Newly Proposed "Medicare Model” Shows Carbon Pricing Has Legs in Ottawa


Huge white smoke from coal power plant

At a speech in Calgary, the leader of the Liberal Party of Canada today made the case that Ottawa should play a distinct role in tackling climate change and pricing carbon pollution.

Though the details of Justin Trudeau’s “Medicare model” are very much to be determined, his proposal is one more piece of evidence that carbon pricing is now a policy with momentum:

  • Washington governor Jay Inslee is championing a cap and trade system in his state
  • Ontario’s government says it’s set to announce a carbon pricing approach this spring. Early reports indicate that the system would take effect following next year’s budget.
  • With China’s regional carbon markets now up and running, the World Bank’s latest carbon pricing report concluded that a nearly quarter of the world’s carbon pollution is now covered by a carbon price.

The table below sums up where the Big Three federal parties now stand on carbon pricing. (We’ve left Elizabeth May’s party out, for space reasons, but suffice it to say that the Greens are very strong supporters of a price on carbon.)

Where they Stand:

Canada’s Major Federal Political Parties and Carbon Pricing

Conservative Party New Democratic Party Liberal Party of Canada
Should the federal government price carbon?
No. Action to curb emissions should be done by regulation and ideally in alignment with the U.S.. Yes, via a cap and trade system. Unclear. Today’s speech proposes negotiating a “framework to reduce carbon emissions across Canada” and says all provinces will “have to do their share”—but doesn’t commit that Ottawa will step in to price carbon if premiers don’t.
Should provinces price carbon?
Sure, if they want to: Alberta’s system, which consists of a regulatory target and several compliance options, won praise from the Prime Minister last year. It’s unclear how the federal NDP’s proposed approach would interact with provincial systems. However, NDP Leader Tom Mulcair supports Quebec’s cap and trade system and has called provincial carbon taxes “interesting additions” to a cap. Yes, under a “Medicare model” where Ottawa sets a national standard and provinces have flexibility about how to meet it.
Which approach to carbon pricing is best?
Conservatives now consider a cap and trade system and a carbon tax to be the same thing. The party is not a big fan of either mechanism A cap and trade system in which permits are auctioned and the resulting revenues are used for environmental purposes, largely in the provinces they were generated. That’s up to individual provinces to determine: Trudeau’s speech mentions B.C.’s carbon tax, Quebec’s cap and trade, and Alberta’s regulations.

It’s worth noting that despite years of over-the-top political rhetoric from Ottawa, all federal parties concede that a price on carbon in some parts of Canada makes sense.

That’s good news for Canadians—especially because the vast majority of our country’s population will actually have some form of carbon price in effect if Ontario does enact a system in the coming months.

It also means that politicians are catching up to Canada’s business leaders—who have supported carbon pricing for years—and to Canadians themselves.

As of today, two of the three largest parties are also clearly on the record that carbon pricing is a tool Canada needs in its arsenal in the fight against climate change.

But as Mr. Trudeau acknowledged, Ottawa is definitely not the only player on the field. B.C.’s carbon tax, for example, is a world-leading model that the province’s government will not want to abandon anytime soon. So for the short term at least, we do need to think about an approach that combines a strong price signal across Canada with flexibility for regional variations. A minimum carbon price, one that could be administered by provinces, would be one way to accomplish that.

Maybe, just maybe, Canada is finally moving from talking about whether to price carbon to how we’re going to make it work.


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