 Well, good morning and welcome everyone. I hope everyone has something to drink, something to eat. And welcome to the second event of our fall Close-Up Speaker Series. I'm Barry Rave. I'm a faculty member here at the Ford School and director of Close-Up the Center for Local, State, and Urban Policy. Do want to draw your attention to the fact that we'll be having a number of additional events in the coming weeks, including in November 1, related to a book launch, a new book on the Clean Air Act, a subject especially relevant for issues of environmental policy, climate considerations in the United States, Vivian Thompson from the University of Virginia, and the Virginia Air Quality Board, had a unique role of being an academic, but also in a direct role overseeing air quality issues related to the Clean Air Act and the Commonwealth of Virginia for about 10 years. Has a book linked to her experience, and she will be here talking about that on November 1. Followed on November 6 by Christopher Thomas, the former Michigan Elections Director. Elections are invariably a central issue for state and local governments, certainly in Michigan. And our Michigan Public Policy Survey, a major project of the Ford School in Close-Up, is looking at some of those topics in Michigan as well. So those should be two timely events, and we encourage you to put those on to your schedule. Today, we want to turn to a very important environmental topic and venture beyond our normal comfort zone, which is the United States. Anyone with interests in climate knows that there have been significant shifts in the United States related to national policy or federal policy on climate change. The reaction of the United States government to the Paris Accords and lots of uncertainty about what that means for a future federal role in carbon pricing, other areas of climate policy. Much less, what happens to states and localities. There is invariably, though, opportunity to learn from other federal systems. And it is, of course, impossible to think of a federal system that, from an American, but also a Michigan perspective, has more relevance than our neighbors in both Ontario, but Quebec, and Canada, and beyond. And so I'm really delighted to welcome Eric LaChapelle from the University of Montreal. Eric is a political scientist at Montreal, and I've had the great privilege of working with him for a number of years on some of our public opinion work, comparative political analysis, and we actually partner on some of our survey work where we're trying increasingly to ask some of the same questions in Canada through Eric's work as we've been asking in the US and asked, how do people who live in provinces compare with states and the like? The reaction to Paris and the reaction to latest shifts in the US have not gone unnoticed in the US, but also in Canada. And they arrive at a point where the Canadian engagement on these issues, a federal system with some formal central power, but enormous power on issues of energy and environment that tend to be delegated constitutionally and politically to provinces, really kicks in and makes this a very, very interesting question going forward. We have a few provinces that have actually partnered closely with the US, other states not, and much like the US, there's some different responses that we're beginning to see in the Canadian case. And I don't really know of any other scholar who's put together the package of engagement on public opinion, politics, some federal policy on these issues in Canada as our speaker today. And so please join me in welcoming, actually back to the University of Michigan after a pause of a number of years, Eric Lushapal. Thanks, Barry. So thanks, Barry, and thanks, everyone, for being here today. Just to be clear, though, I am from Canada, but I'm not here to accept any immigration papers into our country, so I just wanted to make that clear right off the get go. So just a few years ago, and Barry alluded to this, the world celebrated the signing of the Paris Accord. An international agreement signed by 196 parties committed, who committed to limiting, capping global surface temperature rise to two degrees and taking measures that are consistent with pursuing a cap of 1.5 degrees Celsius. Since then, close to 100 signatories to that agreement indicated that they have or are considering carbon pricing as a way of achieving those emissions reductions that they agreed to in Paris. But as the world now moves towards implementation on these commitments, a number of questions arise. So for instance, we know that carbon pricing is, at least in theory, a very elegant, simple solution to reducing greenhouse gas emissions. We want less greenhouse gas emissions. Let's put a price on this and encourage or incentivize behavioral change that's going to reduce these emissions. On the other hand, political scientists like Barry, myself, and others have uncovered that this is actually a little bit more complicated politically when it comes time for implementation. So in this context, the Canadian case, I think, is a really interesting case study for us in Canada, for others around the world, to look at how governments might actually go about implementing carbon pricing. Why? Well, as Barry alluded to, four provinces in Canada, so far, actually have carbon pricing implemented in their jurisdictions. British Columbia has a carbon tax. The Quebec government has a system of cap and trade, which actually worked within close collaboration with the California government, with the linked carbon market with California. Ontario is now on board with a similar carbon market. And Alberta, of all places, now has a carbon tax on fuels of $20 per ton. So there's a lot going on in terms of carbon pricing in Canada. And most recently, the federal government has announced a policy of trying to pan Canadian framework that is implementing a minimum price across Canada for all provinces. And my talk will focus on that policy today. So there's a lot going on in Canada. And I think it's a really insightful case for looking at these sorts of issues. Just need this clicker here. So the outline of my talk. I just want to situate the Canadian case, because I'm sure not everyone is familiar with the intricacies of Canadian federalism. And I think it's really important to understand some of the politics that I'll be talking about today. It's really important to understand the idiosyncrasies of the Canadian case. So I want to situate the Canadian case and get everyone up to speed on that. And I'd like to follow that with a very high level description, but an important one, of Canada's approach to climate change policy in the post-Paris era. And again, I'll be speaking a lot about that pan Canadian framework that I alluded to earlier. Then I'd like to talk about how we got there. How did we get from this very elegant idea? And how did we overcome some of the political obstacles to carbon pricing? Or how was Canada trying to overcome some of those political obstacles? And then importantly, I want to look at the future prospects of this policy. So to start, Barry tells me you might not all be familiar with Canada. So I wanted to start with where in the world is Canada. So can you tell me on this map where Canada is? As you might guess, we're right up here above the United States. Now this is significant. It's not just a joke. This is actually significant because as a Northern nation, Canada has already warmed by about 1.6 degrees Celsius, which is about almost 3 degrees Fahrenheit already. That's about two times the global average. If you look in Northern Canada, average surface temperature has increased by 2.2 degrees Celsius or almost 4 degrees Fahrenheit. That's three times the global average. So this is the warming that's already occurred in Canada. Canada is actually very vulnerable to climate change. There's a bit of a debate about the extent to which the Canadian economy might actually benefit from some warming in terms of agricultural yields, et cetera. But it's clearly the case that Canada is already feeling some of the effects of climate change. Canada is also geographically large. As you can see, I know Americans won't like to hear this, but we're actually bigger than you in terms of sheer landmass. Smaller, however, in terms of population. But this too is significant because Canada's geography and its climate helped to explain why we're relatively dependent on fossil fuels for things like heating, moving around, and that sort of thing. So just in terms of context, I think it's important to situate Canada on the map here. Now let's see if you can spot Canada on this chart. Let's ignore the left panel. The left panel is only looking at global greenhouse gas emissions between 2005 and 2013. And so we see an important increase in the level of greenhouse absolute emissions in the world. But in terms of Canada's share of those emissions, you really got to squint to see Canada. So we see China at the top responsible for about a quarter of greenhouse gas emissions. US, about 15%. I'm rounding the numbers here. Canada barely cracks the top 10. And if you look at Canada's share of global greenhouse gas emissions, that's less than 2%. This is important because it's played into some of the narratives. So some of the people that don't want to have strict climate policy in Canada often point to this number and often cite this number as saying, well, you know what? Canada is only responsible for 2% of greenhouse gas emissions. What we do really doesn't matter if the US and China aren't on board. Now China is on board in the Paris Accord. But as you know, the United States is not. This kind of argumentation is still present in Canadian political debates. The US is not there. We're only responsible for 1.6 of global emissions. What can we really do? It's a drop in the bucket. But counter to that, others are going to point to Canada's per capita emissions. And here you see that Canada is actually an important player. In terms of per capita emissions, the average Canadian emits about 25 tons of CO2 equivalent per year. That's about four times the world average that you see here. So on a per capita basis, the average Canadian is actually quite responsible for, you know, we contribute to this problem, right? And while some of these relatively high per capita emissions can be explained by some of the things I alluded to earlier, like our geography and Canada's climate, another important aspect is Canada actually is a very important producer of fossil fuels. We're in the top 10 for coal, oil, and natural gas. And this might be surprising to some that Canada is actually the fourth largest oil producer in the world, ahead of places like Iraq, United Arab Emirates, and Iran. So I'm sure some of you didn't actually know this. But this is an important aspect of the political economy aspect, because we actually, Canadians, some regions in Canada, some companies in Canada, some workers in Canada, actually profit from the fossil fuel production, which is an important aspect or an important cause of global greenhouse gas emissions. So that makes action on climate change in Canada a little bit tricky. Now this next slide presents another important feature of the Canadian case. And this is actually kind of shared with the United States, right? So Canada is the highly regional nature of the emissions profile in Canada. So what we're showing here is that, well, basic Canadian geography, there are 10 provinces. And we have three territories in the north. And if you look across the provinces and territories, you're going to see a very different emissions profile. So the numbers here are actually per capita emissions per province and per territory. And what we see here is, and it's color coded. So the darker reds are going to be higher per capita emissions. And the lighter, and I'm a little bit color blind with yellows and greens and reds. So I'm going to say this is a yellow, a pale or color, indicates lower per capita emissions. So what you see here is that the emissions are really concentrated in two provinces. This is Alberta here. And this is Saskatchewan here. 60 tons of CO2 equivalent per person in these regions. That's an astronomical figure if we're thinking about the world average being somewhere about five. Five are roughly thereabouts. Another thing I wanted to point out here is that places like Alberta and Saskatchewan, which are highly dependent on, their economies are highly dependent on fossil fuel production, oil production, are almost about a quarter of GDP in some of these places rely on indirectly and directly fossil fuel production. They have an economic stake in the status quo. It's also the case that a carbon price, a national carbon price equivalent across the board, is going to have a different incidence on places like Alberta. So a $10 carbon tax is going to be more significant for Alberta than it is going to be for somewhere in Quebec or other places where greenhouse gas emissions are less intense. Something else I wanted to mention with this slide is that these provinces, the oil producing regions of Canada, they're landlocked. So if they want to sell their products and get their products to market and actually increase production and increase production of their fossil fuels, which they're interested in doing, they need pipelines. So I'm sure you're all familiar with the famous debate over the Keystone Excel, which was nixed by President Obama. Trump is kind of breathing some new life into that proposal. One option is to ship Canadian oil down through to refineries in Texas. Another option is to build extended pipelines and refurbished pipelines on the west coast. And then tankers can then bring that to market. And there's also talk of the Energy East Pipeline, which would cross four provinces or five provinces and would ship oil outside of Canada to the east. Now, this is a highly controversial and highly salient, and I'll be alluding to this later. But I just wanted to mention the economic stakes involved for these provinces, which again makes action on climate change politically tricky. And I'm finishing up my background, but I think it's really important to get a sense of where emissions have been going since 1990. So we have a sense of who's kind of relatively more polluting and who's less polluting in Canada. And there's quite a bit of a difference. But generally, Canada's overall emissions have increased by about 20% since 1990. So despite the fact that we had commitments at Kyoto and this sort of a thing of minus 6% relative to 1990, we've actually increased emissions by 20%. But this is highly variable across the different regions and provinces. So the two largest provinces, we have two really big provinces here in terms of absolute. So these are absolute emissions. The top blue line is Alberta. And we see that the emissions in this province have been increasing substantially since 1990. In Ontario, the second largest producer of greenhouse gases in the country on a completely different trajectory. Emissions have been decreasing quite a bit, actually minus 6% since 1990. The reason for the increase in Alberta, I'm sure you can all guess, is the increase in fossil fuel production in this province. The reason for the decrease in Ontario, we see that in 2000, there's a dip here, which roughly corresponds to the economic recession of 2008. But it's actually, I'm sure the recession had something to do with it, but there was one decision, the phase out of coal fired power generation in Ontario, which removed 40 megatons from Canada's annual greenhouse gas emissions profile, which is the single largest reduction in greenhouse gas emissions in North America. Okay, on the continent. That's one decision. So that explains why Ontario has decreased. If you look at the other provinces, I just wanna note that in British Columbia, we see an increase and in Saskatchewan, we see an increase of, British Columbia is important because British Columbia, although it looks relatively green here, it's green because it produces electricity almost 100, mostly from hydroelectricity. But it's also an important producer of fossil fuels, coal in particular, and increasingly natural gas. But a lot of these fossil fuels are exported and they're not burned inside the province. So that's why it's relatively, we'll say green on that slide. Okay, back to my quiz. Okay, show of hands. Who's more powerful, the Prime Minister of Canada, Trudeau or President Trump? So who says Trump is more powerful? I know he's got small hands, but he's got quite the military backing. And then Trudeau, right here, he actually looks like a train boxer there. Actually, this is kind of Canadian politics 101, but it's crucially important to understand some of the specificities of the Canadian case. Canada is a parliamentary democracy, which means that in contrast to the US presidential system of checks and balances, a parliamentary democracy fuses the executive in the legislative function, okay? That means that the Prime Minister controls his cabinet and the cabinet controls the legislative assembly. So it's very easy once a Prime Minister has control over the House of Commons, over the legislative assembly, that person, that Prime Minister, can do a lot of things that the President can't do. Okay, there's a lot less checks and balances in the Canadian system than in the American one. So thank God you don't have a parliamentary democracy in the United States, but this gives enormous power to our Prime Minister. But it also gives enormous power, right? The principle of responsible government, the principles of parliamentary democracy extend to the provinces. So that means that within their respective spheres of jurisdiction, provinces also have a high degree, or provincial primaries, leaders in provinces also have a high degree of political power. So in order to kind of complete our little background of Canadian politics 101, I wanted to, so we know that the Prime Ministers and primaries are very powerful within their respective spheres of jurisdiction, but what are those spheres of jurisdiction? So the Canadian constitution divides power between the federal and provincial governments as follows. The federal government is responsible for a lot of things, but in terms of climate policy, what's most salient is international treaty negotiations. The federal government has the sole authority to sign international treaties. Inter-provincial and international trade is also a prerogative of the federal government, cross-jurisdictional pipelines, and fiscal measures. Fiscal measures will be important because when we talk about carbon taxation, that's one of the few levers actually that the federal government, one of the few important levers that the federal government has in terms of climate policy. Turning to the provincial governments now, one of the big differences between Canada and the United States, by the way, is the mineral rights property regime. In the United States, subsurface mineral rights are owned by landowners. In Canada, subsurface mineral rights are owned by the provinces, in terms of their management, the ownership, et cetera. That gives provinces enormous control over an important source of greenhouse gas emissions. Provinces are also responsible for things like transportation, buildings, land use, agriculture. A lot of the important levers of climate policy actually fall within provincial hands. So this creates a situation of interdependence, right? The federal government sets, can set international climate targets at international treaties as much as it wants, but it's dependent on the provinces to help implement policies that are going to realize those emissions reductions. Conversely, provinces, although provinces did attend the Paris Agreement, that was more symbolic than anything else. Provinces can't set, and they can't play a former role in international negotiations. So they rely on the federal government to represent their interests at the negotiating table. This relationship of interdependence, climate federalism. This is why climate change in Canada is fundamentally a federalism issue in Canada, and that's what my talk will be about today. And just maybe the last point here, the environment is one of these weird things because when the Canadian constitution was written, they weren't really thinking about environment and environmental policy, right? The environment is a shared jurisdiction with the federal government, which again really renders climate policy making complex in the Canadian system. This is a history of climate change policy at the federal level in Canada since about 1990. And I won't, I could spend quite a bit of time on this, going through the different action plans and this sort of thing, but I think the important thing to take away from this chart is Canada is very, very good at setting international targets, of greenhouse gas reduction targets, right? G7, Rio, 1988, 1992, an important reduction here. The World Conference on the Changing Atmosphere in Toronto, another target was set. The Kyoto target of minus 6% relative to 1990 levels over a period spanning I think 2006 to 2012. That's the target there, but look what happened to emissions. So Canada is really good at setting targets, but dismal at meeting them, okay? And that has to do with what I had mentioned earlier, because getting the provinces on board has proven to be really difficult. Getting all the provinces on board singing the same tune, having provinces implement the policies required to get to these substantive emissions reductions hasn't always been easy. So that's, that was then, and this is now. This is what Canada's climate policy looks like today. In one picture, sunny ways, right? I'm sure you've all heard of Justin Trudeau, or perhaps you've heard of our new Prime Minister, Justin Trudeau, who was elected in October 2015 in a historic landslide victory. It's actually the first Canadian dynasty. It's the first father, son. His Trudeau's father was a Canadian Prime Minister, an important Canadian Prime Minister. Earlier in the, a few decades ago. Importantly though, Justin Trudeau, in his election, in his, during that campaign in 2015, barely mentioned climate change. It's in the platform, but it's like on page 32. The first time climate change is mentioned is on like page 32. Carbon pricing was mentioned once. But the first thing he did when he took power, one of the first things he did was, he rebranded Environment Canada, right? The government agency responsible for environmental regulation federally. He rebranded Environment Canada, Environment and Climate Change Canada. Then in November, December, he shows up in Paris. Canada is back, my friends. He starts, he wants to play. He, Canada re-engages with the international community. You may not know this, but in 2011, Canada actually was one of the few countries that actually was in Kyoto and repudiated Kyoto and actually got out of Kyoto in 2011. Canada disengaged from the international efforts to reduce greenhouse gas emissions with Trudeau, Canada's back. Canada was one of the first industrialized countries to formally endorse the 1.5 degree Celsius target that is now in the Paris Accord. And in December 2016, the Canadian First Ministers minus Saskatchewan negotiated and adopted what's known as the Pan-Canadian Framework on Clean Growth and Climate Change, okay? So what is the Pan-Canadian Framework on Clean Growth and Climate Change? This is a policy document, right? It's more of a framework than anything. It's not actually, it hasn't actually been implemented yet. It's a very important nuance. Nevertheless, it's a policy document that was negotiated in December 2016 with the agreement. So something that we've, I think, never had in Canada before with the agreement of all the provinces except Saskatchewan, okay, with the notable exception of Saskatchewan, but still pretty remarkable. It's extremely vague, however, in terms of funding sources and implementation schedules, but it includes an impressive array of policy areas and policy priorities that Canada is saying we're putting forward that provinces have agreed to in terms of putting emphasis on to realize the emissions reductions agreed to in Paris. So some of these, and I don't have the list, it's a huge list, anything from coal phaseout by 2030, phasing out fossil fuel subsidies by 2025, zero emission vehicle, a national plan for increasing the number of zero emission vehicles on the road, emissions, new emissions performance standards for light and heavy duty vehicles. It's got everything, land use, public transit. It's, you know, it reads everything but the kitchen sink is really in there. But again, very vague on funding sources, very vague on implementation schedules. But the one thing that has captured the attention of most people in Canada, and I'd say internationally as well, is this commitment to a national carbon price. Right, so that's this point here. So the first point is that this is a climate policy package and the carbon price is introduced within this broader framework. But the national carbon price is an important pillar within this national framework. And this carbon price pillar has a few important characteristics, right? The first thing is that Canada wants a common price across the country by 2018, which is just around the corner as you can see. It's based on, it's actually really flexible. Two systems, it should actually say three systems. The official wording is that it's two systems but it's actually three systems. So what this means is that jurisdictions can implement an explicit price-based instrument, i.e. a carbon tax, equivalent to the federal minimum requirement or the carbon price floor that increases over time. I'll mention that, that's a separate point. Or they can implement a carbon market, right? A carbon cap and trade market that is consistent with emissions reductions that would get you the same reductions of an equivalent carbon tax. Or this is where I say it's a three system, not a two system approach. A hybrid system is also acceptable, right? A hybrid system being a tax on the consumption of fossil fuels and an emissions trading market for large final emitters that emit over a certain threshold. So it's actually three systems. So that's why I say it's flexible in the sense of we want a price, we don't care how you do it, okay? Legislated increases in stringency. So in the policy document and provinces agreed to this minus the sketch one, it starts off at $10 per ton in 2018, increasing by $10 each year up till 2020 until it reaches $50 per ton in 2022. I'll talk a little bit about what that means for gas prices a little bit later. Next point, revenues remain in the jurisdiction of origin. This is really interesting, right? This is one of the most interesting features of the policy. So the government has said this is going to be revenue neutral from the perspective of the federal government. Right? Every dollar collected as part of carbon pricing and the different carbon price jurisdictions will go back to, will remain in the jurisdiction with when they were collected. Note that it says jurisdiction and not province, okay? Initially, this was interpreted as, oh, the federal government will impose a price on certain provinces, it'll take the money and it'll give the money back to the province. It's almost like a gift to the province, right? You can claim credit for the money and what you do with the money and you can avoid the blame and say it's Trudeau's carbon tax or Ottawa's carbon tax. But actually, upon further reading and upon further debate, we've realized that it's actually, this was a very judicious use of the word jurisdiction because what the government does with the money it collects is still up for debate. They might actually give the money back to, rebate checks back to Canadians living in the province. So it will be returned in the jurisdiction from which it was raised without kind of bypassing going to the provincial government. There's a five year review on a reporting system to see, to kind of ratchet things up over time. Now the federal carbon price backstop, okay? So this is a backstop. It's a minimum requirement that all provinces must meet by 2018. Otherwise, the federal government will go in there and implement the carbon price for you, okay? And that's what upset certain governments. It's composed of, this federal carbon price backstop is composed of two key elements, a carbon levy applied to fossil fuels and an output based pricing system for industrial facilities. This was actually modeled after the Alberta policy which was implemented by the recent NDP government in 2017. We'll probably return to that later on in my remarks. Both elements will apply in a jurisdiction that does not have a carbon pricing system in place. The backstop will also supplement or top up systems that do not fully meet the benchmark. And the implementation timing, the government was expecting to introduce legislation this fall, right? I said it's the legislation hasn't been introduced. It was expecting to introduce legislation this fall. The latest is that that's probably going to be delayed. They're still in negotiation with some of the provinces that are kind of deciding how they are going to respond to this. And the output based pricing system will not come into effect before January 1st, 2019. So this is still very much, I think it's more than a proposal, but there are some open questions and some significant questions that remain. And the rest of my talk will look at that. But before I get into that, I wanted to mention why this policy is fascinating for a number of reasons. First, the policy is interesting in that the flexibility of the instrument allows provinces like British Columbia, Alberta, Ontario and Quebec to keep their existing policies, right? And for the provinces, other provinces to pursue carbon pricing that makes sense for them. This was a huge issue behind closed doors. The Truro government actually wanted a carbon tax in all provinces and places like Quebec and Ontario resisted saying, you know what, we already have a carbon market. Thank you very much. And if that's the way, we have a right to choose the way to price emissions in our province. The policy also raises all kinds of questions regarding the equivalency and relative stringency of provincial carbon pricing across the Canadian provinces, right? So as you, as I'll mention in a second, the BC carbon tax presently is at $30 per ton. Carbon permits are trading in Quebec at about $15 per ton, so about half of that. That's created quite a debate. BC is upset, the British Columbia has been upset that they're paying $30 per ton and carbon is selling at half the price across the country. And then Quebec turns around and says, well, if we can reduce emissions cheaper, who are you to say we should have a carbon tax, right? So it's very delicate, very sensitive, very important political debates happening in Canada right now around these issues. Really quickly, I just wanted to show you, this is modeling from the Canadian government that shows these are the projected emissions as of December 2016 to 2030, right? We see a rise and a bit of a decline at 2025. With the pan-Canadian framework measures, here are the projected emissions, so 567 megatons, a significant decrease, but won't quite get Canada to its target of 523 megatons, which is 30% reduction relative to 2005 levels by 2030, right? So even with this policy, which is still highly uncertain, politically controversial, we're still not quite there in terms of getting two emissions reductions agreed to in Paris. So how did we get here? I don't have time, I'd like to know how I'm doing for time, but okay, I see it, 25, yeah, great, thanks. So how did we get here? So I don't want to take away from what we've seen in the past year, two years, right? It's a remarkable progress from where we were just a few years ago. The fact that nine Canadian provinces have signed up on this, the fact that this looks to be moving forward, I think is remarkable progress in just a short amount of time, but at the same time, and in order to understand this progress, we need to understand kind of how we got here. I don't want to spend too much time on this, but this comes from actually a co-authored chapter, Barry Daviduil, who's a former postdoc here, and I wrote a few years ago, and it looks at kind of the ebbs and flows in terms of federal and provincial leadership on the climate change issue. And I won't walk you through everything, but just to say that when climate change first appeared on government agendas, there was no significant policy, right? There was a lot of target setting as you saw, but no significant policy was made. In 1995 to about 2001, this corresponds to the Kyoto negotiations, right? And this was a period of contested federalism. So the backstory is, apparently, the provinces had agreed to a 0% reduction commitment for Kyoto. Then Prime Minister Kretzian, who got wind of the European Union's target of minus 8%, and Bill Clinton's target of, I think it was minus 5%, correct me if I'm wrong, some thereabouts. Trudeau, not Trudeau, Jean Kretzian, who was the prime minister at the time, actually a lame duck prime minister at the time, because he was being pushed, literally, being pushed out of office, because he was there for so long. Unilaterally, instructed Canadian negotiators to set the target at minus 6%. The provinces were blindsided. We're very upset that this happened. Quebec was the only province, by the way, that wanted a more ambitious target. All the other provinces said 0% is perfectly fine with us, especially the oil producing provinces. That set off a period of history in Canadian climate policy that we can characterize as contested federalism, because the provinces were so upset that they didn't want to implement, so the implementation became a huge issue. We had commitments in Kyoto, but all kinds of inter-provincial bickering, inter-governmental bickering, so that set off a really, you know, kind of a dark era in Canadian climate policy development. In 2002 to 2005, new government, Jean Kretzian is out of there. In about 2003, replaced by Paul Martin in the same political party, the Liberals. Stefan Dion, who was then the environment minister, had proposed a national cap and trade program. They were gearing up for its launch, but then an election happened, and the Conservative power came into party, which kicked off an era of very low federal engagement in climate change politics and set the stage for high provincial leadership in climate policy development. So what happened was, during this period, Alberta was one of the first provinces to move in terms of developing a specified gas emitters regulation. So this was an intensity targets, which intensity targets are in emissions per unit of production for about 100 entities in the province. The compliance options were to purchase offsets if you didn't meet that target, or you could pay $15 to a technology fund, which most of them actually did because that technology fund would be recycled back into the pockets of industry, or you could use previously generated emissions performance credits that were gained by beating that intensity target. In Quebec, 2007, one of the first jurisdictions, I think the first jurisdiction in North America to implement a very modest carbon tax at $3 per ton, representing just about one cent per liter at the pump. Nevertheless, so this was primarily a fiscal measure intended to raise money to the redevance annuelle au fond-vard. So all of these proceeds would go into a green fund, which would then fund Quebec's climate change, mitigation and adaptation measures. Now, at present, now those policies no longer exist anymore. What we have are carbon prices, fixed carbon prices in BC and Alberta, and carbon markets in Quebec and Ontario. So these are the four jurisdictions with carbon pricing. I'll get to this in a second. Let's just concentrate on the left panel for a second. So in British Columbia, the second jurisdiction, but maybe the first jurisdiction in North America to have a comprehensive carbon tax. So not just a carbon tax, not just a tax on fuels and fuel distributors, but actually a tax on all, a comprehensive tax on most fossil fuels, on all fossil fuels in the province. That is at $30 per tonne since 2012, right? It was introduced at $10 per tonne in 2008, increased to 30, 2012, and since then it's been frozen. The Alberta carbon levy just introduced in 2017, it replaced or it will replace the specified gas emitters regulation. It starts off with a $20 per tonne carbon tax on the consumption of fuels since 2017. This is really Nixon in China. This is, right? Alberta is that red province that produces a lot of fossil fuels. A new NDP, so a left of center government elected in 2016. One of the first things that they do is implementing this important policy which is highly controversial in that province. Quebec has a functioning carbon market since 2013 and Ontario since 2017 also is now auctioning credits in a carbon market that is expected to link with Quebec and California. This panel here, I just wanna say just how important cross national collaboration was in the development, especially in the Quebec and Ontario carbon market. So I'm sure you've heard of, you're more familiar with California than you are with the Canadian cases. California is an important incubator, I guess, of climate policy ideas, anything from the emissions standards for vehicles which diffused into Canada, adopted first by Quebec then by the federal government. This idea of cap and trade, Western climate change initiative, not really Western because you have some eastern provinces here that are actually, California's trading partner right now for in the carbon market is a Canadian province and it was developed together collaboratively. So the United States policy in the United States, especially policy in California has had an important impact on the development of climate policy in Canada. At the time, and I think British Columbia, I don't know what the status are, but they were observers, they were supposed to implement a carbon market. They went with the carbon tax and since then carbon markets are not really on the table in British Columbia but Ontario has now since become a partner with the functioning market and outmanitobus status is still kind of up in the air. So we have very few examples of, we have very few examples of political dynasties in Canada. So allow me to indulge a little bit of one of my interpretations of why Trudeau has kind of gone ahead and implemented this carbon price. Recall that it wasn't talked about during the election, right, but once he's in power, clearly climate change is a top priority issue for the Trudeau government, right. To me, this is an indication that Justin Trudeau is motivated primarily by good policy as opposed to good politics. If it was good politics, he would have been talking about this during the election campaign, but no, this is more of an issue. This is, I think Trudeau believes that this is important. This is an important issue and he wants to move forward on this question. Another interpretation, so good policy motives, but there's this other interpretation and that's this legacy issue. So a little bit of history, and this is a little bit, I think it's really interesting. Trudeau's father implemented the National Energy Program that was in place in Canada between 1980 and 1985. The National Energy Program was a very controversial measure. It was implemented in the context of contraction of global oil supply, rising prices throughout the 1970s, right, the OPEC oil crisis, and the United States transitioning from the world's largest oil producer to a net importer of oil. Pierre Elliott Trudeau, Justin Trudeau's father saw this as an opportunity to kind of put Canada on the map and he wanted to nationalize energy oil, the oil industry in Canada, wanted to take back some of the ownership that was being, you know, a lot of American companies at the time were involved in oil extraction and development in Alberta. So Trudeau Sr. developed this policy that was highly controversial of nationalizing the energy production in Canada and was hated for it in the West, right? Absolutely hated for it. It caused, it kind of stoked sentiments of Western alienation. It gave rise to a movement in Western Canada. The West wants out. Let the Eastern bastards freeze in the dark. This is our energy. So there's this one interpretation that Trudeau, he wants this, he's really motivated by good policy motives, but at the same time he wants to avoid repeating the legacy of his father, right? So what's he to do? This is, so Trudeau now wants, recently the Trudeau government approved pipelines. The Kinder Morgan pipeline and Enbridge pipeline to export or to move oil from Alberta to the West Coast in British Columbia. And this is kind of, you know, Bill McKibbin who's going to be here this week has written that Trudeau's a climate policy hypocrite, right? At least Trump, he doesn't talk out of both sides of his mouth. Trudeau on the other hand wants action on climate change, wants to reduce greenhouse gas emissions, but all of a sudden he's approving pipelines, right? There's a bit of a contradiction there. Which leads, so my interpretation of this is that, you know, Trudeau wants a carbon price, but he doesn't want to, he wants to avoid feelings of Western alienation and imposing too much costs on Alberta. So this is just, so there's this idea that by linking these two controversies, right? Pipelines are very controversial in Canada. Carbon pricing is very controversial in Canada, right? But for different reasons. Pipelines are loved by Western Canadians, conservative Canadians who also hate climate policy. People, green Canadians, however, it's the opposite. They hate pipelines, but they love climate policy commitments. Trudeau is developing a really risky strategy here, where he's trying to find some kind of a compromise and see if pipelines might be a pathway to consensus. So the slide here is showing some data from an abacus data, which is a research group in Canada, looking at views on, so this is kind of a cross tab, looking at views of Prime Minister Trudeau's carbon price. Is it a good idea? Is it acceptable idea? Is it a bad idea? We see that of those who think that Trudeau's carbon price is a good idea, 46% approve a pipeline. And of those that think Trudeau's policy is a bad idea, whoop, support for a pipeline is at 52%. So there's this idea that by having a pipeline, maybe we can kind of increase support for carbon pricing in Canada. I think it's a risky strategy because I think you might end up, you risk alienating both sides of, especially your base. So that's in a nutshell, what Canada's approach to climate policy is and how we got there, right? It's a story about Canadian federalism. It's a story about trying to find, strike compromises between the different interests of a regionally heterogeneous federation. Now what are the future prospects of this policy? I see at least three major challenges going forward. And the first, as you might expect, begins here. The Trudeau government was expecting Clinton to win, as most people I think were. Now they face the prospect of, and these policies were already being developed before the election in the United States. All of a sudden, Trump gets power in the White House, which raises the question, can we really go ahead with these pretty ambitious policies in Canada? There's always been a debate in Canada with respect to what is Canada's room for maneuver? To what extent can Canada have a policy that is independent of the United States? And why is this such an issue? It's because of the relationship between Canada and the United States, the trade relationship, and a very important, too highly interwoven, economically interdependent economies. I have the stats here. About 80% of Canada's exports in 2016 were destined to the United States. 94% of Canadian energy exports go to the United States. Conversely, I think it's about 52, US exports to Canada represent only 18% of US exports. Okay, so this is a highly asymmetric, interdependent relationship between Canada and the United States, and there are voices in Canada that have always said, Canada can't get too much out of step with its most important trading partner lest it lose international competitiveness in its international markets, right? So we would, in other words, we're going to penalize Canadian exporters to the United States, manufacturing and energy exporters if we're gonna make Canadian products more expensive, while the United States doesn't have these sorts of policies. So there's this idea that Canada can't go ahead with these policies given the current climate and context in the United States. And if you look at the role, so this raises the question of what role US policy should play in Canadian climate policy. This is some public opinion data that asks the following question. It asks respondents to choose between two options. Canada should hold off on carbon pricing to avoid having a competitive disadvantage with the United States, that's in blue, and or what the US does shouldn't matter. Canada should implement carbon pricing now. So I've only put the numbers, all numbers should equal 100. I only put the numbers here for the blue. And what you see is overall 55, so the opinions are really divided on this question. Overall, 55% of Canadians think Canada should hold off. So there's this idea that Canadians are relatively cool to the idea of being too far out of step with the United States. So this is challenge number one for Trudeau. And if you look across regions, look at Alberta and Saskatchewan. 65% of people living in Alberta unsurprisingly don't want to get, don't want Canada to be too much out of step with its most important trading partner. But I would argue that the main obstacle for the pan Canadian framework on climate change is less international, less what's going on in the United States, and more a domestic political economy story, something that I've alluded to throughout my talk. So these are some of the provincial reactions to Trudeau's carbon price. Sorry, Quebec and Ontario were immediately on board saying, yes, this is a good thing. Of course, right? They have a carbon price, they want other jurisdictions in Canada to have a carbon price. Their carbon price happens to be lower than other provinces, so there's no issue there as well. With this important caveat or qualification that almost immediately the premiers of these two provinces, especially in Quebec, came out saying, yeah, this is good policy, but you know what? We're not getting rid of our carbon market, right? We're not going switching to a carbon tax. So there's that some qualification there. British Columbia supports the federal approach, but raised the question of equivalency in terms of stringency. And so I mentioned this earlier, the $30 per ton carbon tax in BC, how do we square that with the $15 per ton credits selling in the Quebec and Ontario cap and trade market? So there's an issue there, which has sparked the whole debate about stringency and equivalency, which is ongoing today and is a challenge. Alberta has required, is on board, they have a carbon price, and they're going to be replacing the specified gas emitters regulation soon with a performance-based, intensity-based system similar to what the Pan-Canadian framework has, but the Alberta is actually requiring approval for federal development. So here's a quote from Premier Rachel Notley. This has to be concurrent with a pipeline. An ambitious public policy move like this, even as worthwhile as this, needs to be built on top of a fundamentally healthy economic foundation. And a new pipeline is what will give that not only to Alberta, but to the rest of Canada. Importantly, this argumentation is how Notley justified or sold her carbon price to, I guess, a somewhat resistant public in Alberta. Interestingly, I won't get too far into it, but interestingly, some of the ways that the Alberta has justified their carbon price in terms of market access, right? So I'm sure you're familiar with the debate of dirty oil. We don't want tar sands oil from Alberta. They're not doing anything in terms of climate policy. This is a carbon bomb. The idea is that if Alberta has a carbon price, then they can buy back a little bit more legitimacy on the international stage and kind of protect their access to markets, their export markets by saying, yes, we're a producer of oil, but we also have strict climate policy at home. Take our oil. You can use our oil without feeling too bad about it. Other provinces, Manitoba, a relatively small province neighboring Ontario, has delayed its signature of the Pan-Canadian framework and asked for more federal funding for public health sector. So here we get another kind of linking across issues. Manitoba's saying, you know what? We're open to your carbon pricing regime, but what about those healthcare transfers? Saskatchewan has opposed carbon pricing outright, saying that carbon pricing is not in the interest of the people of Saskatchewan, not in the interest of its economy and will disproportionately hurt its energy sector, which is already reeling from low oil prices. This is probably the reaction you'd expect from Alberta as well, but not with someone like Rachel Nautley, who was in power, who's the left of center government. That's open to this idea of having a carbon price, using that money to modernize the economy, build a new green economy, and also protect access to markets. Have this social license, I guess you could call it. Now, the Atlantic provinces, Nova Scotia, New Brunswick, Newfoundland, and PEI are all developing carbon pricing policies, and I don't wanna get into the nitty gritty because this gets technical really quick, but there are some issues here, right? So Nova Scotia, just last week, I think, released its plans for its carbon market, so it wants to go the route of cap and trade, but there are huge issues here in terms of equivalency. This is actually what's really holding up the implementation of legislation, or the introduction of legislation in the House of Commons this fall. It might still be introduced, but there's a lot more negotiations happening as we speak. So this, to me, is the real challenge, right? It's less Trump and what's happening in the United States, because let's be honest, there are things happening in the United States despite Trump. California just recently re-extended its cap and trade legislation. There's a lot of things going on in the United States that bode well for climate policy in North America, I guess one could say. The real challenge is, I think, these domestic political economy issues across provinces. What about public opinion? So there are three options for governments, and I'll try to wrap up quick because I wanna keep times for questions, but there are three basic options for governments, right? One, you can come up with your own, or continue to implement your own plan to put a price on carbon, or you could do nothing and let the federal plan take effect. That's the federal backstop, right? The federal government will impose a carbon price for you, or you can fight the implementation of a federal carbon tax. Does this sound familiar, by the way? CPP, right? Clean Power Plan, different options for, but I just wanted to highlight where the different carbon price jurisdictions, the public of these different carbon price jurisdictions stand. So if you look in British Columbia, 41%, right? So the modal category says, let's continue with our tax. Quebec, 45%, let's continue with our cap and trade market. So far so good, but if you look at Alberta, let's fight the implementation of a carbon tax, and similarly in Ontario, the modal category here. So that's a majority, but the close to a majority here is even in Ontario, there's actually quite a bit of support for fighting implementation of the federal PCF. Another key challenge, will the provinces with carbon prices actually survive upcoming elections? So we have elections coming up, provincial elections coming up in Ontario, Quebec, and Alberta, we just had elections in British Columbia, Christie Clark lost power, but was replaced by an NDP Green Coalition, don't worry, the carbon tax isn't going anywhere, okay? In British Columbia, so that, but these three other provinces where elections are relatively imminent, right? Are all very vulnerable. So Kathleen Wynn's approval ratings are a dismal 15%. Okay, I was reading some polls as I was preparing for this talk. She has the lowest approval ratings in, I forget how many years now, but I think in the last 14 years for an Ontario Premier, 76% of people in Ontario say it's time for a change, of that sentiment, it's time for a new government. She's not doing too well. The good news is her main opposition, the Conservative Party actually supports carbon pricing, but not a carbon market. They support a revenue neutral carbon tax. So while the Ontario policy is up in the air, carbon pricing I don't think is particularly vulnerable. Let's move on to Alberta. This is, well let's move to Quebec because Quebec's a little bit easier. So Cuyar is actually not doing too well either, 32% approval rating. Recently, just as I was in the cab on the way here, well on my way to the airport to come here, the results of a by-election in Quebec City were happened and the Liberals Cuyol's party lost power in a riding that they've held for the last 14 or 20 years, something like that, to the CAQ party, which is the only party that kind of, if anybody is going to oppose carbon pricing, it's that party. So while by-elections aren't excellent predictors of electoral support, they do provide some indication of the way the winds are blowing and it's not looking too good for the Quebec Liberal government at the time we speak. But I still think that the Quebec policy, Quebec carbon price is pretty solid because there's actually more or less a consensus in Quebec that carbon pricing and action on climate change is good. So the real question is in Alberta, right? The heavy fossil fuel producing province. Rachel Notley is not doing too well in the polls, 28% approval rating. It's fallen ever since. I have the graphs in my extra slides. It's been on a downward decline ever since this carbon price was announced. So she's not doing too well, but fundamentally what's really gonna matter, I think, for Rachel Notley's electoral fortunes and the longevity of the carbon price in Alberta is her ability to get a pipeline through, or the ability to get, if Rachel Notley gets the pipeline, then her argumentation that we can have a pipeline and we can have carbon pricing and everybody can be happy will kind of bear fruit. The last thing I'd say though, and this is pretty important, the federal government modeled their policy, their backstop on the Alberta model, right? It's a price on fossil fuels with an intensity-based performance-based, sorry, with a performance-based system for large final emitters. That's exactly what Rachel Notley has developed, the Alberta government has developed. If she loses power and the conservatives remove the policy or trash the policy, the federal government under the PCF can then go and impose ostensibly, more or less the same policy and all is not lost. So there's this idea of, which I think is a very forward-looking, was pretty smart by the federal government. So I'm gonna conclude with this slide. This is some of our polling that we've done. And we looked at support for Trudeau's carbon price with no cost specified, the two cents per liter, which corresponds to a $10 per ton and the 11 cents per liter, which corresponds to a $50 per ton. And what we see is, as you increase the price per ton, the opposition increases. This is, that's generally, so there's actually quite a bit of support for a carbon price in the abstract, but once you talk about the impact, even a two cent per liter impact at the pump, you're decreasing support by about 10% and by about another 15% at 11 cents. Amongst Liberal Party of Canada supporters, even higher carbon tax support, but once you add a $50 per ton, which is the government's policy in 2022, you're at about 50-50, right? 50% support, what is that? 40% opposition and then the rest are undecided. So it's pretty divisive, even within the Liberal Party of Canada supporters, so that's something to keep in mind and to look at over, monitor over time. Okay, so just to conclude, I don't wanna say what kind of lessons can we draw, but what kind of things emerge out of this, out of this story of carbon pricing in Canada? Well, the first thing I'd wanna point out is the role of horizontal and vertical diffusion, from bottom up to top-down federalism. So there's, you know, the provinces during that period of innovation that I had talked about, during that period of federal disengagement and provincial engagement, actually created their own carbon pricing and that actually really influenced the federal government's approach to carbon pricing that we have today. Other influences on provincial carbon pricing actually came from here, the United States, especially California, but in other places as well. And there's the possibility of a Trump effect, but Trudeau looks like he's dug in his heels and he's going to resist any potential Trump effect. What are the paths to coordinated carbon pricing in federal systems? This is a key, this is probably one of the fundamental questions. And the Canadian case identifies two potential pathways, there may be more. First is the role of the federal government in determining minimum standards, as we've seen with the PCF. And a second potential pathway is the scope for provinces to lead, is there a scope for provinces to lead a coordinated response? Ala WCI, Ala Quebec, Ontario, collaboration on cap and trade, now potentially moving to the Atlantic provinces where they seem to be wanting to integrate a regional cap and trade market for the Atlantic provinces. So there's, so despite the fact that the federal government seems to be determining the minimum standards, there nevertheless seems to be some capacity for provinces to nevertheless contribute to a coordinated carbon pricing system in a federal system. Last two points, I couldn't help while preparing this talk about parallels with the Clean Power Plan, which I'm sure you're probably even more familiar with than I am, I haven't followed it too much. But this idea of the federal government setting minimum requirements with which states must comply, otherwise the federal government will step in, the EPA in this case, would step in to regulate for the state. Just, it strikes me as a really interesting parallel and a really interesting comparison. So for your term papers, you might wanna maybe think about looking at Canada and I'd be interested in feeling any questions you might have or helping you out in that regard. But one of the key differences is also the limited flexibility of the price floor. So whereas the Clean Power Plan was very kind of agnostic on the means of how to meet the requirement of the emissions reduction, the federal government, the PCF framework, actually is a little bit more stringent in saying they wanna fix the price at $10 per ton, let's say. And that actually makes equivalency more of a challenge. So that I think is an important piece of the equation. Finally, the political economy of implementation. Fascinating questions that arise when looking at the Canadian case. I think the same issues arise when looking at the American case. Can consensus through compromise and compensation be achieved? So Waxman-Markey is a good case of this, the 300 extra pages that nobody read before it went to Congress. This idea that we can kind of broker our way, find compromises, cut back room deals, is that a way to consensus? And if so, do the distributional politics approach, which that kind of compromise and compensation embodies, does that lead us directly to a lowest common denominator approach? Watering things down through these compromises in order to get the minimum coalition, the minimum coalition to kind of get these things through, I think is an important question. So this is a very legitimate question in terms of looking at, does the distributional politics approach get us to where we need to be? What are the potential implications of that approach? So that concludes my talk. I think we have sort of 10 minutes for questions and answers, and I'll be happy to take your comments and questions. Thanks.