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Restoring market functionality through carbon pricing

Economists, the business community, and many political leaders agree that the market is the best place to address greenhouse gas reductions. Right now in many jurisdictions in the world, carbon does not have a price. Companies and individuals are free to pollute uncharged, and therefore, have no incentive for reduction. With a price signal that greenhouse gases are no longer free to release, individuals begin to alter their behaviour, and companies begin to apply the ingenuity and creativity to reduce greenhouse gases throughout their processes.

This price signal must be strong enough to initiate action, but not overly high as to destroy the economy in the process.

Alberta has already placed a price on carbon. The province has set emission intensity targets for the largest GHG emitters, and when not met, companies can either purchase offset credits from other Alberta companies or pay $15/tonne of CO2 into a technology fund. The $15/tonne penalty essentially puts a price on carbon.

This approach provides certainty for industry and guarantees costs, both important to Alberta's competitiveness as it moves ahead of its trading partners. It also recycles the carbon charge to the industry and provides funds to invest in technologies needed to transform our economy.

As we move forward, an important question to consider:

- How much are consumers willing to pay? Placing a price on carbon will result in higher prices for consumers until new cheaper substitutes are found. Analysis done by Mark Jaccard, Simon Fraser University's climate change guru, shows that carbon charges near $100/tonne in Alberta could increase household energy bills by as much as 40 per cent initially. For a carbon charge at $30/tonne, the effect would be less pronounced at 5 per cent.

- Does the carbon charge that is collected stay in the region, so that the money can be reinvested into technology and infrastructure to result in actual emissions reductions? Or does the pricing system just transfer money from jurisdiction to jurisdiction like a cap-and-trade system?

- Is it fair and equitable that Albertans pay a price for carbon, while others in other provinces and countries do not?