Reducing carbon emissions is going to cost something

Heather Scoffield explores three options for reducing carbon emissions—a carbon tax, cap-and-trade and regulation—and explains that each involve costs.

The federal policy of regulating emitters sector by sector — “command and control,” as business likes to call the approach — also carries hidden costs. Buried deep in federal regulations to restrict emissions in the coal-fired electricity sector, officials explain that the costs of those new rules is about $16 billion in today’s terms. About half of the cost is due to increased consumption of natural gas that will be the side-effect of cracking down on coal.

The coal regs come with benefits too, which federal officials estimate will more than offset the costs by a margin of $7 billion. That’s because of the savings on health care, power generation and dealing with climate change. Similarly, the cost associated with regulations on emissions for heavy vehicles is about $800 million, by far offset by benefits worth $5 billion. And passenger vehicle rules are expected to cost Canada $4.2 billion, offset by benefits of $13.4 billion. So even though the Conservatives are not even close to finishing regulating emitters — they still have to do oil and gas, and several other major sectors — the costs are already well above the $20 billion Harper accuses Mulcair’s plan of costing.

Elizabeth Payne points out that carbon capture and storage—which the Harper government has committed millions in funding to—will need a meaningful price on carbon to succeed.

Officials with TransAlta, which walked away from a CCS project in Alberta earlier this year (one backed by more than $750 million in provincial and federal dollars), cited the lack of reasonable carbon pricing as a factor. Others in the industry have said the same thing. Some provinces, including British Columbia and Alberta have put prices on carbon.

It seems inevitable that the federal government will eventually have to as well, despite the frantic protestations to the contrary. Either that or explain to taxpayers why it is pouring so much money into massive carbon capture projects that will never do what they were designed to do because carbon capture and storage requires carbon pricing to make financial sense.

Looking for more?

Get the Best of Maclean's sent straight to your inbox. Sign up for news, commentary and analysis.