Carbon Pricing and the Three Amigos Summit

Synchronize National Carbon Pricing Policies Under NAFTA with Carbon Fee and Dividend

Media Release: June 27, 2016, Contact: cathy@citizensclimatelobby.org or 705-929-4043

Sudbury, ON:  Earlier this month, Canada’s Finance Minister, the Honourable Bill Morneau, declared that a national carbon tax is the most economically efficient way to drive emissions reductions. Citizens’ Climate Lobby (CCL) agrees with Minister Morneau and we insist that when Canadian Prime Minister Justin Trudeau, U.S. President Barack Obama and Mexican President Enrique Pena Nieto meet this week in Ottawa that they will discuss carbon pricing policies and how carbon pricing can be synchronized under NAFTA.

Canadians may be surprised to learn that of the “Three Amigos”, Canada submitted the weakest carbon emissions reduction target at the climate negotiations in Paris. Canada is also facing a significant gap between emissions reductions from the inadequate climate policies they inherited from the Harper government and what is actually needed to reduce emissions by 30 per cent below 2005 levels by 2030. As well, the Trudeau government has pledged under the Paris Accord to improve on that target. Canada’s Parliamentary Budget Office says we need a price of $100/tonne by 2030 just to meet our inadequate Paris commitments, and will have to raise it further after that. (page 25)

Mexico already has a national carbon price but it gives preference to natural gas over oil. Canada and the U.S. only price carbon at the sub-national level, and the provinces and states do not all use the same mechanism. There are also many provinces and states that do not yet have a carbon price.

Border tax adjustments can only be negotiated by national governments and they are necessary to prevent competitive pressures on domestic businesses and leakage of carbon emissions to other jurisdictions. The North American Free Trade Agreement (NAFTA) may provide the Three Amigos the protection they need to enact national carbon taxes so as to encourage investment in clean tech businesses while reducing carbon emissions at the same time.

Under NAFTA Article 604: “parties are allowed to maintain duties, taxes or other charges on the export of any energy or basic petrochemical good to the territory of another Party if the duty, tax or other charge applies to the exports of any such good to the territory of all other Parties and any such good when destined for domestic consumption.” As well, the North American Agreement on Environmental Cooperation which was negotiated under NAFTA also allows for the highest level of environmental protection.

Many business persons want national carbon pricing to make it easier to comply with comparable in-country standards. According to Catherine McKenna, Canada’s Environment and Climate Change Minister, they have repeatedly told her, “Please put a price on carbon.” It is understandable that they  want a clear market signal via a carbon price given that Canada is number one in the world – losing 41% our market share of clean tech business globally since 2008. President Obama also supports pricing carbon emissions, “I have long believed that the most elegant way to drive innovation and to reduce carbon emissions is to put a price on it.”

CCL urges the Three Amigos to consider using a pricing mechanism that puts a price on carbon transparently as well as quickly, and to raise it steadily so that emissions go down significantly and fosters growth in clean tech businesses –  Carbon Fee & Dividend. Carbon Fee and Dividend also provides a way to protect the poor and the middle class from price shocks as we transition to a low-carbon economy.
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