Laser Talk: Complementary Policies to Carbon Pricing

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 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:

  • 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 possibly complement carbon pricing, the following policies are supported by Pembina Institute and Deep Decarbonization Pathways and incorporated in the Pan-Canadian Framework:

  • a coal power phase out;
  • clean energy standards, including a low-carbon transportation fuel standard;
  • percentage targets for vehicle manufacturers’ sales of electric vehicles(EVs); and
  • standards for energy efficient buildings.

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

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.

Here is an informative infographic from Canada’s Ecofiscal Commision:

 

Source: https://ecofiscal.ca/reports/supporting-carbon-pricing-complementary-policies/infographic/#&gid=1&pid=1

 

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