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JOHN IVISON: Report showing how high carbon tax must go to meet Paris targets gives Tories major ammo

Leader of the Opposition Andrew Scheer rises during Question Period in the House of Commons, in Ottawa, Wednesday, May 29, 2019.
Leader of the Opposition Andrew Scheer rises during Question Period in the House of Commons, in Ottawa, Wednesday, May 29, 2019. - Adrian Wyld

Calculating anything so far into the future is a bit of a mug’s game, but for Andrew Scheer this is too good an opportunity to let slip

The Conservatives have been raising expectations over the climate change plan that leader Andrew Scheer will unveil next week.

In a short video released to promote the speech next Wednesday, Scheer promised a “real plan to protect our environment, fight climate change and reduce global emissions.”

To underline the emphasis on the international aspect of the plan, he reiterated his impatience to “take our fight against climate change global.” That strongly suggests the Conservatives will claim credit for low-carbon energy exports that displace emissions-intensive sources like coal. Let’s hope not. No country in the world gets credit under the United Nations Framework Convention on Climate Change for emissions that happen outside its borders, unless the importing country agrees a deal to hand over carbon credits to the exporter. Those valuable credits won’t be exchanged for nothing.

In the absence of the plan’s details, we are left with the drum-roll.

One interesting thing about the Conservative climate change strategy has been the focus on the Liberal government’s projected failure to meet its Paris emission reduction targets.

As my colleague Marie Danielle Smith noted in a story based on an internal Conservative memo , the communications plan aims to make people aware that Canada is not on pace to meet its Paris commitment of a 30-per-cent cut in emissions from 2005 levels by 2030.

The “#Not-As-Advertised” campaign says the Liberal carbon tax will have to go a lot higher if Justin Trudeau wants to meet his Paris targets. “He knows that but isn’t telling you,” says one of the campaign’s social media posts.

With impeccable timing, the Parliamentary Budget Officer, Yves Giroux, released a new report Thursday calculating exactly how high the carbon tax will have to go to meet the Paris commitment of a reduction to emissions of 513 megatonnes of CO2 equivalent by 2030 (from 732 megatonnes in 2005).

Giroux and his colleagues estimate that under current policies and measures, emissions will fall 79 megatonnes short of the target in 2030.

To bridge that gap, the PBO estimates that an additional carbon price rising from $6 per tonne to $52 per tonne in 2030 would be required. That would be in addition to the $50-per-tonne scheduled for 2022 in provinces covered by the federal backstop — an explicit carbon price of $102 per tonne. For perspective, that represents an additional cost of 23 cents for a litre of gas.

There are a number of caveats to this calculation. For one thing, it assumes carbon pricing would be applied evenly across the economy, except agriculture, and in all provinces. That would mean an end to the output-based allocations that shield some large emitters from the full cost of the carbon tax because they operate in competitive international businesses, the worry being they could decamp from Canada and pop up elsewhere, with no emissions reduction. If the output-pricing system were to stay in place, the carbon tax would have to be higher.

Calculating anything so far into the future is a bit of a mug’s game, and the PBO offers a range of analysis: a scenario where GDP growth is faster (and thus emissions higher); one where growth is slower (and hence emissions lower); plus, an alternative scenario where technological advancement happens faster than assumed.

But if we take the PBO’s best guess at face value, it suggests challenging times are ahead for the oil and gas industry under a rising carbon tax. Emissions from the sector are projected to increase 12 megatonnes by 2030 as production growth continues.

The authors suggest that oil sands production would remain “viable” but they forecast that for Canada to close the 79 megatonne gap, the oil and gas industry would have to reduce its emissions by nearly half that amount — 37 megatonnes — rather than the predicted 12 megatonne increase under the status quo.

That could be done without output reductions, if technology is applied to reduce the intensity of emissions per barrel. The challenge may be made less daunting thanks to market forces — the impact of shale oil on oil sands competitiveness and the rise of the electric car. But it’s clear that a carbon tax of $102 per tonne would negatively impact the National Energy Board’s calculation that crude oil production will see a 50-per-cent increase by 2040.

The PBO report provides the Conservatives with a storage depot of live ammunition to fire at the Liberals. Within three hours of its release, the party issued a rather smug press release pointing out that to meet his Paris targets, Trudeau will have to put gas prices up 23 cents a litre.

On Wednesday afternoon, environment minister Catherine McKenna downplayed speculation about carbon tax increases after 2022. “The price will not go up, the plan is a price until 2022,” she said. “That is what was negotiated with provinces and territories.”

But the PBO report makes it pretty clear: if the carbon tax does not rise to twice the level penciled in for 2022, Canada will not achieve its Paris targets.

‎Still, the report provides the Liberals with some cover. It points out the general consensus among economists is that explicit carbon pricing is the most cost-effective approach to reducing greenhouse gas emissions — and that regulatory measures and subsidies impose a higher, if less visible, cost than carbon pricing.

Scheer was chosen as leader in 2017 because he was the continuity candidate — he promised to take the Harper government’s policies and present them in a more palatable fashion.

He has avoided criticism thus far by saying little of substance and doing less. But that ends next week. In an election where affordability and climate change are set to be top of mind for voters, Scheer has to offer a credible plan that straddles both concerns.

• Email: jivison@nationalpost.com | Twitter:

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