Pricing carbon emissionsThe problem: It's free to pollute
Many environmentalists and economists agree that putting a price on greenhouse gas emissions is one of the most powerful tools we have in the fight against climate change. That's because pricing carbon pollution addresses one of the fundamental problems in Canada: there are currently no limits to the amount of pollution that can be spewed into the atmosphere and there are no costs associated with this pollution.
Just as we pay a fee to throw our garbage into the landfill, connecting a cost to pollute the atmosphere creates an incentive to avoid polluting and spurs innovation in cleaner technology.
The two most commonly discussed methods of pricing carbon are a carbon tax and cap-and-trade approach. Both approaches, if well-designed, are among the most powerful incentives governments have to encourage companies and households to pollute less and invest in cleaner choices. Although both these tools make polluting activities more expensive, they make green technologies more affordable.
Carbon pricing through a carbon tax or cap-and-trade system can improve fairness since it is based on the "polluter-pay principle", where individuals and companies are faced with the full social costs of their actions
Benefits of putting a strong price signal on carbon pollution
Fight climate change
By putting a strong price on carbon through a carbon tax or a shrinking cap on emissions, governments can save lives and protect communities from the threat of climate change, including extreme weather events like flooding and intense drought. This action can also transform Canada's industrial facilities into leaders in energy-efficiency and cutting-edge clean technologies. This is critical because about half of Canada's greenhouse gas emissions come from industry sources.
Save lives with cleaner air
Action to reduce fossil fuel pollution will also reduce smog, save lives and reduce the risk of disease such as asthma. The Canadian Medical Association estimated that in 2008 Canada's air pollution was responsible for 21,000 premature deaths, 92,000 emergency room visits and 620,000 visits to a doctor's office. Today, between 15 and 20 per cent of Canadian children suffer from asthma.
Create thousands of jobs in clean energy
Lastly, our federal and provincial governments could position Canada at the forefront of the clean-energy economy, one of the fastest-growing industries in the world, with an annual growth rate of 30 per cent during the past decade. This global trend offers an exciting opportunity for Canada to be the "build it" nation when it comes to solutions to global warming versus being the "buy it" nation of clean technologies if action is delayed.
Fuelled by rising demand for clean, secure energy sources, investment in clean energy technologies totalled $243 billion worldwide in 2010. The clean-energy sector has also been one of the most resilient during the recent global recession as countries around the world have pursued low-carbon infrastructure and clean energy as a primary strategy for economic recovery.
Many Canadian business leaders are in favour of carbon pricing, as it offers a flexible and least-cost approach to reducing greenhouse gas emissions. A carbon tax and/or cap-and-trade system can encourage rapid cost-effective investments to reduce emissions, through actions such as investing in a green technology or changing behaviours or business practices.
Carbon pricing is crucial but must be supported by other solutionsPricing carbon emissions forms the foundation of any effective government strategy to reduce global warming emissions, but it must be supported by other solutions. A credible climate action plan must also include energy-efficiency standards for buildings and vehicles, financial incentives for home-energy improvements and renewable energy, and investments in public transit. These solutions are essential to get clean, renewable energy and sustainable transportation technologies into use in Canada.
It's also important to ensure that a carbon-pricing system is fair to low-income households, which are at risk of being disproportionately affected because a larger share of their incomes goes toward energy bills. However, a well-designed carbon-pricing approach can protect low-income families by recycling a portion of the revenues back to low-income households.