CCL Canada Education: A discussion about Quebec and California’s Cap and Trade Program with Dr. Mark Purdon of IQ Carbone

February 2017 CCL Canada Education Call: A discussion about Quebec and California’s Cap and Trade Program with Dr. Mark Purdon of IQ Carbone

The Pan-Canadian Framework on Climate Change and Clean Energy allows for provinces to choose their own carbon pricing policy.  On our February 2017 CCL Canada Education call, Mark Purdon introduced us to the complex cap and trade program and answered our questions.

Mark Purdon is an expert on climate change policy and political economy, working at the intersection of public policy, comparative politics, and international relations. He is currently a visiting professor at the Department of Political Science at the University of Montreal, after earning a doctorate in political science at the University of Toronto in 2013 and an SSHRC postdoctoral fellowship at the London School of Economics in 2014. He is also co-founder and CEO of the IQ Carbone.

Laurel Thompson facilitated the call. Laurel has been the leader of CCL Montreal group since 2012.
There is no Powerpoint.
It is a 60-minute call that begins in earnest at the five-minute mark.

AGENDA
1) Introduction – Laurel explained why she needed to understand Cap & Trade.
2) Then Laurel asked all CCLers to introduce themselves.
3) At the five minute Mark Purdon began his discussion on cap and trade. (Note there is no accompanying powerpoint). He explained how cap and trade works. How companies buy permits. Discussed the secondary market and free allocations. He covered what was it about their respective economies and cultures that made California and Quebec choose cap and trade as opposed to a carbon tax.
4) Questions from our members:
John Stephenson: Your paper explained how free allowances could protect trade-exposed industries, but it seems this would be limited to those with direct emissions like cement plants.  What about manufacturing in the broadest sense and anything else with indirect emissions, the costs of which they would be burdened with via pass-through?

Cathy Orlando:
How can we integrate cap and trade policies with the national carbon pricing policy? When and if the national carbon price rises above the cap and trade floor price, how will the prices be stacked or consolidated? Do you have recommendations?

Another Question from John:
Wouldn’t you agree that excess allowances firms might find themselves holding would likely be the result of either an unforeseen business turndown, change in business plan or low hanging fruit somebody bumps into?  Normally, they would lower emissions, but now they can sell the allowances to allow someone else to pollute, who might otherwise have had to actually reduce their emissions.  The cap becomes a floor.
Questions from anyone on the call.

It is suggested that you start at the five-minute as the first five minutes was CCL members introducing themselves. Please note fifteen people had called in and there were at least four more people watching online.

 

Feedback after the call from Carole from Chelmsford, ON:
Great speaker today. I appreciated the nuances of the pros and cons of the two major systems (cap and trade/carbon tax) and one thing that stood out for me was that the price of carbon is not a measure of its stringency. Also, I am left feeling quite respectful/sympathetic of all governments struggling with how to reduce current levels of CO2 plus stop new emissions. So much to learn, so little time. 

Take home messages:
1) Squeezing oranges: California’s economy is dirtier than Quebec’s economy. Thus, it is easier for California to reduce emissions. Imagine squeezing the juice out of a full orange versus a half empty orange.
2) The carbon market does not reward provinces/jurisdictions for how clean your economy is. The carbon market is there to help companies reduce the costs of reducing emissions.
3) There is a fallacy of policy stringency of cap and trade markets that must be addressed – that an emissions trading program with a higher price is more stringent.
4) It is cheaper to reduce emissions per dollar with cap and trade vs carbon taxes.
5) The equivalency of the carbon price between a carbon tax and cap and trade prices are a big challenge and must also be addressed and is very complex.

Suggested Reading:
PurdonEtAl_2016_The_Political_Economy_of_Free_Allocation

PurdonEtAl_2014_CaliforniaQuebec_En_Final

PurdonEtAl_2014_CalifornieQuebec_Fr_Final

Purdon&Sinclair-Desgagne

HouleEtAl_2015

Diodati&Purdon_AnalyseSPEDE_1nov2016_Final_Eng

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 TO AVOID ANY CONFUSION ABOUT WHY CCL CANADA IS LEARNING MORE ABOUT CAP AND TRADE PLEASE NOTE

Citizens’ Climate Lobby Canada has been lobbying for carbon fee and dividend: a national and revenue-neutral carbon tax as written since 2010 in Canada and we will continue to do so as many politicians and supporters expect us to do so. It is simple to understand and easily has the broadest political appeal given that it is a market solution that will reduce income inequality and GHG emissions at the same time.

Lobbyists stay highly focused unless the overwhelming evidence propels them otherwise. Staying focused conserves precious time resources and thus avoids burning out our best volunteers. As well, we must be reliable to our social base that joined on for carbon fee and dividend and that we have diligently created over the years.

We are not against cap and trade and we are not against non-revenue neutral carbon pricing. We are for carbon fee and dividend: a national revenue-neutral carbon price because the planet needs an integrated carbon price of $150-$200 by 2030. Complex carbon pricing policies are probably less likely to get us there.

At the end of the day,  we want a carbon pricing policy that will effectively reduce GHG emissions while avoiding a tax revolt.

For a more detailed and nuanced discussion of the criteria for which will evaluate carbon pricing please read our Guidelines for a National Carbon Price: English or French