Authors present ideas for reducing greenhouse gas emissions in a way that leverages new technology, mitigates the economic damage to low income earners and disproportionately affected industries, and avoids throwing money at costly 'green' initiatives.
OTTAWA, Feb. 5, 2016 – Canada’s new federal government has rightly identified combating climate change as a priority. Now the hard work – of identifying and implementing policies that manage the risks of climate change without harming the economy – begins.
The Macdonald-Laurier Institute, in a new commentary paper, offers Ottawa practical advice for achieving its climate change goals.
MLI Senior Fellow Sean Speer and University of Guelph economics professor Douglas Auld urge the government to take an honest assessment of the economic costs of pricing carbon. Nearly every aspect of the industrial economy produces carbon dioxide and reducing the flow of emissions will hurt economic growth in the short-term.
This should not be used as an excuse for inaction. It means that we need a smart plan.
“The question, then, is not whether the government ought to take steps to mitigate climate change in the immediate- and long-term but rather which policies are likely to limit global warming’s negative effects at the lowest cost in terms of economic growth,” write the authors.
The issue should be top of mind at an upcoming first ministers meeting between the prime minister and the premiers to set a new climate change policy for Canada.
How should they plan to tackle it? Speer and Auld offer several recommendations.
Use technological innovation – but make it “bottom-up”
Technological innovation holds a great deal of promise for combating climate change. But governments have traditionally fared poorly in designing or investing in innovation.
The authors urge Ottawa to consider policies that enable bottom-up, market-driven technological innovation to mitigate and adapt to the risks posed by climate change.
Low taxes, intellectual property laws that ensure creators can benefit from innovation and high-quality infrastructure are all measures the government should take to foster “the next big idea to address climate change” among Canadian businesses and universities.
Allowing different provinces to design climate change policies that work for them holds a lot of advantages. It would, for example, enable provinces and territories that produce more carbon to design their policies accordingly.
This “patchwork” arrangement holds real limitations, however: Different policies in different jurisdictions could act as a barrier to trade between provinces and territories, which will have to be managed by the federal government.
Resist the urge to tax grab
Want to tax carbon? Carbon pricing is less costly than reducing greenhouse gasses by regulation, but it’s still going to have a negative effect on businesses and consumers. That’s why, if the government ultimately goes this route, it should offset this higher cost with a corresponding cut in taxes.
Otherwise it will be difficult to combat the notion that “fighting climate change” is code for “hiking your taxes to help out cash-strapped governments”.
Use trial and error
The fight against climate change is an endeavour largely unparalleled in history. It’s unreasonable to expect that anyone will immediately have all the answers.
That’s why Speer and Auld say the government should adopt an attitude of humbleness and rely on trial and error in designing its policies.
“If there was ever an issue that is not well-suited for simplistic solutions, it is this one”, they write. “Government should neither be dismissive of climate change nor reckless in its response to the risk that it poses”.
This paper is the seventh entry in MLI’s series, From A Mandate For Change To A Plan To Govern.
The series, which is publishing weekly from the Throne Speech to the first budget this spring, is designed to offer practical policy recommendations that help the newly-elected government follow through on its election promises.
Douglas Auld is a professor of economics at the University of Guelph.
Sean Speer is a Senior Fellow at the Macdonald-Laurier Institute. He previously served in different roles for the federal government including as senior economic adviser to the Prime Minister and director of policy to the Minister of Finance.
The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government.
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