Most of the media attention thus far has focused on Ottawa’s pledge to increase the price of carbon from $30 per tonne to $170 per tonne over the next decade.
Personally, I find that issue rather tedious. Carbon pricing is a market-based, conservative approach to reducing greenhouse gasses.
Conservative partisans have made this argument convincingly in Canada and in the United States.
Even the National Post’s John Ivison, who has virtually nothing good to say about the roll-out of the Liberal announcement, agrees “with the carbon pricing model the federal government has chosen, at least as long as the rebates equivalent to the carbon tax continue to make their way back to consumers.”
I’m much more interested in a foreign policy implication noted on page 30:
“The Government is exploring the potential of border carbon adjustments, and will be discussing this issue with its international partners.”
Border carbon adjustments are environmental tariffs by another name.
In Ottawa’s own words:
“Border carbon adjustments level the playing field across jurisdictions: they put a carbon fee on imports from countries that either do not have carbon pricing or price it too low so that those products face the same costs as those supplied by domestic producers who pay a price on carbon pollution. As such, border carbon adjustments can help maintain competitiveness while also encouraging other countries to step up and take effective action to reduce emissions.”
The idea is hardly new.
In 1991, the United States Senate considered a proposal to tax imports from countries whose pollution controls were less stringent than America’s.
The bill failed, and the World Trade Organization has habitually rejected environmental tariffs as counter to the spirit of globalization.
But the WTO is tottering, and it looks like Washington will try again.
“Carbon adjustment fees” were mentioned in President-elect Joe Biden’s environmental platform. They are also included in the European Union’s plan to mitigate the effects of climate change.
Environmental tariffs resonate because they appeal to populists and pragmatists alike.
They are unapologetically protectionist, but they also serve a practical, functional end: they prevent the subsidization of pollution.
In this context, the Trudeau government has little choice but to price carbon in Canada aggressively.
If it doesn’t, Canadian exports could face new barriers to critical markets.
Armed with evidence of an acceptably high carbon price at home, however, Global Affairs Canada will be well-positioned to negotiate a regional, or even global, border carbon adjustment regime with our likeminded allies.
The governments of Alberta, Saskatchewan, and Ontario are currently contesting the Trudeau government’s right to tax carbon at the Supreme Court.
With Joe Biden about to assume the presidency of the United States, I’m not certain that they should be hoping for a win.
The best summary of recent Canadian thinking on what he calls carbon border adjustments is this prescient article by Adam Radwanski in the Globe and Mail. I’ve noted in a previous post that Radwanski’s reporting on environmental policy has been outstanding.
One of the best academics on Canadian environmental policy is Wilfrid Laurier’s Debora VanNijnatten. On energy and the environment, I enjoy the work of the University of Ottawa’s Monica Gattinger. For the Alberta angle, follow Andrew Leach, Trevor Tombe, and Duane Bratt on Twitter, or read their regular public commentaries,
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