National, provincial and territorial governments across Canada have implemented a myriad of policies to reduce greenhouse gas emissions in recent years. However, these stubbornly high emissions have only just started showing signs of falling.
In principle, each level of government is working toward the same goal. Yet, the approaches they use vary in effort, design and coverage — with some emissions sources covered by multiple policies while others remain unregulated.
To achieve our emissions goals, we need federal, provincial and territorial policies paddling in the same direction in addition to synchronized efforts to maximize our impact.
In our new study, recently published in Climate Policy, we examine the development and design of climate policy mixes across Alberta, British Columbia, Ontario and Québec, as well as at the federal level, and evaluate their expected impact on emissions abatement.
Regulatory sticks over policy carrots
Over the last 20 years, the number and types of climate policies implemented in Canada and globally have expanded dramatically.
Policy “carrots” — economic incentives, such as subsidies for low-carbon technologies — are by far the most common policy type and have also been found to be more politically popular. But, it is the mandatory regulations — the regulatory “sticks” — including carbon pricing and flexible regulations that are expected to do most of the heavy lifting.
While the increased effort toward implementing climate policies across jurisdictions is good, synchronized policy decisions are better.
We see many instances of overlapping policies across provinces that can support or undermine our emissions reduction objectives. Most policy interactions (74 per cent) help reduce additional emissions. For example, incentivizing electric vehicle adoption while decarbonizing our electricity grid can create greater emissions reduction than either policy can on its own.
However, interactions between overlapping policies — particularly across provincial/territorial and federal levels — can also lead to unintended consequences that undermine our policy objectives.
For instance, electric vehicles earn credits under the federal vehicle emissions standards in excess of their actual emissions intensity (prior to policy changes coming in 2025).
This can mean that when additional provincial policies incentivize the adoption of electric vehicles, like B.C.‘s zero emission vehicle sales mandate, they allow even higher emissions intensities from the rest of the vehicle fleet while still meeting the federal standard. This can result in a net increase in emissions.
Need for synchronized climate policies
Understanding how policies work together is critically important.
Consider the case of Canada’s alternative approaches to carbon pricing. When additional policies are imposed to reduce emissions from fuels covered by the federal carbon tax, the incentive from the carbon price adds on to the incentive from the other policy.
This is because the increase in cost of higher polluting goods from the carbon tax does not change in the presence of additional policy. For example, in British Columbia, fossil fuel use for transportation is disincentivized by both the province’s carbon tax and low-carbon fuel standard.
However, the interaction differs when the additional policies to reduce emissions are also covered under a cap-and-trade program. Cap-and-trade programs set a limit on the total greenhouse gas emissions from regulated sectors such as electricity, transportation and heavy industry.
A set quantity of emissions allowances are then allocated or auctioned to firms by the government. These allowances are then used to account for that firm’s greenhouse gas emissions. This is seen in the provinces of Québec and Nova Scotia, for now.
Additional policies can reduce emissions from sectors covered by the cap and with it, the demand for emissions allowances. This makes it easier to achieve the limit set by the cap. However, since the limit set by the emissions cap remains unchanged, additional policies don’t necessarily contribute to any additional emissions reduction, but simply shift costs and emissions between activities.
Such interactions have important implications for how we compare the stringency of carbon pricing systems across Canada in relation to the federal benchmark.
Provinces across the country vary in their economic structure, access to energy resources and political ideologies. So it is no surprise that alternative policy approaches are being pursued.
For instance, Alberta, which relied on the oil and gas sector for nearly 25 per cent of GDP and 10 per cent of government revenue in 2019, has implemented about half the number of policies as the other provinces studied.
However, ensuring policies work together to achieve our goals requires greater co-ordination and co-operation across, and between, governance levels. Re-invigorated inter-governmental bodies like the Canadian Council of Ministers of the Environment offer a path in this direction.
The variety of policies implemented across the country also highlight the importance of evaluating policy choices within the context of the broader policy mix — a key consideration for climate accountability bodies such as the Net-Zero Advisory Body and B.C. Climate Solutions Council.
We are all in the same boat. And if everyone is paddling in their own direction, we can veer off course and make it even harder to reach our destination. To propel us efficiently towards our emissions targets, policies and programs across national and provincial jurisdictions need to paddle together.