The “official” case for carbon pricing: weak and wanting

Ontario has swung hard away from conventional environmental thinking. The incoming government, elected June 7, has signalled it is taking Ontario out of the cap and trade system its soon-to-be-predecessor took us into, and has cancelled a slew of similarly and putatively “green” government programs. The premier-elect toured the Pickering nuclear plant and praised it as a job generator and low-cost energy provider. All this is red meat to the ENGO crowd and the beat reporters who use ENGO sources as ballast in stories that have anything to do with energy. The latter have busily reprinted the formers’ best throwaway lines on the Pickering issue (quoting Greenpeace and the Ontario Clean Air Alliance for example, in this CBC piece), and have gone to what has become a… go-to source on cap and trade, the Ecofiscal commission, a collection of academics and former bureaucrats, for some allegedly expert blowback on the new government’s attitude toward cap and trade.

The commission is apparently well funded and backed with some serious PR expertise, because its policy recommendations get tons of media play. I guess this shouldn’t be too surprising. On the issue of carbon pricing, I don’t see that the EFC offers much more than the standard fare that Canadian academics have always trotted out on climate change: safe inside-the-box recommendations that appear crafted so as to either win the approval of or (more likely) not offend the same ENGOs that the soon-to-be-former Ontario Liberal government passionately courted and that Doug Ford ignores. I struggle to find an explanation for why so many media types embrace, like limpets embrace rocks, these vapid, milquetoast, non-solutions.

I know—if what the EFC offers has a sound basis then who really cares whether it is standard fare, and who cares whether it meets or doesn’t meet ENGO approval. The problem is, the basis of what EFC offers is pretty unsound.

After the incoming premier made clear his intent to withdraw Ontario from cap and trade, the Globe and Mail published an EFC opinion piece protesting the move and asking if not carbon pricing then what.

It’s a legitimate question. The incoming premier has made no secret of his hostility to the notion of cap and trade and the federal carbon tax. It’s not a stretch to say he is hostile to the notion of carbon pricing, though he has not said that specifically.

But it’s a rhetorical question. The EFC already knows the answer. The answer is, according to them, “nothing.” And that’s where their analysis begins to circle the toilet bowl.

The EFC’s critique includes a self-referenced three-case summary of what it alleges are carbon pricing successes:

1. British Columbia’s carbon tax.
2. California’s cap and trade (the same system Ontario just quit).
3. The United Kingdom’s “hybrid” carbon tax and cap and trade.

I have touched the BC carbon tax in an article in early 2017. I was then and remain today strongly unimpressed by that measure’s results. I simply fail to see how anybody can say with a straight face that this measure—which appears to have achieved absolutely zero in the way of reducing fossil fuel usage in transportation in BC—should be the lynchpin of our CO₂ reduction campaign. I repeat the gasoline/diesel chart from my 2017 article. Have a look and ask yourself: did the BC carbon tax have an appreciable effect on the sales of gasoline and diesel?

This is the example that EFC leads off with in its defense of carbon pricing.

Is the carbon tax worth all the ink it has gotten in the press?

Canada has an ambitious CO₂ reduction target—we are on record with a commitment to chop roughly 200 million tons of the gas out of our national inventory by 2030. That’s less than 12 years from now. This is all part of a global effort to prevent global mean surface temperatures from rising beyond 2 Celsius degrees. We are supposed to be cutting transportation CO₂ by significant amounts—ten, twenty, fifty percent.

Look again at the BC chart. How big of a contribution has the carbon tax made to reducing gasoline and diesel usage in that province? BC gasoline and diesel consumption appears unchanged since the year 2000.

Moving on to California. EFC says in its Globe piece “Carbon pricing – whether a carbon tax or a cap-and-trade system – creates powerful incentives to reduce GHG emissions.”

Really? California’s cap and trade system began in 2012. The state closed the San Onofre nuclear power plant in 2015; that plant made huge amounts of power with no CO₂. You’d imagine San Onofre would be exactly the kind of thing a carbon price ought to encourage. Did the cap and trade scheme prevent this plant from getting shuttered for political reasons? The state today actively seeks to close the Diablo Canyon nuclear plant. The governor actually applauded the state regulator’s decision to close it. San Onofre and Diablo Canyon together made up 40 percent of California’s in-state zero-CO₂ generating capacity. EFC is silent on this glaring paradox, and instead repeats that cap and trade is the way to go. More important, it is silent on the actual amount of CO₂ California is supposed to have cut.

Here’s California’s 2015 grid electricity CIPK (i.e. its CIPK prior to San Onofre’s exit), compared with Germany’s and Ontario’s.

California’s CIPK is similar to Ontario’s at the height of coal. (Germany is simply a writeoff.) Why isn’t EFC touting Ontario as an example of successful climate change policy? Why is EFC saying that Ontario, which has had an undeniable success in reducing CO₂, should be copying California, whose power system CIPK resembles Ontario’s at the height of coal? Ontario’s grid electricity CIPK is far lower than those of Germany and California, and it had no cap and trade system in 2015. Ontario is obviously doing something that California and Germany are not. What’s that thing? Is it possible that that thing is more decisive when it comes to reducing grid CO₂? The answer appears to be yes. Ontario’s CIPK in 2015 was one fifth California’s and one-tenth Germany’s.

As dodgy and questionable as BC and California are as examples of carbon pricing “success,” it is EFC’s third example, the United Kingdom, that I find the most problematic. First, EFC claims that it is the hybrid nature of the UK’s approach that has brought down CO₂. The UK participates in the ETS, the European Emission Trading Scheme, which has existed since 2005 and which, given the deplorable emissions increase from the electricity generating sector of the EU’s biggest power Germany, is the best example against cap and trade. The EFC claims that because the UK has its own tiered CO₂ levy on several sectors including electricity, it has achieved deep reductions since 2000.

Well, the ETS didn’t exist until 2005 and the UK’s own levy didn’t begin until 2013. So giving carbon pricing credit for emission reductions that began in 2000 makes no sense.

The EFC includes a couple of charts intended, I guess, to drive the point home. One chart shows overall electricity generation from “traditional” sources—presumably the ones that carbon pricing would help to get rid of. Nuclear is included in these traditional sources. Their collective output decreased between 2006 and 2016. Another chart shows “renewable” sources—solar, “bioenergy,” wind, and hydro. These, especially “bioenergy” and wind, increased over the same period.

Yaaaayyyy, right? No. “Bioenergy” shows the biggest increase. It is combustible, and comes with more CO₂ than coal.

Also, the “renewables” chart is scaled to the collective output of solar, “bioenergy,” wind, and hydro. Scale it to total generation, and you’d be unimpressed.

Regardless of these graphical tricks, what is the EFC saying? It’s saying the UK CO₂ levy caused this great investment in renewable energy. But doesn’t the UK have a so-called “Renewables Obligation,” i.e., a massive subsidies program, for this kind of energy? Doesn’t the RO function as a similar incentive program to the FIT programs in Ontario and Germany? Isn’t it simply dishonest to claim that this heavily subsidized investment was actually the result of the CO₂ levy in concert with the ETS (in spite of which Germany still needed four major pieces of renewables enabling legislation, which in turn failed to prevent German power plants from dumping more CO₂ into our air in the years following 2001)?¹

It is perplexing and highly disappointing that the EFC gets the play it does, because in my view it makes an amateurish, weak case for CO₂ pricing. This is not to say I oppose CO₂ pricing or that I think Ontario’s new premier ought to avoid it. But if it does not overtly and openly support nuclear energy, the only technology capable of actually reducing CO₂, cap and trade or a carbon tax is just what I said last year: preening and posture to win approval from ENGO activists.

So, to answer EFC’s question to the new premier—if not carbon pricing then what?—here’s my answer. More nuclear power. It actually reduces CO₂. As you would know if you were paying attention to CO₂ emissions from power generation in Canada’s biggest province.

1. Of Germany’s four major pieces of RE-enabling legislation (2000, 2004, 2009, and 2012), two were enacted after the ETS. This suggests that the ETS did not spur a wholesale replacement of fossil fuels in electricity generation, as cap and trade proponents predict. It is a striking indictment of those who tout cap and trade and “green” energy that a major cap and trade system together with the equivalent of four Ontario-style Green Energy Acts failed to make a dent in German electricity generation pollution emissions.