CALGARY – To avoid wasting clean-technology research and development funding, the Canadian government should adopt a carbon price and encourage other countries to follow suit, a new report from the CD Howe Institute argues.
The report, published Tuesday, notes that Ottawa has earmarked $2 billion for the Low Carbon Economy Trust, the Ontario government has pledged $375 million for clean-tech research and development and the Alberta government plans to use some of the proceeds from its carbon tax to fund technology research to reduce emissions.
In order to get "the most bang for these public bucks," Syracuse University economist and author of the report David Popp said Canada should create a broad-based price for carbon, use the money from that tax for clean-tech research and encourage other countries to reduce emissions at the same time.
Popp's report noted that the domestic market for solar panels, wind mills and other clean-tech products is small relative to other OECD countries, and so actions by foreign governments to curb emissions will have an outsized effect on Canadian clean-tech companies.
Popp acknowledged it would be challenging for the Canadian government to push for policies in foreign countries, but suggested Canadian entrepreneurs target countries where carbon prices are more strict than the U.S. for their products.
"Get Canadian investors to turn away from the U.S. market and look more at the European market," Popp said.
Environment and Climate Change Minister Catherine McKenna said in an email that she was reviewing the report and the federal government knows "that carbon pricing is the most effective way to reduce emissions and stimulate investments in green infrastructure and low-carbon innovation."
The Liberal government has floated the possibility of a nation-wide carbon tax and has applauded efforts by provincial governments in Alberta, B.C. and Ontario to reduce emissions through carbon pricing or carbon trading programs.
Popp said it was not necessary for the federal government to harmonize carbon taxes or trading programs across Canada in order to achieve its goal, but it was important to have an emissions price that affected the majority of the country – something Saskatchewan Premier Brad Wall has publicly opposed at various times this year.
University of Alberta economics professor Andrew Leach, who chaired a panel that provided policy recommendations on carbon taxes to the Alberta government last year, said implementing carbon prices and policies is extremely difficult in practice.
"What is really challenging is there are so many overlapping policies in this area," Leach said and used the example of the Alberta electricity market, where carbon prices need to work in conjunction with existing laws for emissions and market regulations.
Like Popp, Leach recommended the provincial government use a carbon tax to fund research and development in clean technology and in resource industries.