Canada, U.S. need joint approach to carbon emissions: Study

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OTTAWA — Canada needs to act in unison with the United States on cutting carbon emissions in order to ease the impact on the country’s energy-intensive business sector, an economic think-tank said this week.

The C.D. Howe Institute study, a joint effort between the think-tank and environment specialists at Simon Fraser University, said the country could move forward with “tough” climate change policy — such as putting a price on carbon, through a cap-and-trade scheme or a tax — with little concern about carbon-intensive businesses fleeing to other jurisdictions, such as emerging economies.

However, that would require Ottawa and Washington agreeing to enact similar climate-change policies, it said.

Relocation of Canadian companies would be greatest if Ottawa “were to impose significantly higher carbon pricing than the United States,” the study said Tuesday.

“A joint Canada-U.S. approach would largely eliminate both the potential for (relocation) and overall competitiveness issues.”

President Barack Obama has pledged to reduce climate-altering carbon emissions by 80 per cent by 2050. The Conservative government had announced in 2007 a promise to cut greenhouse gas output by 20 per cent by 2020, but it used 2006 levels as a benchmark.

Environment Minister Jim Prentice has said one of his key goals is to work with the Obama administration on developing climate-change policies that do not inflict further pain on the economy.

The analysis said pricing carbon remains the most effective method of reducing greenhouse gases, but the method has political obstacles, as evident in the last federal election when the Liberal party was defeated and lost seats partly due to its Green Shift proposal. Moreover, the energy sector and other emission-intensive industries would aggressively lobby Ottawa against such a move.

There are policy tools, such as border tax adjustments, that Ottawa could embrace to protect certain industries from carbon pricing, but the analysis said that carries risks to the wider economy and there are concerns it may violate global trade rules.