Federal report calls for carbon tax, trading in Canada

Canada must put a price tag on carbon emissions and quickly develop a carbon tax or trading system to target emitters, a new federal report recommends.

The report was released Monday by an independent advisory panel commissioned by the federal government to study ways Canada can make major, long-term cuts to the country's greenhouse gas emissions.

The report, which comes after more than a year of research, concludes that the only way to make truly deep cuts, in keeping with the current government's plan to reduce emissions by up to 65 per cent from 2006 levels by 2050, is to start charging for carbon as soon as possible.

"As long as there is free carbon, and carbon can be emitted freely, it will be extremely challenging to achieve any significant reductions," said Glen Murray, chair of the advisory panel, which is known as the National Round Table on Environment and the Economy.

"Right now greenhouse gases are emitted for free. There's no cost," Murray added, speaking at a press conference in Ottawa. "If something's free, then lots of people will do it."

The advisory panel, whose findings are not binding, has not recommended what the specific price of carbon should be or when the price should be implemented, although members suggest changes must be made as soon as possible, possibly within the next year.

Once a price is established, the panel recommends that Canada adopt a carbon tax and/or a cap-and-trade system based on that price.

A carbon tax would tax industries or consumers who produce carbon emissions. A cap-and-trade system would establish a limit on the amount of emissions an industry can produce, and any industries that exceed their limit could buy credits from those who don't.

Environmentalists from the Sierra Club of Canada and the David Suzuki Foundation praised the report for its emphasis on carbon pricing.

"Whether it's capping carbon emissions or charging for them, the key is for government to start moving now," Dale Marshall, a climate change policy analyst with the Suzuki Foundation, said in a press release.

"If we wait too long Canada will not meet its targets. Delay has many risks, including higher cumulative emissions, a steeper carbon price down the road and increased economic costs."

Tories oppose carbon tax

Prime Minister Stephen Harper has flatly opposed the idea of a carbon tax in the past, as has Liberal Leader Stéphane Dion.

On Monday, the federal Liberals seemed to be more receptive to the idea.

At a press conference in Ottawa, long-time Liberal and environmental activist John Godfrey said his party currently favours a carbon trading system, but will keep an open mind about carbon taxes and is waiting to see what research emerges on the topic.

The Conservatives, however, stuck to their position.

Environment Minister John Baird said Monday that he welcomes the report's call for fixing a price on carbon, but would not consider a carbon tax. He said his government is instead working to regulate industry emissions by pushing for major polluters to significantly reduce their emissions by 2010 and encouraging an eventual carbon trading system in North America.

"What we're not going to do is be like Stéphane Dion and the Liberals who constantly change their position and their policy," Baird told reporters outside the House of Commons, referring to the Liberal's apparent softening stance on a carbon tax.

"I understand the Liberals are now entertaining dumping their current policy — policy No. 8 by my count — and adopting a completely new policy. Every time a report comes out, you can't change your mind."

Murray said he is optimistic that Parliament will support carbon prices and measures like carbon taxes and carbon trading.

"It's time to move the discussion forward because there isn't a realistic case that we have seen yet where we can achieve reductions without a price [on carbon]," Murray said.

"You'll now quietly hear people talking very seriously about cap and trade systems," he added. "Our job [as an advisory panel] is to push government, not just the governing party, but Parliament and Canadians."

'Significant' impact on Ontario, Alberta

Murray noted that the costs of a carbon tax or cap-and-trade system could particularly be "significant" on Alberta's oil producers and Ontario's manufacturing sector.

But he stressed that in the development of any new policy, there would be investments in green technologies that would ultimately benefit both provinces significantly.

He said any policy would have to be created to ensure all regions are treated fairly, and that Canada's industry as a whole doesn't suddenly find itself on an "unlevel playing field" with the rest of the world.

Murray said the development of a carbon tax or cap-and-trade system must include industry officials, environmentalists and representatives from all regions of the country.

Representatives from all sectors were already involved in the creation of the panel's report, he said, noting that 65 groups were consulted and extensive economic modelling was done.

GDP wouldn't be seriously affected

David McLaughlin, CEO of the advisory panel, said the report has concluded that Canada can feasibly reach its 2050 target of a 65 per cent emissions reduction, and that reaching this target will not be detrimental to the Canadian economy as a whole.

Canada has enough green technology in place to meet the goals, although the development of more technology would be encouraged, according to the panel's findings.

"Our findings suggest in the long run the overall effect on Canada's gross domestic product will not be significant, amounting to the equivalent of approximately one to two years of lost growth of GDP between now and 2050," McLaughlin said at the press conference with Murray.

While the Liberals applauded parts of the report, they accused the Conservatives of putting constraints on the advisory panel, giving it a mandate to work with the Conservative government's environmental targets, instead of the targets proposed under the international Kyoto Protocol.

"The report reminded us once again that this Conservative government has unilaterally abandoned Canada's international legal obligations," Godfrey said.

The Kyoto Protocol, which Canada signed under a Liberal government in 1998, requires that the country reduce its greenhouse gas emissions by six per cent from 1990 levels by 2012.

The Conservative government created new environmental goals in April 2007 that see Canada meeting its Kyoto commitments years behind schedule. Under the new plan, Canada's overall emissions will be cut by up to 65 per cent by 2050 and 20 per cent cut by 2020, all based on 2006 levels.

McLaughlin said the panel used the new targets because they are feasible and focused on the long-term, giving Canada enough time to make necessary changes.

Kyoto's targets are too focused on the short-term, McLaughlin said.