Carbon pricing too tough for indigenous groups, small businesses, too loose for industry: audit

Canada’s Environment Commissioner says the country’s carbon pricing system is disproportionately harsh on indigenous communities and small businesses and not harsh enough on the largest emitters.

On Tuesday, Jerry DeMarco released five audit reports on carbon pricing, shifting workers from fossil fuel industries, hydrogen power, climate-related infrastructure policy and the government’s efforts to reduce its own emissions.

The carbon price audit comes three years after the federal Liberals passed legislation requiring provinces to set a price floor on greenhouse gas emissions or use the federal system instead. The price started in 2019 at $20 per ton of emissions and reached $50 on April 1st. Now until 2030 it will grow by $15 per year.

DeMarco says there is a “broad consensus” among experts including the World Bank, OECD and International Monetary Fund that carbon pricing is the most important tool for limiting greenhouse gas emissions.

“As recognized by the Supreme Court of Canada and many international organizations, effective carbon pricing leads to changes in consumer and producer behavior, which in turn reduces overall greenhouse gas emissions,” the written statement said. “Therefore, carbon pricing is essential if Canada is to finally be able to significantly reduce greenhouse gas emissions.”

But he says Canada’s system hasn’t done enough to ensure that the price of carbon is fairly applied to the largest industrial emissions.

There isn’t enough sunlight to show how well provincial systems compare to the federal benchmark, he adds, and grant money to help small businesses become more energy efficient is slow to come.

Most provinces have their own pricing systems for large issuers approved by Ottawa. But the audit says there aren’t enough controls to ensure they meet what the federal benchmark would do, and the cost to industries varies widely between provinces.

Demarco says the weakness of the large industrial system undermines the polluter pays principle in carbon pricing.

As a rule, heavy industries only pay for carbon for a small part of the emissions they produce, and not for all the emissions produced by the fuel they buy. The plan seeks to prevent the economically devastating effects on companies that could force them to relocate while providing an incentive to reduce their emissions.

The fuel surcharge is how consumers and small businesses pay for their carbon emissions. Consumers receive rebates from the federal government to offset these higher costs, but they also have an incentive to save money by reducing their fuel consumption.

Demarco’s report also says the government is “not ready and in no hurry” in responding to the need to help more than 170,000 fossil fuel workers prepare to transition to a cleaner energy economy.

The government has been promising for more than two years to pass what it calls a “just transition” law, but has yet to introduce it. A fair transition plan is a critical element in securing public support for the transition from fossil fuels to low-emission, zero-emission energy sources.

DeMarco’s audit says there is no implementation plan and no monitoring or reporting system to support this transition.

He also says that the transition program created for coal workers relied heavily on existing policies to train the unemployed without precise measurements of their effectiveness.

Demarco adds that Infrastructure Canada does not require or receive reliable information about the climate impact of the projects it funds. He says the original climate lens that would apply to new infrastructure projects in 2018 has been blurred in 2021 and can no longer accurately account for the projects’ impact on climate action.

— Mia Rabson, The Canadian Press.

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