Canada will need a significantly higher carbon price if it hopes to use pricing mechanisms to meet its climate targets for passenger vehicles, the Laurier Centre for Economic Research concludes in a study released last month.
The alternative is to “rely on a series of regulatory measures that are even more costly,” the Globe and Mail reports. But with political battles brewing around its floor price on carbon, the Canadian government is indeed “developing complementary regulations to drive down GHG emissions in the transportation sector—rules that are costlier but more politically palatable than an explicit levy.”
Environmental economists Nicholas Rivers and Randall Wigle see a carbon tax as the most economically efficient way to cut emissions, compared to a suite of regulations and subsidies that “have impacts that are less noticeable to the public but far more costly”. Those hidden costs “are borne by consumers in the price of fuel and new vehicles, by industry and by taxpayers,” the Globe states.
Rivers said a price of C$175 per tonne, some of which could be rebated back to households, would be needed to cut emissions 10% in seven years. But he acknowledged the political barriers to such a high carbon price.
“Partly, it’s political—people don’t want to see this overt price that changes the price of gasoline so obviously,” he told the Globe. “Partly, it’s geopolitical, in that we don’t want to get too far ahead of our trading partners with a high price, for fear of making some of our industry uncompetitive.”
The Globe cites fuel efficiency standards, zero-emission vehicle policies, and a forthcoming clean fuel standard as measures the federal government is introducing to supplement the floor carbon price in its pan-Canadian climate plan.