the province, Mitchell acknowledged a critical environmental challenge facing the company is the generation of high levels of GHGs. Cenovus and other industry leaders began collaborating with environmental groups, to reach consensus on the preferred methods of limiting negative climate consequences he explained. The result was a commitment to methane reduction, emissions limits, and carbon pricing, which became the foundations of the Climate Leadership Plan.

Hines took a broader view, discussing the merits and drawbacks of carbon pricing compared to the other primary legislation used to limit GHG emissions, cap-and-trade policies. While cap-and-trade provides a relative certainty on the quantity of total emissions, energy prices become more susceptible to volatile prices. The reverse is true of carbon taxes, leading to less assurance of hitting a specific emissions limit.  While many critics insist that carbon taxes are unreliable at reducing emissions, Hines argued that hitting specific numerical reduction targets should be less of a focus than an overall commitment to combating climate change.

The event concluded with a discussion moderated by Hughes on the politics of the consensus building process, how to bring industry to the emissions reduction table, and what is the best use of revenues generated from carbon taxes.

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