A Principled Approach to Policy Development
Peter Boag is President and CEO of the Canadian Fuels Association.
IT IS CLEAR THAT 2019 IS SHAPING UP TO BE A PIVOTAL YEAR FOR CLIMATE-CHANGE POLICY IN CANADA. What was, with some exceptions, a national consensus between the federal and provincial governments on carbon pricing as a preferred policy mechanism for GHG emission reduction has been unravelling in recent months. The ongoing political debate comes with plenty of rhetoric and too often, precious few facts.
Whichever policy emerges, its success will depend on adherence to some fundamental principles, including clarity, predictability and transparency. Clarity to ensure the meaning and outcome implications of the approach are fully understood by Canadians. Predictability to enable businesses and consumers to see the road ahead and plan for change. Transparency, most important of all, to ensure Canadians appreciate the true costs associated with the policy, and can make informed decisions.
If for no other advantage, placing a price on carbon at least provides some transparency; however, opponents of carbon pricing often favour some form of regulated approach. Consider renewable fuels mandates, low-carbon fuel standards, and forced electrification of the vehicle fleet—as in Quebec, which is setting mandatory sales targets for zero-emission vehicles. Experience has shown that policy approaches imposing technology through regulation or subsidization come with their own costs—if inherently opaque. Data buried in a regulatory impact analysis or an obscure web page hardly pass the transparency test. Research shows that the costs associated with these policies can reach hundreds or thousands of dollars per tonne of avoided GHG emissions compared to $30 to $50 per tonne—or less—with a carbon price. The Montreal Economic Institute, for example, found that the cost of avoiding the production of one tonne of GHGs in Quebec was $1,560 by subsidizing the purchase of electric cars versus $11.39 by purchasing emission quotas on the carbon market.[1]
Whichever policy emerges, its success will depend on adherence to some fundamental principles, including clarity, predictability and transparency.
The C.D. Howe Institute analyzed the federal government’s proposed Clean Fuel Standard (CFS) and determined that its economic cost would be high. In the interest of transparency, the Institute has encouraged Ottawa to “undertake a comprehensive cost/benefit analysis and feasible compliance modelling for a CFS, along with an economic costing of the plan in addition to a carbon price, both for businesses and for households, relative to a simple price on emissions.”[2]
Canadians want to make a difference regarding climate change. But there is a limit to how much sacrifice they are willing to make. They are not well served by regulations that take a command-and-control approach to direct what consumers and businesses must do, with hidden costs. Instead, clear, predictable and transparent policies will help Canadians make informed decisions about how they can best contribute to addressing the challenge of climate change. A policy that takes a non-prescriptive approach and fully informs businesses and individuals also propels them toward the lowest cost opportunity for compliance—and a greater likelihood of success in reducing emissions.
The role of the consumer in the climate policy debate—and the power of consumer choice—are a key focus of this issue of Perspectives. In “Policy Shift” we examine the challenges of getting people to change their behaviours and preferences. “Survive and Thrive”, by respected auto-industry analyst Dennis DesRosiers, explores the impact of vehicle quality improvements on how long consumers keep their vehicles, and the implications for emissions reduction. Stewart Muir offers his observations about the efficacy of carbon taxes in influencing both human behaviour and emissions reductions in “The Carbon Price Debate: A Distraction From Solutions.” We consider the vital economic importance of Ontario’s petroleum refining sector in “Irrefutable impact”. “Real World” showcases how driving behaviour can have a real impact on emissions. As always, our “Petro Profiles” introduce you to the caring and committed professionals who define Canada’s petroleum refining industry. And our three Canadian Fuels vice-presidents weigh in with further thoughts on carbon pricing, and valuable insights on the federal clean fuel standard and price volatility at the fuel pump.
With a federal election just months away, and writs scheduled to drop in at least three Canadian provinces this year, Perspectives again strives to ensure that debate about transportation energy is balanced and based on sound evidence. This is part of the petroleum refining industry’s own effort to uphold the principles of clarity, predictability and transparency. 
- Chassin, Y and Tremblay, G. Do We Need to Subsidize the Purchase of Electric Cars? Montreal Economic Institute, November 2014.
- Dachis, B. Speed Bump Ahead: Should Ottawa Drive Slowly on Clean Fuel Standards? C.D. Howe Institute, July 2018.
