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North America Should Lead the
Way Toward a Worldwide
Harmonized Carbon Price
Notes for an address by the Honourable Stéphane Dion at The NAFTA
Promise and the North American Reality: The Gap and How to Narrow
It, a joint conference between the American University School of
International Service Center for North American Studies (CNAS) and
Tufts University Fletcher School of International Affairs Institutions,
Law and Security Center (ILSC)
Washington, D.C.
November 1, 2013
TheHonourable Stéphane Dion,
Privy Council of Canada and Member of Parliament for St-Laurent / Cartierville
House of Commons of Canada
Email: stephane.dion@parl.gc.ca
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The question asked of Panel 3, Energy and the Environment, is:How to reconcile North
America’s interests in energy security and the challenge of the climate change crisis? It is
my conviction that carbon pricing is an essential part of the answer; otherwise, solutions
such as renewable energy will continue to develop at too slow a pace to curtail serious
climate disruption.
During the 2008 Canadian federal election campaign, while I was Leader of the Liberal
Party of Canada, our main party's proposals was to set a price for carbon emissions via a
carbon tax and to use the resulting revenues to reduce personal and business income
taxes. While many economists and most environmentalists supported the fundamentals
of this tax reform, I was unable to convince Canadians of the merits of the plan, nor to
counter the Conservative Party’s effective campaign against what they portrayed as a
“tax on everything.”
If the Liberals had won in 2008, 75% of Canada’s GHG emissions would have been
taxed, to the tune of up to $10 per tonne of CO2 in 2009, gradually rising to $40 in 2012.
This green fiscal reform would have led to substantial cuts in personal and business
income taxes, and to enhanced tax benefits for clean technologies, processes, practices,
and activities that reduce GHG emissions. Many studies, including those made by the
MIT and the OECD, indicate that “this combination of a carbon tax with general tax cuts
improves overall economic performance” and promotes employment growth.1
That carbon pricing policy would have shown that Canada was serious about fulfilling its
climate responsibilities, and in so doing, would have protected our resource industries
and economy from protests and boycotts such as those organized against the oil sands
in Europe and the U.S.It is likely that today, Canada would be universally perceived as a
champion of the fight against climate change, and nobody would even think to block
Canadian goods at the border in retaliation for climate inaction.
Yes, the high carbon footprint of Alberta oil sands extraction would have remained a
challenge. But it is likely that with a carbon tax matched with lower corporate taxes and
green tax incentives, added to Alberta’s current Specified Gas Emitters Regulation, the
industry would have substantially increased its investments in low-carbon practices and
technologiesin order to decrease its carbon tax burden. As the leaders of the oil sands
industry themselves said, there is little incentive for industry to nvest in the development
and deployment of low-carbon technologies if there is no price on carbon.2 These
1
Raush, S., & Reilly, J., Carbon Tax Revenue and the Budget Deficit: A Win-Win-Win Solution? MIT Joint
Program on the Science and Policy of Global Change, Cambridge, MA, Report no. 228, August 2012, P.
17(retrieved from:http://globalchange.mit.edu/files/document/MITJPSPGC_Rpt228.pdf); also: Chateau, J.,
Saint-Martin, A., & Manfredi, T., Employment impacts of climate change mitigation policies in OECD: A
general equilibrium perspective OECD Environment Working Paper no. 32, OECD Publishing, Paris,
December 2011 (retrieved from:http://dx.doi.org/10.1787/5kg0ps847h8q-en).
2
Shawn McCarthy: "President of Royal Dutch Shell Canadian division urges carbon price", The Globe and
Mail, September 11, 2012 (retrieved from:
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meaningful investments in energy-saving and emission-reducing practices would have
been beneficial for Alberta’s economic growth, job market and trade opportunities.
Instead, look what we have today: theKeystone XL pipeline saga, an unfortunate debate
in terms of economic growth and job creation, energy security(since Canada is the most
secure source of US energy imports) and environmental protection. If the American
economy needs Canadian oil, it will import it, pipeline or no pipeline. According to the US
Energy Information Administration, Canadian crude oil imports have increased between
2008 and 2012, without the Keynote XL pipeline. Canadian oil finds its way to the US
anyway – by rail, truck and barge – at a higher risk of accidents and environmental
damages than if there was a pipeline.3
We are told that Prime Minister Harper wrote President Obama to propose joint action to
reduce greenhouse gas emissions in the oil and gas sector. Should President Obama
play along and enter into negotiations to approve Keystone in exchange of a joint GHG
reduction plan? That would be an excellent test of Mr. Harper’s seriousness about
reducing emissions.4 The US Environmental Protection Agency itself recommends that
the US and Canada join their focus on carbon capture and storage research and
projects, energy efficiency measures and cleaner extraction practices and technologies.
And why not invite our Mexican partners to join an initiative that has high potential to
enhance our continent’s energy security and climate policies?
A NAFTA climate and energy policy would be a good thing, but in and by itself, not good
enough to allow us to deal effectively with the climate change crisis. It is not only North
America that is warming up; it is the whole planet. Accordingly, what we need is a
worldwide global agreement, because worldwide GHG emissions are increasing much
faster than expected.
Despite existing policies and regulations limiting fossil fuel use, it is now clear that the
current global trends point to a breach of the 2 degree Celsius limit established by the
scientific community as the global warming tipping point beyond which there will be very
serious impacts on the natural environment and man-made infrastructures. According to
the international Energy Outlook 2013, world energy consumption will grow by 56%
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/president-ofroyal-dutch-shell-canadian-division-urges-carbon-price/article4534929/); also: Van Loon, J., &Mayeda, A.,
"PM wrong to fight carbon tax, industry: Oil companies see advantages in greenhouse-gas levy",
Edmonton Journal, February 2, 2013 (retrieved
from:http://www2.canada.com/edmontonjournal/news/business/story.html?id=08ac9937-f602-43c8-9d5a2c0ba761e023).
3
John Miller, “Benefits of Blocking the Keystone XL Pipeline: Facts or Myths?”, The energy Collective,
September 10, 2013 (retrieved from : http://theenergycollective.com/jemillerep/270736/benefits-blockingkeystone-xl-pipeline-facts-or-myths ).
4
Geoffrey Styles,“Would An Emissions Deal Break the Keystone XL Deadlock?”,GSW Strategy Group,
September 26, 2013 (retrieved from : http://energyoutlook.blogspot.ca/2013/09/would-emissions-dealbreak-keystone-xl.html ).
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between 2010 and 2040, with fossil fuels continuing to supply almost 80% of world
energy use. Meanwhile, worldwide energy-related carbon dioxide emissions, far from
regressing as they should, will increase by 46%.
The world will not be able to reverse this trend without a global climate agreement.
Governments and businesses in United-States, Mexico, Canada and the world are very
unlikely to step up their greening efforts to an adequate level if they have no assurance
that their competitors will play by the same climate rules. Only an international
agreement can give them that assurance.
What I am suggesting, along with many others, is that an international strategy against
global warming must be based on a world carbon price – not as a stand-alone policy but
as a cost-effective, universal anchor. This is essential to the success of any serious,
comprehensive climate plan.5
I propose that the United States – the world’s largest oil-and-gas consumer and
producer and largest contributor of cumulative GHG emissions–take the lead, in
cooperation with its North American partners, in a concerted effort to redirect
international climate negotiations towards the establishment of a much-needed
universal, harmonized carbon price.
The plan would be for all countries to commit to introduce, in their respective
jurisdictions and through a negotiated price signal trajectory, a carbon price
aligned with a scientifically-validated international standard, in order for the world
to keep global warming to as close as possible to 2º C over pre-industrial era
levels – the limit accepted for itself by the international community at the 2010
Cancun Conference. Countries may levy this price through carbon taxes or
emission quotas. Governments would be free to invest, as they see fit, any
revenues accruing from carbon emission levies and the corresponding – and
necessary – gradual elimination of fossil energy subsidies.
Developed countries would be required to set aside part of their revenues to help
developing countries design and implement policies to lower their emissions,
adapt to climate change impacts and create carbon sinks (through reforestation, for
example). This requirement would help fund the yet unsourced $100 billion annual
injection into the Green Climate Fund, which developed countries agreed to
provide beginning in 2020.
The proposed global carbon price would provide the world with an excellent instrument
for sustainable development. Everybody would have an incentive to choose lower5
Stéphane Dion and Éloi Laurent, "From Rio to Rio: A Global Carbon Price Signal to Escape the Great
Climate Inconsistency", OFCE, Paris, May 2012 (retrieved from:http://www.ofce.sciencespo.fr/pdf/dtravail/WP2012-16.pdf).
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carbon-content goods and services and invest in new energy-saving and pollutionreducing technologies. And governments and legislators would finally have an effective
tool to meet the scientific target they would have rightly endorsed.
Is this plan realistic? Believe me, I am not naïve. After the rebuke my party suffered in
the 2008 Canadian Federal election, I am not one to underestimate the political obstacles
any government will face when trying to implement an economy-wide price on GHG
emissions. I am well aware that here in the US, part of the Congress, backed by a
majority of Americans,6i s opposed to President Obama’s current initiatives to regulate
GHG emissions through the Environmental Protection Agency.
So I understand why some will call my plan unrealistic. Yet, if anybody has a better idea
to avoid the astronomical economic, human and environmental costs of a 3 degree
Celsius global warming spell, let them speak up! True realism – and plain common sense
– dictate that as long as we are allowed to pollute for free, we will be unable to curb our
GHG emissions sufficiently.
We need worldwide carbon pricing in order to do what must be done to make the world's
economy truly sustainable. We need harmonized carbon pricing as an incentive to
replace coal with cleaner and renewable energy sources or at least to equip coal power
plants with effective carbon capture and storage technology; to enhance energy
efficiency; to develop affordable alternatives to petroleum-based fuels; to implement a
major retooling of transportation industries and a massive conversion of on-road vehicle
refueling infrastructures; to reduce high risk oil imports and increase energy security.
So what choice do we have, to protect humankind against a looming 3 degree Celsius
warming? Pursue our current initiatives – not without merit but definitively not good
enough? Let people continue deluding themselves in thinking that blocking a pipeline will
make a discernible difference in the fight against global warming? I suggest our best and
soundest choice, as denizens of a continent so gifted in natural resources and
technological knowhow, is to champion this much needed tool for an effective and
comprehensive climate and energy policy: a worldwide, harmonized carbon price.
6
United Technologies/National Journal Congressional Connection Poll, July 2013.