Nova Scotia continues to resist a sales pitch from Ottawa to sign on to its system for reducing emissions starting in January 2019.
That resistance comes despite a warning different carbon pricing regimes within Atlantic Canada could drive up administrative costs for companies such as Irving Oil, Wilson Fuels, Northern Pulp, and Lafarge Cement. Those are among 20 companies that emit more than 50,000 tonnes of carbon a year in Nova Scotia; many of the companies also do business in New Brunswick, which is adopting Ottawa’s paperwork and carbon pricing system.
Under the federal plan, big polluters that pay the full price per tonne of carbon emissions will get 70 per cent of their cost back from Ottawa. That will still lead to higher prices on gasoline and electricity for consumers, but those increases will be offset in New Brunswick and Alberta with cuts in other taxes and through rebates.
The McNeil government in Nova Scotia has chosen an alternative “cap and trade” system modelled after Ontario and Quebec that caps the total amount of greenhouse gas emissions from the biggest polluters. The companies are then handed free credits or allowances to keep them from passing along those cost increases to consumers and keeps industry from moving to countries like the U.S. where there is no price on carbon.
Both PEI and Newfoundland and Labrador have yet to decide which carbon pricing system they will choose. Each province must submit a plan for reducing carbon emissions to Ottawa by this September 1, and if it falls short, the federal government will impose its system known as the “backstop.”
Last week the Atlantic Provinces Economic Council hosted a webinar on carbon pricing for business leaders and government officials because there is still plenty of fuzz and uncertainty over how different carbon pricing systems will operate. Dale Beugin, an economist and executive director of Canada’s EcoFiscal Commission, says without a carbon tax, emissions in British Columbia would have been five to 15 per cent higher than they were 10 years ago. “Economists aren’t crazy,” he says. “Prices do affect behaviour.”
“The devil is in the details,” Beugin says about the daunting task of comparing one regime to another. And a lot of those details — including how much of a subsidy electricity producers such as Nova Scotia Power and New Brunswick Power would receive from Ottawa under its system — are still being thrashed out, but it’s certain that the utility subsidy will be less than 70 per cent.
“It’s difficult to compare and say one plan will have less of an impact than others because the feds are still working on the details of their system and we are still working on the details of our system,” said Jason Hollett, executive director for climate change within Nova Scotia’s Department of Environment. That said, Environment Minister Iain Rankin told the Examiner the province has no intention of taking Ottawa up on its invitation.
“The cap-and-trade system has worked in other jurisdictions and it is the lowest cost based on our analysis,” said Rankin. “When we look at the impact of the federal system, the impact on fuels is significant.”
Rankin says no cap or limit can be set on emissions until the province receives reports due next month from heating oil, gasoline, and fuel distributors. Federal legislation now requires these companies to track their carbon emissions. The transportation sector contributes 27 per cent of total emissions; NS Power accounts for 40 per cent. The power company will get a better deal under the made-in-Nova Scotia policy than whatever the federal subsidy turns out to be.
“The cap will be beyond what is business-as-usual,” said Rankin. “I can’t really speculate on the specific number of tonnes that will be reduced other than to say it will be further than we would see without a cap-and-trade system.”
That’s, well, murky.
“There is still time to develop a system which could be regionally coordinated,” said webinar presenter John Moffet, associate assistant deputy minister for Environment & Climate Change in Ottawa. “There would be significant support [for a regional plan] from Ottawa because it would likely be a more efficient system that would last over time and attract new investment.”
That’s a reference to concerns expressed by Moffet and acknowledged by Nova Scotia that companies such as Northern Pulp and Heritage Gas that will receive credits from the province could see their compliance costs rise significantly if they are forced to share them with a company moving to Nova Scotia that also has a large carbon footprint — for example, the massive LNG plant for Guysborough County still under active consideration by Pieridae Energy based in Calgary.
“Our Legislation allows flexibility,” replies Environment Minister Rankin. “There are opportunities for us to link with other Provinces (Ontario and Quebec) to increase the amount of allowances available if a new carbon intensive industry moves into the province. We have options there as well as options to auction a portion of credits although our intention is to distribute them freely to industry.”
“A cap-and-trade system limits the total amount of GHG emissions which decline over time,” notes Hollett. “Under the federal plan for industry, emissions can actually go up if you have new players or they emit more because it is an intensity-based standard and not an absolute cap.”
A round of consultation with the 20 companies that will be affected by the new carbon pricing system in this province has yet to be scheduled. The Environment Minister is still saying “late spring” which could mean the middle of June. Sounds as if a lot of work and key decisions have yet to be made to hit the September deadline.