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Climate Action 2009-2010

REGIONAL FOCUS: CANADA

REGIONAL FOCUS: CANADA © fstop123/iStockphoto Addressing regional economic variations while meeting a national cap Pierre Sadik Manager of governMent affairs, DaviD suzuki founDation LEADERSHIP 206 With strong national and regional government policies, Canada can meet a science-based greenhouse gas (GHG) emissions target in 2020 and have a strong growing economy, a higher quality of life than Canadians currently enjoy, and continued steady job creation across the country. However, the Canadian government needs to implement far stronger policies than it has proposed to date to meet even its current modest GHG emissions target in 2020. CANADA’S ROLE Like most industrialised countries, Canada is at a crossroads regarding the economy and climate change and how the two will intersect in the period leading up to 2020. With the UN climate negotiations in Copenhagen this December, and with the process of establishing meaningful climate policies well underway for Canada’s major trading partner to the south, the David Suzuki Foundation and Pembina Institute conducted a study to raise the level of understanding and debate on the economy and climate policy. Climate Leadership, Economic Prosperity is the first Canadian study of its kind to show regional impacts on employment and gross domestic product, and the first to examine comprehensively how Canada can meet a greenhouse gas reduction target for 2020 that goes beyond the federal government’s target. We commissioned leading Canadian economic modelling firm M K Jaccard and Associates and struck an advisory committee comprising senior bank economists, federal government and federal agency officials, among others, to help guide the study. Ultimately, the analysis brought forth credible answers to how Canada’s economy would fare in the face of both a science-based emission reduction target of 25 per cent below 1990 levels by 2020 as well as the federal government’s more modest target. The Government of Canada’s current greenhouse gas (GHG) target of 20 per cent below the 2006 level by 2020 represents a modest reduction of three per cent relative to the 1990 level. Figure 1. Absolute growth in GDP 2010-2020 under business as usual and with climate change policies. KEY FINDINGS Climate Leadership, Economic Prosperity yielded significant findings, including: } Canada’s gross domestic product would continue to grow at 2.1 per cent per year on average between 2010 and 2020 while meeting the science-based target, compared to 2.2 per cent for the government’s target and 2.4 per cent under business as usual. } Canada’s total number of jobs would grow by 11 per cent between 2010 and 2020 while meeting either target – essentially the same rate as under business as usual. } The urgent need to address very high emissions in Alberta and Saskatchewan would reduce projected growth rates in these provinces. However, Alberta’s per capita GDP would continue to be much higher than that of any other region, and Saskatchewan’s per capita GDP would stay close to the Canadian average. } To meet the two degrees Celsius target, a carbon price would start at CAN$50 per tonne in 2010 and reach CAN$200 per tonne by 2020. To meet the government’s target, the carbon price would need to reach CAN$100 per tonne by 2020, or CAN$145 per tonne if Canada does not purchase any international credits. } Almost half of carbon price revenue can be returned to Canadians through reductions in income tax. Revenue from carbon pricing can also fund major public investments to reduce greenhouse gas emissions, such as building smart grids and transit infrastructure. VISIT: WWW.CLIMATEACTIONPROGRAMME.ORG

REGIONAL FOCUS: CANADA Figure 2. Emission reduction technologies and actions taken to achieve science-based target. } Technological approaches to achieve major reductions in Canada’s greenhouse gas emissions range from increased energy efficiency and renewable energy to carbon capture and storage. INTERNATIONAL COMPETIVENESS The study examined two different scenarios under which Canada could achieve either emissions target in 2020. In the first scenario, “OECD acts together,” other OECD (Organisation for Economic Co-operation and Development) countries implement GHG emission reduction policies at least as strong as Canada’s. If Canada’s major trading partners implement similar policies, their costs of production will change by a similar amount to Canada’s, reducing the likelihood that customers of Canadian goods will replace their purchases with foreign equivalents. In the second scenario, “Canada goes further,” other OECD countries do not implement a meaningful price on GHG emissions, and Canada’s GHG reduction policies are sufficiently stronger than the rest of the world that Canada can be considered to be “acting alone.” In this scenario, the analysis shows some shifting of GHGintensive activities to other jurisdictions. However, we ensure that no manufacturing sector experiences a decline in output (relative to today’s levels) by returning some carbon pricing revenue to producers in proportion to production levels. In both scenarios, developing countries are assumed to have considerably less stringent GHG reduction policies than OECD countries between now and 2020. The results lend support to the notion that Canada can feasibly implement much stronger GHG reduction policies than the U.S. and other OECD countries without undue trade-related impacts. INTERNATIONAL CREDITS Canada’s substantial delay in introducing a national climate change policy entails a price in achieving a meaningful climate change target by 2020. In our study, the federal government invests in substantial volumes of international emissions reductions to meet either of the two targets, thereby lowering the cost of meeting them. For example, if Canada purchased no international reductions, the carbon price would need to reach CAN$145 per tonne by 2020 to meet the government’s target. Moreover, the analysis shows that Canada cannot meet a science-based target entirely domestically without forcing an unrealistic rate of capital stock turnover. REVENUE RECYCLING Under the carbon pricing policy modelled in our study, emitters would have to pay for every tonne they emit, either by purchasing emission allowances auctioned by government in a cap-and-trade system, or by paying an emissions tax. This would generate considerable government revenue. The analysis shows that the revenue from carbon pricing would be more than $70 billion per year by 2020 under the science-based target, and over $45 billion per year by 2020 under the government’s target. It is important to note that, in our approach, almost half of this revenue is returned to Canadians in the form of reductions in the rate of personal income tax, which provides a boost to job creation and take-home pay. Smaller portions are used to fund public investments to reduce GHG emissions, to make payments to individuals to compensate for regional variations in household energy cost increases, and to protect the international competitiveness of the most vulnerable manufacturing sectors. CONCLUSION Our analysis shows that with strong policies, Canada can meet a science-based target in 2020 and have a strong, growing economy, a quality of life higher than Canadians enjoy today, and continued steady job creation across the country. However, far stronger policies than the federal government has proposed to date must be implemented. Meeting Canada’s GHG reduction targets requires a significant price on global warming emissions broadly across the economy, and backing this up with strong complementary regulations and public investments. Author Pierre Sadik holds a law degree and is the Manager of Government Affairs at the David Suzuki Foundation in Ottawa, Canada. Pierre has worked extensively in the environmental field in both Ottawa and Washington, D.C. His expertise lies in the area of market-based instruments for greening the economy as well as the use of sustainable development strategies to promote sound environmental governance. Organisation The David Suzuki Foundation is committed to protecting the diversity of nature and our quality of life, now and for the future. We work with government, business and individuals to conserve our environment by providing science-based education, advocacy and policy work, and acting as a catalyst for the social change that today’s situation demands. For further information: Climate Leadership, Economic Prosperity can be downloaded at www.davidsuzuki.org LEADERSHIP 207 VISIT: WWW.CLIMATEACTIONPROGRAMME.ORG

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    Contents 8 Advertisers Index 9 Than

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    53 57 61 Alternatives to carbon off

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