Laser Talk: Complementary Policies to Carbon Pricing

Posted on February 22, 2018 in Laser Talk

Laser Talk: Complementary Policies to Carbon Pricing

Carbon pricing is widely accepted as the most cost-effective way to reduce greenhouse gas (GHG) emissions. However, where a

Carbon pricing is widely accepted as the most cost-effective way to reduce greenhouse gas (GHG) emissions. However, where a well-designed carbon price falls short on regulating GHGs, complementary policies can be considered.

For example, Canada’s Ecofiscal Commission identifies three specific areas of our economy where complementary policies may be warranted:^[1]

where emissions from small, distributed, non-point sources are challenging to measure, e.g. methane from agriculture;
where consumers are not responsive to price increases due to lack of information (e.g. pay off for home retrofitting) or lack of alternatives (e.g. electric car availability); and
where other benefits will be significant (e.g. health benefits of a coal phase-out).

To complement carbon pricing, the following policies are supported by Pembina Institute^[2] and/or Deep Decarbonization Pathways^[3] and incorporated in the Pan-Canadian Framework:^[4]

a coal power phase-out;
clean energy standards, including a low-carbon transportation fuel standard;
increasingly stringent sales targets for vehicle manufacturers’ sales of electric vehicles (EV) with separate targets for passenger cars, light duty trucks and heavy duty trucks;
standards for making new buildings more energy efficient and for retrofitting existing buildings;
new federal energy efficiency standards for appliances and equipment.

Even when there appears to be a clear rationale for a complimentary policy, however, it is only worth proceeding if the policy is well designed and cost-effective. For example, the Ecofiscal analysis found subsidies for EVs in Quebec were costly and had little effect on demand, whereas regulated quotas for EV sales were much less costly and more effective.^[5]

The bottom line is that carbon pricing must be at the heart of any climate action plan, with additional GHG regulations implemented if they meet specific criteria that demonstrate complementarity.

REFERENCES

^[1] “Supporting Carbon Pricing: Identifying complementary climate policies.” https://ecofiscal.ca/reports/supporting-carbon-pricing-complementary-policies/. Accessed 28 Jun. 2019.

^[2] “Report Download PDF – Pembina Institute.” 2 Sep. 2016, https://www.pembina.org/reports/race-to-the-front-english.pdf. Accessed 8 Aug. 2019.

^[3] “Pathways to deep decarbonization in Canada.” http://deepdecarbonization.org/wp-content/uploads/2015/09/DDPP_CAN.pdf. Accessed 8 Aug. 2019.

^[4] “on Clean Growth and Climate Change – Canada.ca.” 9 Dec. 2016, https://www.canada.ca/content/dam/themes/environment/documents/weather1/20161209-1-en.pdf. Accessed 8 Aug. 2019.

^[5] “Supporting Carbon Pricing: Identifying complementary climate policies.” https://ecofiscal.ca/reports/supporting-carbon-pricing-complementary-policies/. Accessed 28 Jun. 2019.