Three core assumptions guided our approach:

• First, the overarching objective of our climate change policy should be to contribute to the global goal of climate stabilization;
  
• Second, Canada's medium- and long-term emission reduction targets have been defined; and
  
• Third, Canada has national economic and environmental circumstances that need to be taken into account in the design and implementation of its climate change and clean air policies.

Enabling Conditions for Managing the Transition

The NRTEE's research is premised on the federal government's commitment to achieve deep, long-term GHG emission reductions. We acknowledge that achieving these deep reductions poses real challenges given Canada's economic circumstances. But we also recognize that this challenge creates opportunities in terms of innovation and technology development.

It is in Canada's national interest to begin the transition to a low-emission future immediately. This Advisory Report concludes that the government's medium- and long-term targets are achievable. We also conclude that delaying action to reduce GHG emissions comes with economic and environmental risks. One such risk is that, in the absence of a long-term climate change policy framework, energy infrastructure choices being made now will be increasingly difficult and costly to address in the future. On the environmental side, the main risk involves higher cumulative GHG emissions over the time period in question.

To minimize these risks and ensure we achieve our long-term targets, the NRTEE sees the need for five enabling conditions that should be reflected in Canada's climate change policy framework:

• Canada will have to work in concert with the world 
  This will ensure that the adverse economic consequences of policy action - particularly in relation to the competitiveness of our exporting industries and major trading partners - are minimized.
  
• Policy certainty - beyond the short term - is central.
  Our analysis points to the need for a transition in policy from a short-term approach to a medium- and long-term focus in order to create the long-term predictability required for new investment in innovation and technology.
  
• An economy-wide emission price signal, implemented with complementary measures, is the core element of a policy framework.
  The most effective and efficient policy that would result in deep GHG emission reductions is a market-based policy, such as an emissions tax, a cap-and-trade system, or a combination of the two. This core policy then needs to be complemented by other regulatory policies to force emission reductions from parts of the economy that do not respond to a price policy.
  
• Technology deployment will be imperative.
  Our analysis shows that existing and near-term technologies are sufficient to meet our emission reduction targets, but all possible low-emission technologies will need to be widely deployed. These point to the need for development and implementation of other specific policies to facilitate and accelerate technology deployment.
  
• An integrated approach to climate change and air pollution should be pursued.
  Substantial benefits can result from a policy framework in which climate change and clean air measures are designed and implemented concurrently, as many sources of GHGs also produce air pollutants.

A critical point that the NRTEE would like to make, that falls not in the category of enabling conditions but in the category of absolute requirements for Canada moving forward, is that attention must be given to implementation of any policy measures considered and put in place. The mere development of a policy framework for climate change should not be confused with its implementation by government, industry, capital markets, and at the consumer level.

Recommendations

Drawing from the findings and conclusions contained in this report, the NRTEE makes the following recommendations to the federal government:

GHG Emissions

• Implement a strong, clear, consistent and certain GHG emission price signal across the entire Canadian economy as soon as possible in order to successfully shift Canada to a lower GHG emissions pathway, achieve the targeted reductions for 2020 and 2050, avoid higher emission prices that a delay would entail and reduce cumulative emissions released to the atmosphere.
  
• Institute a market-based policy that takes the form of an emission tax or a cap-and-trade system or a combination of the two.
  
• Develop complementary regulatory policies, in conjunction with the emission price signal, to address sectors of the Canadian economy that do not respond effectively to such a price signal or where market failures exist. Complementary policies should also provide support for research, development and demonstration of technologies, as well as strategic investments in infrastructure.
  
• Establish a Canada-wide plan, in the earliest possible time frame, that leads to better coordination of complementary federal, provincial and territorial GHG emission reduction policies aimed at common or shared targets, time frames and actions.
  
• Apply GHG emission reduction policies that incorporate adaptive management practices and have built-in monitoring and assessment mechanisms to allow for regular reviews to ensure efficiency and effectiveness. This approach will ensure that progress is monitored, compliance issues are addressed, and policies are adjusted to match the required level of abatement effort, and will minimize and mitigate unanticipated adverse outcomes.
  

Air Pollutants                             

• Address GHG emission and air pollutant reductions concurrently to ensure maximum health benefits to Canadians and greater economic certainty for industry, by designing and implementing co-pollutant reduction policies in an integrated manner.

For Both GHG and Air Pollutants

• Implement, immediately, the development and design of market-based policy instruments, plus complementary policies, for Canadian environmental objectives, economic circumstances and technology needs, following broad consultation with industry, environmental and other stakeholders, experts, and all other levels of government, drawing upon international, national, regional and local knowledge and experiences.

Looking Ahead

In order to better understand how to minimize the risks associated with the transition to a low emission society, we suggest that additional policy research be conducted. These issues include:

• further analysis of data gaps and modelling;
• policy design issues on our proposed market-based instruments;
• a "bottom-up" analysis of sectoral and regional implications of policy design;
• governance issues related to federal-provincial-territorial coordination of climate change policies, linkages to international frameworks and approaches; and
• consideration of potential benefits of addressing climate change.

« Previous — Next »