Bending the Curve: Alberta’s Tectonic Shift in Climate Policy

George Hoberg
November 22, 2015

Rachel Notley’s Government of Alberta made history today by transforming her province from a renegade to a leader on climate policy. The province announced today that it will introduce a $30 per tonne economy wide carbon pricing (starting at $20 per tonne in 2017 and increasing to $30 in 2018). It will also cap carbon emissions from oil sands facilities at 100 million tonnes, compared to about 70 million today. That is designed to allow for growth from the facilities currently under construction. The province will also phase out coal use for electricity by 2030, and require 30% of its electricity to be generated by renewables by 2030.

These changes are monumental. While the details of the carbon price will need to be analyzed, its $30 level matches BC’s current carbon price, the highest in Canada. The cap and trade regime being operated by Quebec and California currently has a price of about $16 per tonne (although that price is likely to increase somewhat by 2018).

The overall emissions cap is also important, signalling a limit on the growth the oil sands impact on our climate. It does not cap oil sands production, but increased production beyond the level of those facilities under construction will only be able to occur if innovation drives down carbon intensity of oil sands significantly.

These changes fundamentally alter the politics of Canada. It will make it much easier for Canada to become a constructive player in global climate policy. The meeting tomorrow between Trudeau and the premiers can be much more productive with this bold move by Alberta in advance. If other provinces want to claim the mantle of climate leadership, they are going to have to step up their game, creating the potential for a “race to the top” in Canadian environmental policy. It will contribute, as Notley stated, to “a significant de-escalation worldwide of Alberta’s oil sands.”

These changes are testimony to two fundamental political changes. The first is a concerted resistance movement to new oil sands transportation infrastructure in both Canada and the United States.  While there are many sources of this resistance, to many anti-pipeline activists, resistance has always been first and foremost about forcing climate policy change. Notley referred to this indirectly when she described Obama’s denial of the Keystone XL pipeline application as a “kick in the teeth”. The second dramatic political shift is Notley herself, beaming from the podium. Her May 2015 election brought decades of Conservative rule to an end, allowing this tectonic shift, a reminder that elections matter more than anything else.

There’s a lot more work to be done. Remember that we need to completely decarbonize the energy system by mid-century. But today is a day for celebration. Alberta has bent its carbon emissions curve, and provided a lever to Canada to show real climate leadership.

Here’s the Panel’s Climate Leadership report.

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Game over for Keystone KXL: How environmentalists created Obama’s new climate test

George Hoberg
November 6, 2015

Environmentalists protesting Keystone XL at White House

Obama’s decision today to reject the Keystone XL pipeline brings a seven year saga to a close (well, except for the lawsuits). It is an extraordinary victory for the climate movement, but in this post I wanted to focus on the narrower issue of the rationale for today’s decision. It is extraordinary in how it vindicates the symbolic power of the pipeline.

US environmentalists transformed the Keystone XL decision into a test of climate leadership.’s Bill McKibben, echoing climate scientist James Hansen, repeatedly used the frame of the pipeline being a fuse to one of “the largest carbon bombs on the planet,” the exploitation of which would mean “game over for the climate.”

Obama sent a powerful signal about his climate views and this particular pipeline in his famous Georgetown speech in June 2013, where he spelled out the “climate test”:

“Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.”

I was struck that today’s was not based on a decision that Keystone XL “would significant exacerbate” GHG emissions. Instead, today’s decision states “the proposed project by itself is unlikely to significant impact the level of GHG-intensive extraction of oil sands” (p. 29). Despite finding little measurable impact on GHG emissions, the Record of Decision continued, “it is critical for the United States to prioritize actions that are not perceived as enabling further GHG emissions globally.”

The decision cites the broader standard of the “net effects of the pipeline’s impact on our climate,” but makes that about global political reaction, not modelling estimates. In effect, the decision transforms Obama’s climate test into a broader consideration of the impact of the decision of global climate politics:

“A key consideration at this time is that granting a Presidential Permit for this proposed Project would undermine U.S. climate leadership and thereby have an adverse impact on encouraging other States to combat climate change and work to achieve and implement a robust and meaningful global climate agreement. Strong climate targets and an effective global climate agreement would lead to a reduction in global GHG emissions that would have a direct and beneficial impact on the national security and other interests of the United States.”

In his public remarks, Obama stressed the role model justification for the decision: “Today, we’re continuing to lead by example, because ultimately, if we’re gonna prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we’re gonna have to keep some fossil fuels in the ground rather than burn them and release more dangerous pollution into the sky.”

The climate movement, remarkably, transformed Keystone XL into a line in the sand on climate. Today, the very symbolic magnification of importance they manufactured was used as the core rationale for the rejection decision.

What an extraordinary victory!

Addendum: A lot of great journalism and commentary has emerged around this decision by Obama in the broader context.

From the architect of the campaign, Bill McKibben, in The New Yorker
Ben Adler on the activist campaign on Vox
David Roberts on the misguided critique of activism on Vox
Brad Blumer on Obama’s rationale on Vox
Elena Shor with a thorough 7+ year timeline on Politico

Posted in Energy Pipelines | Leave a comment

The Softwood Lumber Dispute – a Hoberg Course Brief

George Hoberg and Gabrielle Schittecatte
October 10, 2015

Since before Confederation, trade in lumber between Canada and the United States has been politically contentious.  The modern conflict began in 1982, when the US softwood industry asked the US government to impose countervailing duties on imports from Canada. As Canada’s largest lumber producer, British Columbia has been strongly affected by US trade actions.

US lumber interests argue that Canadian policies have the effect of subsidizing lumber exports to the US, giving Canadian lumber an unfair advantage and making them inconsistent with the US Trade Act and free trade agreements. The biggest source of concern has been how stumpage (the price paid by a forest company for what is a publically owned tree) is set in the country. In most of the US, where private forest land dominates, trees are priced by markets. Because of the public land model north of the border, stumpage in Canada, including BC, is set administratively. The US has long argued that the way stumpage is calculated amounts to an unfair subsidy. The US has also complained about direct subsidies to the forest sector, limitations on log exports, and cut control policies.

In the early 1980s the US lumber industry petitioned the US Department of Commerce (DoC) to implement its countervailing duties, a tax the US would then charge Canada on its softwood exports. The DoC declined to do so. In 1986 the US lumber industry again petitioned the DoC to establish countervailing duties, which it agreed to at a level of 15%. However, before this could take place Canada agreed to a Memorandum of Understanding (MOU) which established a phased export tariff. In essence, Canada, in order to decrease tensions on the matter, agreed to tax itself so at least revenues would remain within the country.

In 1991 Canada withdrew from the MOU and the US industry petitioned the DoC again to implement countervailing duties, which it did at a level of 6.5%. This decision was reviewed under the Canadian-US Free Trade Agreement (a predecessor of NAFTA). The review panel ruled in Canada’s favour, finding that the DoC had not made a convincing case under the US Trade Act. Consequently, Congress amended the Trade Act to make it easier to demonstrate the existence of an illegal subsidy. In response, Canada agreed to the 1996 Softwood Lumber Agreement, which was planned to last five years. This agreement determined that a certain amount of softwood exports would be allowed tax free, but that above this level there would be substantial export fees.

In 2001 the Softwood Lumber Agreement expired, and the US forest industry again applied for countervailing duties. This time, the DoC agreed to impose even higher duties, at 27.2%. Canada again challenged the decision under the dispute settlement mechanisms of both NAFTA and the World Trade Organization (WTO), virtually all of which ruled in Canada’s favour.

At the same time, the BC government embarked on an extensive policy reform designed in part to address US criticisms by substantially increasing the role of market forces in determining stumpage and other aspects of BC forest policy. The 2003 Forest Revitalization Plan included a 20% take back of harvesting rights, half of which were allocated to auctions to create a system of market-based pricing. Appurtenancy was eliminated, along with other reforms to “bring the market back in.” One key part of the justification for these changes was to address the concerns raised by the US in the softwood lumber dispute.

Despite BC’s significant policy reforms, and the victories in dispute settlement mechanisms, Canada agreed again, in 2006, to enter into an agreement where export taxes were collected if the price of lumber fell below a particular threshold. The US refused to return the $5 billion in duties inappropriately collected from the industry over the past 4 years, and Canada felt the need to agree to trade restraints to get access to the funds.  The 2006 Softwood Lumber Agreement, which would last for 7 years and be renewed for 2 more, places an export charge on lumber based on the current market price measured in price per thousand board feet. The charges on lumber increase when the market price of lumber decreases – the maximum rate is 15% if the price falls below $315, and goes to zero if the price exceeds $355. In September 2015, Canadian exporters paid a tax of $5 US because the price of lumber was in the range of $336 US and $355 US.

The agreement expires on October 12, 2015, and there are no apparent signs of active negotiations. The agreement stipulates that the US is prohibited from launching new trade actions for a year after expiration. Premier Clark is committed to renegotiating a new deal, and recently stated she would bring the matter up with the prime minister “as soon as the federal election is over.”

The longstanding softwood lumber dispute between Canada and the US has had a significant impact on the BC forest industry’s policies and profitability. The dispute prompted one of the biggest changes in the forest industry through the Forest Revitalization Act and ensuing tenure take-back. It also continues to have impacts on the price of exports to the US, and thus the vitality of the BC forest industry. These US trade pressures have pushed costs up, induced policy reforms, and been a major challenge to Canadian sovereignty.

Additional sources:

Government of Canada DFAIT site Softwood Lumber

Government of BC Softwood Lumber

Random Lengths overview of softwood lumber dispute

Coalition for Fair Lumber Imports

Posted in BC Forest Policy | Leave a comment

Formal Government Processes for Policy Production in Canada – A Hoberg Course Brief

George Hoberg
September 21, 2015

A public policy is a purposive course of action or inaction by government. Understanding where policies come from requires an understanding of how the formal processes of government work. In Canada, these processes are a combination of rules written in the Constitution Acts and federal and provincial governments, but also unwritten “conventions” that have evolved over time from their origins in the traditions of parliamentary democracy in the United Kingdom and Canada. Canada is technically a constitutional monarchy and a parliamentary democracy. It is also a federal country, meaning that constitutional powers are divided between the federal government and the provinces. The governments at both levels consist of the executive, legislative, and judicial branches. At the federal level, the legislature is made up of the elected House of Commons and the appointed Senate. The provincial governments are “unicameral”, meaning they don’t have a senate. (This post does not discuss either the Senate or the judicial branch.)

The Executive

The Queen is officially the head of state, but her work is delegated to her representatives in Canada: the Governor General at the federal level and Lieutenant Governors at the provincial level. Formal government actions – including legislation and regulations – require the approval of the Queen’s representatives. Approval or disapproval occurs with the “advice of the executive council”, the cabinet of the current government. By convention, this advice is always followed except in extraordinary circumstances.

The Prime Minister (or the premier at the provincial level) is the leader of the political party that holds the “confidence of the legislature”, meaning the support of a majority of the House (or the provincial legislature). That party, in particular its cabinet, forms “the government.” Ordinarily, this is the leader of the party with the most seats in the House of Commons (or provincial legislatures). When one party has a majority (as Harper’s Conservative Party has had from 2011 to present), who is Prime Minister is straightforward. It gets more complicated when no party wins a majority. It seems generally understood that the party that wins the most seats in an election gets the first opportunity to form a minority government. (They could also go into formal coalition with another party to form a majority.) Technically, the convention is that it’s up to the Queen’s representative, and it’s conceivable that the Prime Minister’s party could be given an opportunity to demonstrate they have the confidence of House even if they don’t win the most seats in the election.

The cabinet consists of individuals, selected by the Prime Minister usually from his or her own party in the legislature. Members of the cabinet are known as ministers, and are responsible for the management of one of the government’s major departments (e.g., Finance, Natural Resources, Environment). Deputy ministers are the senior public servant in each ministry. They are not elected, but appointed by the government to manage the ministry under the direction of the minister.

The prime minister and cabinet are executive officials, but they are also members of the elected legislature, creating a quite different arrangement from the one that exists in a separation of powers system like the United States, where members of the executive branch are prohibited from being in the legislature.

Legislatures in an Executive-Centred Parliamentary System

Despite being referred to as a parliamentary democracy, legislatures play surprisingly little direct role in modern Canadian governance. The executive-centred form of government results from the relationship between the prime minister (or premier) and the members of their party in the legislature. Members of the legislature are divided into party caucuses, which decide the party’s positions on votes that come up in the legislature. The government’s party has a caucus, and other parties represented in the legislature also have a caucus, the most important of which is the official opposition – the party outside the government that has the most seats in the legislature.

In practice, party members almost always vote in accordance with their party’s policies, known as “party discipline”, for several reasons. Members of the government party want to ensure their party continues in that role, so they need to work together to ensure their party maintains the confidence (majority support) of the legislature. In addition, party discipline is enforced by party rules that give the leader of the party the authority to discipline members who don’t follow government policy. Members can be removed from the caucus, meaning they need to sit as an independent, and the party leader also signs nomination paper when candidates run for office. These rules create powerful incentives for members of the legislature to vote how their party leader tells them to. Finally, cabinet positions are prestigious and higher-paying, so members of the caucus have additional incentives to seek the approval of the party leader who gets to select cabinet ministers if their party forms the government.

This combination of system incentives and party rules means that in Canada, governments are very centred around the prime minster (at the federal level) and premiers (at the provincial level). Legislatures must pass budgets and other legislation in order for the government to operate, but in practice, policies are proposed by the executive and other members of the government caucus vote according to the directions they are given. However, the power of the prime minister (or premier) is not unlimited. If the government caucus perceives that the policies of the government, or other actions of the leader, are jeopardizing the electoral viability of the party, they can threaten to withhold their support for the party’s positions. If a prime minister or premier can’t hold confidence of his party in the legislature, he or she is likely to resign, as Premier Gordon Campbell did in British Columbia in 2011.

The dominance of the executive over the legislature is limited in periods of minority government. In that case, the governing party needs to get the cooperation from members of other parties to maintain the confidence of the legislature. In the case of majority government, the power of opposition parties is limited to the threat of exposure through Question Period, an opportunity for the opposition parties to formally question the actions of the government when the legislature is in session.


Members of the legislature are selected in elections, in an electoral system known as single-member, first past the post. Jurisdictions are divided into electoral districts (different for federal and provincial elections), also known as ridings, and the candidate with the most votes (not necessarily a majority) becomes the member of the legislature from that district. Provincially, the UBC Vancouver campus is in the Vancouver-Point Grey riding, represented by NDP MLA David Eby. Federally, UBC is in the Vancouver-Quadra riding, represented by Liberal MP Joyce Murray. There is no direct election for the Prime Minister or Premier. They are the leaders of the party that forms the government after the election, and they must run for election in a riding like other party members. Prime Minister Stephen Harper, for example, is the MP for Calgary-Southwest, and is Prime Minister because the party that he leads won a majority of seats in the 2011 election.

One important measure of a political system’s representativeness is how well votes get translated into seats in legislatures. Our electoral system works well in doing so when there are only two dominant parties. However, when three or more parties get significant vote shares, the potential increases significantly for distortions between the proportion of votes in the election and the proportion of seats in the legislature. Such has been the case in Canada in recent decades. For political scientists, Canada is an electoral curiosity. Duvenger’s law states that when you have single member districts and a plurality voting rule like we do, you are likely to have a two-party system. The last time a party received a majority of votes in a Canadian federal election was in 1984, and even then Brian Mulroney’s Progressive Conservative Party just barely exceeded the threshold with 50.03% of the votes. In British Columbia, since 1972, the only election when a winning party won a majority was Gordon Campbell’s BC Liberal Party in 2001.

Minority-based majorities are not the only challenge when more than two parties are competitive in our type of system. You can also have situations when the party who wins the most votes doesn’t win the most seats. In the 1996 BC election, Glen Clark’s NDP won a majority of seats even though the NDP received fewer votes than Campbell’s Liberals (the Liberals won 41.8%, the NDP 39.5%). These types of misfires are more likely happen when there are significant differences in winning margins for the parties across ridings.

These distortions between seat and votes have increased calls for electoral reform in Canada. Demands for change have increased since 2011, when Stephen Harper’s Conservative Party of Canada won a majority in the House of Commons with only 39.6% of the vote. Harper’s party forms the conservative end of the political spectrum, meaning that more than 60% of Canadian voters that year supported parties less conservative than Harper’s. The main alternative to the Canadian system is proportional representation, which is designed to ensure that seats in the legislature closely match the proportion of votes parties receive in the election. In the 2015 Canadian election, the NDP, Liberals, and Greens all formally committed to pursuing electoral reform if elected.

The Production of Policies through Formal Processes

Production of policies at the provincial level

The accompanying figures illustrate how the various formal elements of the process combine together to form a system for the production of policies. The first diagram is for Canadian provincial governments, whereas the second generalizes for both levels of Canadian government. Public policies are authorized by enabling legislation and funded by annual budgets enacted by the legislature. The executive (cabinet and PM/premier) direct the implementation of these policies, either by passing regulations (delegated legislation) or other forms of policy, through ministries (government departments). These ministries consist of public servants (bureaucrats) who work under the supervision of a cabinet minister representing the government of the day. Implementation of these policies is designed to influence the behaviour of target actors such as business or consumers.

For example, the BC Forest Practices and Range Act (FRPA) is an act of the BC Legislative

Formal process for the production of policy in Canada

Assembly. The Forest Planning and Practices Regulation was passed by cabinet under the authority of FRPA. FRPA is implemented by the Ministry of Forest, Lands, and Natural Resources Operations, under the supervision (as of 2015) of Minister Steve Thomson.  FRPA is designed to influence the behaviour of forest companies to ensure that forest management was carried out in a way that promotes a series of values built into the law, such as timber production and biodiversity.

The system also provides for feedback and checks. Business and consumers are taxed, and the revenues from those taxes flow into government treasuries to support government services. Periodically, citizens have the opportunity to vote to keep the government in power, or if they are not satisfied with the performance of the current government, replace the government with another political party.

The judicial branch also checks the actions of government. Courts can challenge Act of the legislature as inconsistent with the Constitution, and regulations or other actions of governments as inconsistent with the authority established in enabling legislation.

Additional Resources:

For a far more entertaining version, see Rick Mercer’s take on the RMR in 2009.

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Nobody Believes You, Mr. Harper: Five Key Energy-Environment Insights from the Opening Canadian 2015 Election Debate

George Hoberg
August 7, 2015

Pipeline and climate issues took central stage in last night’s leader’s debate hosted by Maclean’s. There are five main takeaways from the debate. You can watch the debate here, and read transcripts from it here at Maclean’s. All the quotes below are taken from the Maclean’s transcription.

1. Energy and environmental issues have become central to Canadian electoral politics.

The most remarkable thing about last night’s debate is the simple fact that the party leaders spent about one-fourth of their debate on energy and climate issues, a striking change from the 2011 federal election debates where energy and environment was largely ignored. The profile of these issues is a clear indication of the remarkable success of First Nations and the environmental movement in forcing these issues onto the political agenda.

2. Opposition leaders teamed up to blame stalled infrastructure on Harper’s poor environmental policies.

Most of the focus of this debate segment was on attacks on Harper’s environmental record by the other three party leaders, although there were noteworthy exchanges and differences among the opposition party leaders as well. Mulcair and Trudeau made almost identical argument that Harper’s poor environmental record had undermined social license for new energy projects and, as a result, hurt the economy.

Trudeau began the assault:

“[N]ot only has he not helped our environment, but he’s actually slowed our economy. He cannot get our exports to market because there is no public trust anymore. People don’t trust this government to actually look out for our long-term interest. We – he hasn’t convinced communities of the rightness of his – his pipelines, of the proposals he supports. He hasn’t been working with First Nations on the kinds of partnerships that are needed if we’re going to continue to develop our natural resources. Canada will always have an element of natural resources in our economy, but the job of the Prime Minister is to get those resources to market. And in the 21st century that means being smart and responsible about the environment. Mr. Harper’s inability to understand that is exactly why he’s so struggled to actually get our economy growing in a right way anymore.”

Mulcair taunted Harper about his record of getting pipeline projects approved:

“Mr. Harper thought that by gutting our environmental laws, somehow he could get our energy resources to market better. How’s that working out, Mr. Harper? None of those projects has gotten off the drawing board, and it’s not hard to understand why. Canadians across the country want a clear, thorough, credible environmental assessment process. Canada can be a leader around the world. We can play a positive role. But with Mr. Harper, we’ve got the worst of all worlds. Dirtier air and water, we’ve got more carbon pollution, and we’re a laggard on the world stage.”

Trudeau piled on:

“The reason environmental groups in Canada and across the United States are so concerned about Canadian oil is because Mr. Harper has turned the oil sands into the scapegoat around the world for climate change. He is – has put a big target on our oil sands, which are going to be an important part of our economy for a number of years to come, although we do have to get beyond them. And his lack of leadership on the environment is hurting Canadian jobs and Canadian relations with other countries.”

Of course that’s not quite right. It’s the environmental movement that has succeeded in framing the oil sands expansion as a major climate risk. Harper has contributed to the stigmatization of the sector by failing to take any meaningful climate action on Canada’s oil sector.

3. Opposition leaders differ on bitumen exports and pipelines

While the opposition leaders were singing the same song about the link between Harper’s environmental policy retrenchment and the failure of his oil sands export strategy, there were important differences in their positions on the merits of exporting raw bitumen. Trudeau supports Keystone XL, but Mulcair and May both oppose it. Mulcair stressed this difference with the Liberal leader: “Mr. Harper and Mr. Trudeau both agree with Keystone XL, which represents the export of 40,000 jobs. I want to create those 40,000 jobs here in Canada.”

Mulcair and Trudeau had an embarrassing exchange accusing each other supporting Energy East in English and opposing it in French. You could almost hear Harper laughing. May emphasized her opposition to Energy East, stating it “is still about export.”

May sought to drive a wedge between the NDP and environmentalists in BC by demanding to know whether Mulcair opposed the Kinder Morgan pipeline. Mulcair re-articulated his nuanced position that he would wait until the regulatory review was complete. But of course he did not do that with Northern Gateway, which he opposed long before the environmental assessment was completed. That exchange led to flashbacks of the 2013 BC election, where NDP leader Adrian Dix (remember him?) began the campaign with the same position, and disastrously changed it mid-campaign. Mulcair’s probably too smart to make the same mistake.

4. Opposition leaders need to bone up on their understanding of GHG trends

Harper has little credibility on the environmental file, and opposition leaders mocked him for it. When Harper described his climate record, May chimed in “That’s not true!” And a bit later Trudeau blurted out “Nobody believe you!” The problem is that what Harper was saying at that point was correct: “Mr. Trudeau, let’s be clear on what the record actually is. Not only do we take both the economy and the environment seriously; we are the first government in history to reduce greenhouse gas emissions while also growing our economy.” Nic Rivers, economist at the University of Ottawa, provided the numbers, direct from Environment Canada.

It is true, as May later emphasized, that the main reason for the decline was the great recession and the policy actions taken by provinces, especially Ontario. It is also true that there has been a steady rise since the 2009 nadir, and that the Harper government’s own projections show them continuing to increase substantially as the oil sands sector expands. But it is also unquestionably true that emissions for the latest year we have data (2013) are lower than when Harper took office, despite economic growth over that period.

There’s plenty of dishonesty in Harper’s statements on energy and environment to criticize. In the debate, he said more than once that Mulcair is opposed to LNG in BC, when that is not his position. His continued castigation of his opponents for pushing a carbon tax (discussed below) is another obvious example. But the opposition leaders should sharpen their understanding of and arguments about carbon emission trends.

5. Harper continued his silly demagoguery against the carbon tax, and no one responded

Since he feasted on Stephan Dion in the 2008 election, Harper has gleefully bludgeoned opponents for supporting a carbon tax. In last night’s debate, he persisted:

“The way you don’t deal with this problem is start imposing carbon taxes that will inevitably – they raise money for the government. They don’t reduce emissions. They hit consumers, and they hit consumers hard…Paul, I’ll say what I’ve said to people across the country: a carbon tax is not about reducing emissions. It’s a front. It is about getting revenue for governments that cannot control.”

There are several problems with this statement. First, while May’s fee and dividend is a carbon tax, the two main opposition parties aren’t supporting a carbon tax. Mulcair advocates cap and trade. Trudeau would let the provinces choose their instrument. More importantly, the argument that they don’t reduce emissions and are only a front for padding government finances is just not supported by the record. BC’s carbon tax has been held up as an international model of a revenue-neutral (meaning it does not raise government revenues) carbon tax that has reduced emissions while the economy grew substantially. It is true that you could use carbon pricing to increase government revenues, and there are pros and cons of doing so. But Harper’s argument that it’s a front for padding government treasuries is sheer demagoguery.

What surprised me is that not one of the three opposition leaders chose to defend carbon pricing. I’m not sure whether this is because they see defending carbon pricing as a no-win strategy against Harper, or they just chose to focus their arguments elsewhere. Whatever the reason, we ended up with a debate heavy on pipelines and remarkably unilluminating on climate policy. A basic word search shows climate issues were out-mentioned by pipelines 43-28.

Climate content 2015 2011
climate 6 10
greenhouse gas 5 3
carbon 17 0
Total climate 28 13
Pipeline content
pipeline 20 0
Keystone 6 0
Northern Gateway 6 0
Kinder Morgan 4 0
Energy East 7 0
Total pipelines 43 0

We’re still waiting for that long overdue national conversation about climate policy.

Nonetheless, congratulations to Paul Wells and Maclean’s for fostering a vigorous debate on these important issues.

Posted in Climate Action Policy, Energy Pipelines, Oil Sands | Leave a comment

Lament for a Nation – The Climate Version

George Hoberg
April 15, 2015

Last week, the prestigious Ecofiscal Commission released a report on climate policy that strongly advocated “The Way Forward” (its title) was through carbon pricing by the provinces. It is certainly no surprise that a group of economists would advocate carbon pricing. But it is quite striking that a group of economists would be so enthusiastic about provincial instead of federal leadership. Typically, economists advocate the most economically efficient solution, and a balkanized subnational process would seem inconsistent with that. Their endorsement of the provincial approach has been widely applauded in the media.

I have the utmost respect for both the member of the Ecofiscal Commission and the process they are using. However, before the idea of provincial leadership gains even more credibility (did we really just have a provincial “Climate Summit”), I did want to go on record that, in the opinion of this political scientist, it is a ridiculous idea. Only in Canada, and in particular in Harper’s Canada, could the outlandish notion that it is not the federal government’s place, indeed duty, to lead in developing a national climate policy gain such currency.

When George Grant published his famous essay in 1965, he was lamenting what he saw as Canada’s capitulation to American hegemony. In contemporary climate policy in Canada, we’re not capitulating to the US (which is racing ahead of us on climate). We’re capitulating to a self-imposed ideology of provincial paramountcy that blinds us the obvious merits of federal leadership.

The Ecofiscal approach contrasts with the recommendation of the Sustainable Canada Dialogues, a group of over 60 Canadian academics that released its report, Acting on Climate, last month. (I helped draft the section on climate policy instruments.) That report strongly endorsed national carbon pricing either through a national carbon tax or a national cap and trade system. The report states:

From a cost-effectiveness standpoint, a national GHG reduction plan has advantages. There would be concerns about fairness and competitiveness if emitters in one province paid a significantly different carbon price than emitters elsewhere in Canada. A cap and trade system would realize economic benefits from being applied to a larger and more diverse area.

The Ecofiscal Commission report, however, was supported by much more extensive analysis, including elaborate modelling with a computable general equilibrium model that compared different scenarios. They compare the cost-effectiveness of provincial-led regulatory approaches, provincial-led carbon pricing approaches, and then linked (national) carbon pricing approaches. The most compelling conclusion of their report is that the modelling shows you get 89% of the gains from shifting from a regulatory approach to a more flexible carbon pricing approach at the provincial level. A national approach would be more cost-effective (getting you the final 11%), but the Commission uses the results to downplay the relative important of federal leadership and play up the huge gains available from provincial carbon pricing.

A more careful look at their results suggests that conclusion, in my view, is not justified, for three reasons.

The analysis overstates the cost-effectiveness advantage of a provincial approach: The figure below shows the relative benefits of three features: flexibility, revenue recycling, and linkage. The biggest gains in efficiency, 2/3rd nationwide, are from moving from a regulatory approach to a more flexible carbon pricing approach. An additional 24% comes from what they call revenue recycling, and the final 11% from linkage in a nationally-coordinated approach

The analysis is notable in how large the efficiency gain are by moving away from regulation, especially given the federal government’s continued reliance on that instrument. But I don’t think it is right for the Commission to attribute the gains from revenue recycling to a provincial-led approach. The Commission is certainly correct to note that the revenues collected from carbon pricing raise significant political questions about what to do with the revenues, a particularly sensitive topic in post-1980 Canada. Much of the tension can be addressed by returning any carbon pricing revenues to the province of origin. That can be done with a federal approach as easily as it can with a provincial approach. That’s what the Sustainable Canada Dialogues’ Acting on Climate report recommends (pp. 29-30). What the Ecofiscal Commission’s analysis models is not revenue recycling per se, but the economic impact of the income tax reductions made possible by a tax shift from income to carbon (as BC does with its revenue-neutral carbon tax). There’s no guarantee that provinces will use the revenues that way (Ontario is saying it won’t), and even if they did that’s not an impact reasonably attributed to a provincial-led approach.

There is indeed a substantial efficiency gain from moving to carbon pricing at the provincial level, but the degree of efficiency gains from a provincial vs. national approach are overstated.

The analysis relies on the dubious assumption that provinces will voluntarily meet their targets: The Ecofiscal Commission report builds its analysis on scenarios assuming provinces meet their existing targets. Doing this avoids two challenging features of a national approach: having a national discussion about sharing the burden for reductions, and mechanisms for compliance if provinces fail to meet their targets. First, you can also avoid a conflict over dividing up responsibility for a national target  if you have a nationwide carbon tax or cap and trade program because, as the Sustainable Canada Dialogues report describes, “provincial emission levels would be responses to market signals, not established in advance” (p. 29).

Second, if there’s no strong federal leadership role, there’s no mechanism to force compliance with targets.  Canada’s most stubborn climate challenge remains the reluctance of the country’s largest and fastest growing emitting province, Alberta, to enact sufficient climate policies to contribute to the national effort. (The Ecofiscal Commission notes that Alberta’s current approach “had no significant impact on annual GHG emissions or even emissions intensity” (p. 22).) BC and Saskatchewan will also face big challenges meeting their targets. We could surrender to a “naming and shaming” approach of voluntary provincial commitments, like the UNFCC is doing with international climate diplomacy. But that’s supposed to be the difference between nation-states and the international community. In nations, we have laws that we enact through the political process and that we agree to enforce.

Provincial leadership would produce large inequalities in burden-sharing: What the Ecofiscal report doesn’t say is how the carbon price varies across the country when provinces pick their own approach to meet their own target without federal coordination. Due to highly variable costs of control and stringency of targets across the provinces, their recommended approach would likely lead to widely different carbon prices across the country. This would create serious problems for competitiveness and fairness.

A national approach would be more cost-effective, coherent, enforceable, and equitable. If one or more provinces so strongly resisted adopting the national approach, it could work to exempt a province so long as mechanisms were put in place to ensure that the province contributed its fair share to the national reductions.

I completely get what the Ecofiscal Commission is trying to do, and applaud their sensitivity to political feasibility. We need to get going on climate policy, and in Harper’s Canada, provincial leadership offers the hope of quick progress. But don’t let the report raise doubts about the strong merits of federal leadership and a Canada-wide climate policy. It’s more efficient. It’s fairer. And it’s what nations do.

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Rethinking the impacts of fossil fuel divestment: a critique of the Pacific Institute for Climate Solutions white paper

February 27, 2015
George Hoberg*

The Shadow Impact Calculator and Divestment: Data and Model LimitationsGeorge Hoberg*

A White Paper released by the Pacific Institute for Climate Solutions last month argues that fossil fuel divestment campaigns are based on a set of unfounded assumptions. The authors, Hadi Dowlatabadi and Justin Ritchie of UBC, make some valuable contributions to the debate over divestment. But their criticisms of the divestment advocates’ core arguments are off-base.

The PICS paper makes two important contributions to the debate. The authors provide a series of recommendations about policies and financing that can provide effective support to the divestment movement. Second, the authors emphasize the challenge, frequently lost in the divestment dialogue, that a very high fraction of the world’s fossil fuel reserves are owned by governments and not traded in financial markets, and therefore relatively immune to pressure tactics focusing on financial markets.

But the paper’s challenges to the core assumptions of the divestment movement are unfounded, both because they are not addressing the actual theory of change guiding the fossil fuel divestment movement, and because their methodology, and the way they applied it, does not actually allow them to effectively measure what they are trying to analyze.

First and most important, the PICS paper attempts to examine the direct impacts of divestment, either on the greenhouse gas emissions associated with portfolios, or on directly reducing carbon pollution because divestment “will keep fossil fuels in the ground.” This is not an accurate representation of the theory of change underlying the divestment movement. As our colleagues at the University of Victoria have highlighted already in response to this study, “The divestment movement’s primary goal is to challenge the social license to operate oil companies enjoy, making it harder for them to successfully lobby against needed government action.” (For similar responses to the PICS study, see here, and here.)  An influential report from Oxford University argues: “The outcome of the stigmatisation process, which the fossil fuel divestment campaign has now triggered, poses the most far-reaching threat to fossil fuel companies and the vast energy value chain. Any direct impacts pale in comparison.” The same study, which also looked at past divestment efforts, found that “in every case [they] reviewed, divestment campaigns were successful in lobbying for restrictive legislation.”

Second, the PICS report analysis of the more direct impacts of divestment is based on a methodology that does not effectively measure what the authors are trying to analyze. A new critique posted on the PICS website takes the PICS report to task for several methodological and analytical problems. The authors of the PICS report develop a methodology called the “shadow impact calculator” designed to show the “carbon shadow” of investments. The shadow impact calculator relies on an input-output model using historic greenhouse gas (GHG) emissions intensities and single-year snapshots of the economy. As a result, it is just not particularly useful in illuminating the future carbon footprint impacts of changing investment decisions, which is exactly what the climate-focused investors are trying to do.

Finally, the way the authors applied their method to a sample university portfolio (UBC’s) dramatically underestimates the carbon impact of divestment. Their analysis substituted the six fossil fuel companies in which UBC has direct holdings for a sample of six renewable energy firms. They come up with the surprising result that the carbon shadow of that investment shift is only reduced by 22%. Their sample of renewable firms was selected randomly, but the six they ended up with had a major outlier in it which led, unintentionally, to a terribly unrepresentative sample. As shown in the figure, a re-analysis using the average carbon shadow of renewable companies – a more representative approach – reveals a much larger 90% reduction in the carbon shadow.

The PICS White Paper is off-base for two reasons. First, it does not address the theory of change actually guiding the fossil fuel divestment. Second, a more careful analysis shows that the direct impacts of divestment on the carbon shadow of investments can be much higher they find.


*Double disclosure statement: As any reader of this blog would likely know, the author is the faculty coordinator of UBCC350, the group leading the divestment campaign at UBC. The author also received research funding from PICS on forest carbon policy.

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Letter to Vancouver Sun in response to editorial critical of divestment at UBC

February 27, 2015

This letter was submitted to the Sun today:

Your February 26 editorial relied heavily on a study that concluded that divestment from fossil fuels would not have a significant impact on the “carbon shadow” of UBC’s endowment. Unfortunately, that study significantly underestimates the impact of divestment.

The renewable firms the authors used to assess the impact of reinvestment turn out to be outliers. Using average renewable firms yields a 90% reduction of the carbon footprint of the fossil fuel component of UBC’s endowment, not 22%. (Technical critique here.)

The study compares investments based on firms’ emissions only to the point of sale. For a solar panel producer, that approximates emissions over the product’s full life cycle. For fossil fuels companies the PICS study excludes the vast majority of emissions, which occur when those fuels are burned by consumers. The moral justification for divestment lies in the much larger differences over the full life-cycle that are not captured by the study’s methods.

If we are to live in a world with a safe climate system, “the vast majority of [fossil fuel] reserves are unburnable,” Bank of England Governor Mark Carney recently warned. UBC should not fund its students’ education by investing in industries whose products inevitably harm their future.

Kathryn Harrison, Political Science, UBC
George Hoberg, Forest Resources Management, UBC

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Two cheers for Trudeau’s climate plan – the best a climate hawk could expect out of a Liberal leader named Trudeau?

George Hoberg

February 7, 2015

In a speech to the Petroleum Club in Calgary yesterday, Liberal leader Justin Trudeau gave more details about what climate policy his party would pursue if they form the government after the October 2015 federal election.  He announced that the federal government would, in cooperation with the provinces shortly after the Paris climate summit in December, establish a national target for greenhouse gas reductions. But it would be up to the provinces to choose their own approach to reducing emissions.

For the perspective of a climate hawk, this is a significant improvement over the indication several weeks ago that he would leave carbon pricing to the provinces. Without a binding national target and a federal effort to coordinate compliance with the target, deference to provincial policies would not have improved on the status quo. But in his Calgary speech, Trudeau made very clear that the federal government would play this coordinating role under his leadership.  For me, that is a major breakthrough.

But there is much that Trudeau did not specify. For one, he didn’t mention anything about what the national target would be, only that they would be  “informed by the best economic and scientific analysis.” (The US announced in October a new national target of 26-28% below 2005 levels by 2025.) He also didn’t say anything about what will turn out to be the most divisive part of his policy – how to allocate province-specific reduction targets. This gap is particularly important, because a well-designed national cap and trade system or carbon tax would not require the allocation of province-specific emission reduction targets. The emission responses of provinces would be determined by how prices and/or exchanges influenced the behaviour of emitters as they adapted to the new price of carbon.

While I’m disappointed with Trudeau’s unwillingness to work on the development of a national plan, listening to his speech reveals that his proposal is quite artful politically. He carries special baggage, as he explicitly noted in his speech, because of his father’s 1980 National Energy Program that poisoned both his name and his party in Alberta, whose cooperation is necessary if any Canadian climate policy is going to be effective.  He’s addressing at least part of that toxic political legacy by letting the provinces choose the policy instrument that works for best for them.

At present, the provinces essentially have three different mechanisms for carbon pricing in play. British Columbia has it revenue-neutral carbon tax, Alberta has its hybrid regulation-tax, and Quebec has a cap and trade system. Ontario recently announced that it would be introducing a carbon pricing system but is not indicating whether it will go in with Quebec or pursue a carbon tax.

If we have a national target that actually has teeth and is a meaningful contribution to global efforts, the inconsistency among provincial approaches will become problematic. If you have a cap and trade system, you want as large a market as possible to trade in, so there are real incentives to spread it nationally. Moreover, if there were different prices on carbon across the country, questions of fairness and competitiveness would inevitably arise.  One outcome of the Trudeau approach is that a nationally coherent plan could emerge out of intergovernmental discussions after the October election. Much will hinge on what Ontario decides to do; Wynne’s instrument choice could be pivotal in getting either Quebec or BC to reconsider their approach. For now, Trudeau is betting that his worst mistake would be to be perceived as imposing the preference of the federal government on the provinces.

By not forcing the provinces to adopt a national policy instrument, Trudeau would avoid a political challenging choice. But he also creates another – the need to allocate province-specific targets. At the end of the day, Trudeau’s approach trades one politically difficult decision for another. But in the Harper era, it may be the best a climate hawk could expect out of a Liberal leader named Trudeau.

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Forces at Work in Natural Resource Policy – A Hoberg Course Brief

George Hoberg

Analytical Framework for Natural Resource Policy

February 6, 2015
pdf: Forces at Work in Natural Resource Policy – Hoberg course brief

In thinking and teaching about natural resource policy, I find it useful to use a framework I refer to as “forces at work in natural resource policy,” shown in the accompanying figure.   In environmental and natural resource policy, at the end of the day, we are interested in how human actions affect the economic, social, cultural, and environmental values of concern to us. We’ll refer to these as consequences, and include things like jobs, income, economic growth, regional equity, environmental impacts, quality of participation in decision-making, etc.

Policies are the rules produced by government designed to influence actions. Policies can be thought of as bundles of objectives or goals, instruments, and settings on those instruments. For example, in the area of climate policy, we could have an objective to reduce greenhouse gases by a certain amount by a particular time, an instrument of a carbon tax, and a setting of that carbon tax of $40 per tonne of carbon dioxide equivalent.

Policies are produced through governance processes, influenced by environment and markets. Governance is the structure and process through which policies are decided. It consists of three core components:

  1. Who has authority to make policy decisions? In Canada, this usually involves elected decision-makers, but can also include appointed officials with regulatory authority.
  2. Who participates in policy processes? Many interest groups, such as industry associations or environmental groups, play important advocacy roles in the policy process, but they do not have decision-making authority. They may have a great deal of influence over decision-makers, but they are not, in the immortal words of George W. Bush, “deciders”.
  3. At what level of government are decisions made? Government authority can exist at the local or regional level, at the provincial (or state level), at the national/federal level, or at the international level. At times, authority is shared between different levels of government

By environment, we’re referring to the physical-material world, particularly biophysical and resource characteristics. Climate, for example, would be part of this variable, as would the content and quality of reserves of a particular energy source like goal or natural gas, or the quality and quantity of the standing timber stock or species habitat in a landscape. The state of available technology is also included in this variable.

With markets, we are referring to a wide range of economic variables, including prices and quantities and exchanges in the marketplace, driven by the relationship between supply and demand.

The “forces at work” framework emphasizes how these three categories of variables interact with each other to produce policies, that influence the actions of business and consumers that produce the consequences to the values of concern to us.

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