Contrary to what an editorial suggests The Press from April 131, the rest of Canada should look to Quebec for lessons on how to decarbonize in a politically feasible way. Public opinion studies, including those conducted by the ESG-UQAM Chair on Decarbonization, show that support for carbon pricing decreases when the price increases.
Thanks to its link with California (and perhaps soon with Washington State), the carbon market allows Quebec to share the costs of reducing emissions with partner jurisdictions where, at least for now, decarbonization costs are lower.
The editorial reveals significant misunderstandings about the Canadian federal carbon tax in relation to the Quebec carbon market. Most serious is a concern over the Canadian federal government’s goal of increasing the federal carbon tax to $170 per tCO2e by 2030. This price, however, is far from corresponding to the price that Quebec would need to achieve its emissions reduction objective in 2030 if it gave up the link with California.
Modeling work carried out as part of the Canadian Energy Outlook project suggests that these prices should reach $300 per tCO2e if Quebec acted unilaterally. This would add about 66¢ per liter of gasoline by 2030.
Concerns about the over-allocation of emissions allowances in the carbon market, while not insignificant, also appear increasingly exaggerated. For example, the study of the Chair of Energy Sector Management at HEC Montréal to which Mme Grammond refers to predicted carbon market prices would be US$25 per tCO2e in 2024-2026 when they have already reached US$42 (CA$57) during the February auction. This indicates that the supply of emission rights is less important than expected in the study. In reality, carbon market prices are influenced by a number of factors. One factor that may help explain the significant rise in prices since 2021 is the entry into force of a much larger 2030 emissions reduction target in California.
Quebec and British Columbia
It can also be misleading to focus on prices. What about emissions trends? The best comparison is between Quebec and British Columbia, a province that also relies heavily on hydroelectricity. Emissions data from Canada’s National Inventory Report shows that in 2020, emissions have declined in Quebec and British Columbia since 2008 – the year British Columbia’s carbon tax was introduced – 11% and 5%, respectively. These numbers are surprising because British Columbia’s revenue-neutral carbon tax has served as a model for Canadian federal policy.
While British Columbia had to abandon its emissions reduction target for 2020, Quebec even exceeded it if we take into account the emissions rights purchased by Quebec companies from their Californian counterparts.
Overall, Quebec can be proud of the performance of its carbon market, even if improvements are of course possible. It might be useful to recycle part of the revenue generated and find effective measures to spend the surplus. For example, revamping the Roulez Vert program to target low-income residents or financing public transportation. But if federal climate policy is a good start, the rest of Canada should take inspiration from Quebec to achieve deeper decarbonization.
1. Read “Our carbon exchange is in the field”
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reference: www.lapresse.ca