Read on Twitter
I was lamenting recently to a university sustainability class that clear, long-term price signals are necessary for carbon pricing mechanisms to be most effective ...
... but political risk aversion prevents gov't from signalling the kinds of prices that are inevitably necessary for attaining future goals.
For a minority government with unknown runway before an election to stick its neck out and run on 10 years of incremental price increases is — well — extraordinary.
This is the kind of policy signal that makes clear the economics of immediate investments in physical capital that is amortized over multiple decades. "If you are not prepared to bring down emissions through further measures, here's what it will cost."
Anyone who has sparred with industry over additional GHG regulations that impact existing assets (and their threats of "stranded capital") will recognize how important these signals are for averting "investment expectations" arguments later.
But they're tough to implement because of the easy "sticker shock" that this offers to critics. You will definitely start seeing "467% tax increase" memes and talking points in coming weeks and months.
The reality is that the vast, vast majority of lower- and middle-income households will be better off through the Climate Action Incentive — as the price rises further, this starts to become something of a serious guaranteed income. https://www.pbo-dpb.gc.ca/web/default/files/Documents/Reports/RP-1920-024-S/RP-1920-024-S_en.pdf
And industry's competitiveness is still protected through the same measures that exist to date — plus the prospects of further competitiveness enhancement through border carbon adjustments.
It will be interesting to see, though, how provinces that have fallen to the federal backstop on carbon pricing will feel about the billions lost to Ottawa (who gets to return it to families).
Alberta, for example, could see this lost revenue grow to $5-8B per year by 2030. That could pay for a lot of interesting initiatives that are more suited to Alberta's unique economic and investment circumstances.
