A week ago the Houston government submitted to Ottawa an alternative proposal to the federal government’s plan to price carbon by means of a carbon tax.
Larry Hughes is a professor in the electrical and computer engineering department at Dalhousie University as well as Dal’s School for Resource and Environmental Studies. He has read the 13-page letter Premier Tim Houston wrote the federal government asking for a tax exemption. Hughes agreed to offer the Halifax Examiner his observations on the province’s position.
But before we go there, here’s a quick sketch of how we got here.
To meet its global obligations to fight climate change, Ottawa will gradually increase the price on a tonne of carbon from $50 to $170 by 2030. For the past four years, Nova Scotians have been exempted from the tax, which added about 11 cents a litre to the price of gasoline in most other provinces.
Instead of the carbon tax, the previous Liberal government successfully negotiated with Ottawa to reduce carbon emissions through a cap-and-trade arrangement which allowed polluters that exceeded their cap on emissions to purchase carbon “credits” from companies which produced emissions below their limit. Experts suggest that system was not likely to be sustainable in the long term, and it will end next year.
The new Houston proposal asks Ottawa to continue to exempt Nova Scotians from paying a carbon tax on the grounds it would be “punitive” because we are already paying higher power rates, and will soon be paying even higher rates, to recover the cost of shuttering coal-fired plants and building or buying more wind and hydro. Nova Scotia Power accounts for 40% of the province’s GHG emissions.
Houston’s letter estimates paying the carbon tax would cost the average homeowner between $1500 and $3,100 annually by 2030, depending on the size of the rebate cheque the homeowner receives from Ottawa. The made-in-Nova-Scotia alternative is estimated to cost homeowners about $488 a year.
Here are Hughes’ conclusions after reading the Houston letter and after having researched and written a report in 2021 called “An Analysis of Greenhouse Gas Emissions Reductions Targets in Nova Scotia’s Environmental Goals and Sustainable Prosperity Act,” an Act the PC government updated and re-named last fall.
Hughes Summary: “While a home-grown approach can be designed to protect Nova Scotians (as the province’s cap-and-trade program was intended to do), it is not necessarily the most effective method, for example:
- If Nova Scotia Power does not supply 80% of its power from renewable sources, the province will most likely fall short of its 2030 target. This would require other sectors to reduce their emissions, something for which the province is ill-prepared.
- By avoiding the carbon price, Nova Scotians are protected only until it is imposed on them. The province’s argument that this is not the right time to have a 14-cent increase in the price of gasoline is a consequence of Nova Scotia’s carbon price not being nearly as stringent as the federal price over the past four years.
- How the province intends to deal with emissions in the transportation and building sectors after 2030 is unclear as their 2050 net-zero plan has yet to be released.
- The province’s proposal does not appear to address the Premier’s plan to double the province’s population over the next 30 years”.
It is undoubtedly unpalatable to be responsible for an increase in the cost of energy; however, the federal carbon pricing system has been reworked so that it reduces the impact to those on low-income by issuing quarterly rebates and encourages behavioural change in those who can afford to make the changes.
The province should look carefully at the federal carbon pricing system, note its faults, and develop a made-in-Nova-Scotia program using evidence-based data. Ideally, the province can develop a carbon pricing system that meets both Nova Scotia’s and the federal government’s commitments to reducing greenhouse gas emissions.
The deadline to send Ottawa alternative proposals is next week, Sept. 1, and although the Nova Scotia submission has been received, there may be room for further negotiation.
On the issue of whether the federal carbon tax will cost Nova Scotians as much as the Houston government claims, Hughes says he hasn’t seen enough information to make a valid comment. However, the report on GHG Emission Targets Hughes prepared in 2021 supports the province’s argument it is en route to achieving a 53% reduction in carbon emissions by transforming the electricity sector. And that the work is well underway, with emissions down by 36% since 2005.
How realistic are Nova Scotia’s emission targets?
The Houston government argues Nova Scotia’s proposal is “better than a carbon tax” because our legislated targets to reduce carbon emissions go further than what Ottawa is requiring. Ottawa is demanding GHG reductions in the range of 40-45% by 2030 and Nova Scotia’s goal is 53%.
In his analysis of the Nova Scotia alternative to the federal carbon tax, Hughes notes that while having ambitious legislated emissions targets is a strong argument, it remains to be seen if the province can convince Ottawa it will be able to meet them. As one example, Hughes discusses this claim by the Houston government in its proposal to Ottawa:
At present, Nova Scotia’s electricity mix is expected to be over 40% renewable energy and by the end of the year.
Expected, maybe, but at present it appears that this goal (part of the Electricity Act regulations for 2020) will not be met in 2022. The reasons for this are problems with Muskrat Falls and the Labrador Island Link, bringing renewable electricity from the Muskrat Falls hydroelectric station to Labrador.
Hughes quotes further from Nova Scotia’s letter to Ottawa:
By 2025-2026, Nova Scotia will reach an energy mix of 75% renewable. With more wind coming online, Nova Scotia will reach its 80% renewable target by 2030 through a combination of Maritime Link, wind, hydro, solar and biomass.
Five of the eight remaining coal plants can be closed by the energy supply options described in Appendix “A,” combined with capacity from the new batteries, an expanded Nova Scotia-New Brunswick intertie and two coal-to-gas plant conversions. The remaining three coal units can be replaced by firm capacity which can flow from multiple sources: the Atlantic Loop, off-shore wind and hydrogen, new gas turbines, more Smart Demand Response and Green Button systems as well as longer-duration Batteries and Storage.
The letter does not elaborate on the likelihood and efficacy of any of these technologies, although the final paragraph in this section calls for more federal money and clarity on the Atlantic Loop.
Hughes notes that the day before the release of the Nova Scotia alternative to the carbon tax, the province announced the awarding of five major contracts to build large wind projects that will add another 10% of renewable energy (about 370 MW) to the grid by 2025.
Is Nova Scotia a “leader”?
Here’s the claim by Nova Scotia in its letter to Ottawa. On paper, it does appear to be accurate.
Nova Scotia is a leader in GHG reductions. In 2020, the province’s emissions were 36.4% below 2005 levels, making Nova Scotia one of the national leaders in GHG reductions (second largest reduction among all provinces).
Hughes agrees that in 2020, Nova Scotia’s emissions were 36.5% below 2005 levels. But Hughes goes on to say:
…to claim that Nova Scotia was one of the national leaders in GHG reductions is misleading: first, it masks a number of other indicators affecting emissions, notably changes in GDP, energy demand, and population; and second, results for 2020 are not indicative of long-term changes because 2020 was the first year of the pandemic.
To support his position, Hughes created the table below using data he gathered from several Statistics Canada reports as well as Canada’s National Inventory Report on GHG emissions. The table shows the change in these indicators (emissions, GDP, Energy demand, and population) among the provinces from 2005 to 2019 and 2005 to 2020.
Hughes notes that while most of Nova Scotia’s 36% decline in carbon emissions is due to changes in how electricity is produced, “a significant part is due to closing and shuttering of petroleum refining, offshore gas extraction, and coal mining.”
He notes that Nova Scotia had the fourth lowest GDP growth in 2020 and the demand for energy has been dropping due to industrial closures (Northern Pulp was a big one in 2020) as well as a 2020 decline in transportation (fewer trips taken during the first year of the pandemic).
If Ottawa accepts the Nova Scotia proposal, Hughes agrees with provincial data that shows there won’t be large reductions in emissions related to heating buildings or driving vehicles. But he suggests delaying the imposition of a price on carbon merely “delays the inevitable” when it comes to cutting emissions in these areas.
One takeaway from the work done by Larry Hughes is that while the province appears to be on the right track when it comes to reducing the carbon footprint of the electricity sector, hitting those targets will be no slamdunk and may require further amnesty or assistance from Ottawa.