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VIBERT: Cap and trade saves Nova Scotia consumers

Jim Vibert
Jim Vibert - SaltWire Network

Nova Scotia seems to have come up with a way to reduce greenhouse gas (GHG) emissions without causing much pain to Nova Scotian consumers, or polluters either for that matter.

Nova Scotia’s cap-and-trade system, designed to reduce carbon emissions, goes into effect Jan. 1, 2019, and the province positioned it as a program that will save Nova Scotians mightily when compared to the alternative – a federally imposed carbon tax.

The federal government has accepted Nova Scotia’s cap-and-trade plan as it meets federal emission standards. New Brunswick, Ontario, Manitoba and Saskatchewan aren’t so lucky, and face the federal tax, 90 per cent of which Ottawa has promised to return directly to the citizens of the province where it is collected.

RELATED: Nova Scotia's cap-and-trade carbon system accepted by Ottawa

If Nova Scotians are looking for someone to thank for saving them pain at the pumps, or from higher power and heating oil bills, they should likely start with the Conservative provincial government in 2007 that brought in the Nova Scotia Environmental Goals and Sustainability Prosperity Act (EGSPA) and set Nova Scotia on a path to greenhouse gas (GHG) emission reductions earlier than most jurisdictions.

Tuesday, Premier Stephen McNeil acknowledged the efforts previous governments made that positioned the province to meet the federal emissions standards.

By 2022, the cap and trade system will result in an additional reduction of about 650,000 tonnes of CO2 emitted by Nova Scotia’s big polluters. But that’s a fraction of the GHG reductions that have been accomplished since the EGSPA took effect.

By 2030, the province says it will have reduced total GHG emissions by 40 to 50 per cent of 2005 levels and will be a national leader.

Cap and trade means marginally higher energy costs for Nova Scotians.

For example, by 2022, the province expects the price of gas to increase by about one cent per litre as a result of the program, compared to the 11.6 cents per litre the federal carbon tax would add.

Power rates, heating oil and other energy sources will all increase, but again those hikes are much lower under cap and trade than a carbon tax. Power rates are anticipated to increase by about one per cent and home heating fuel will increase by about 1.4 cents per litre.

A factor mitigating cost increases to Nova Scotian consumers is that the allowances – which collectively make up the carbon cap – are largely being provided to companies at no cost, so there’s no cost to pass on to consumers.

Nova Scotia Power will receive 90 per cent of its carbon allowances free, and fuel companies will get 80 per cent of their initial allowances at no cost. Most other jurisdictions that implemented cap and trade charged for those allowances from the outset.

The trade component of cap and trade comes into play when industries have reduced their emissions below that required by their allowances and have room to spare. They can then sell the excess allowances to other companies that need them to cover higher emissions.

That’s the built-in incentive to reduce emissions under cap and trade. Companies that reduce emissions have a saleable asset – their unused allowances – while those that don’t will need to buy extra allowances.

Nova Scotia’s cap-and-trade system captures about 80 per cent of the total provincial GHG emissions. Nova Scotia Power, the large fuel companies and individual operations like Northern Pulp and Lafarge cement are mandatory participants.

Power generation is the province’s biggest single polluter, accounting for 44 per cent of Nova Scotia’s GHG emissions. On Tuesday, 54 per cent of Nova Scotia’s power was being generated by coal. Transportation accounts for another 31 per cent. Other sectors emit much lower GHG levels. Residential heat, for example, accounts for eight per cent of Nova Scotia’s total GHG emissions.

The province will earn revenue from the sale of allowances and from the penalties it collects from companies that exceed their allowances. It plans to use the money for other green energy programs, to help consumers with energy costs and to mitigate climate change impacts.

The environmental community was largely supportive of the province’s effort.

However, Meghan McMorris, Community Energy Coordinator at the Ecology Action Centre, noted the province’s plan falls short of what is needed to address the worst impacts of climate change.

According to a recent UN report, the world has 12 years to cut emissions far more radically than the reductions contemplated to date, and avoid catastrophic, irreversible damage from climate change.

So, Tuesday was a good day for Nova Scotia consumers. Polluters got free allowances. And there’s still lots of work to do to save the planet.

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