Benchmarking – Chapter 3.5
Chapter 3
Canada and the G8 Indicators: Detailed Ranking of Canada’s Low-Carbon Performance
3.1 EMISSIONS AND ENERGY
3.2 INNOVATION
3.3 SKILLS
3.4 INVESTMENT
3.5 POLICY AND INSTITUTIONS
3.5 POLICY AND INSTITUTIONS CATEGORY
CANADA RANKS 6TH IN THE POLICY AND INSTITUTIONS CATEGORY. WHY THIS MATTERS:
A low-carbon economy will come about only as a result of committed and focused public policy direction. The nature of the response to climate change and low-carbon competitiveness requires countries to adopt horizontal policy initiatives across jurisdictions and sectors and support these with ongoing policy adaptation and governance mechanisms. From the presence of a low-carbon growth plan (LCGP), to carbon pricing, to guiding governance mechanisms, the implementation of strong, integrated public policies is imperative for a successful low-carbon transition. Policy certainty is a key signal to private investors and consumers that a new, different, and reliable focus on low-carbon is essential and emerging. It tells individuals whether and how to reduce energy use, and firms whether and how to develop low-carbon energy alternatives. As no one policy measure will successfully shift any country or society onto a low-carbon pathway, governments need to consider and adopt a range of policy instruments designed for differing national, regional, and sectoral economies and needs. Appropriate governance mechanisms for managing policy implementation and administering monitoring and evaluation activities are equally important. Policies and institutions can therefore act as an important enabler of a nation’s ability to address climate change challenges and to achieve low-carbon performance objectives over time.
THE INDICATORS
Three indicators were selected for the policy and institutions category:
// PRESENCE OF A LOW-CARBON GROWTH PLAN (LCGP)
// GREENHOUSE GAS (GHG) TARGETS AND ACCOUNTABILITY
// CARBON PRICE COVERAGE AND STRINGENCY
Presence of a Low-Carbon Growth Plan Indicator
PRESENCE OF A LOW-CARBON GROWTH PLAN, OR LCGP, in a country is an indicator of national leadership in developing and implementing a comprehensive strategy for a low-carbon economic, environmental, and social transition.
An LCGP can be defined as:
“a strategic plan to assist the country in shifting its development path to a low-carbon and climate resilient economy and achieve sustainable development. It is based on the socio-economic and development priorities of the country. It has a long-term component that includes a strategic vision and a short- and medium-term component that shows which specific actions will be undertaken to get on a low-carbon, climate resilient pathway.” [55]
A number of key success factors for the development of LCGPs have been identified, including senior government leadership, strong data and analysis of mitigation potential and costs, extensive stakeholder engagement, and continuous improvements to the plan to build consensus around priorities.[56] LCGPs developed to date are neither consistent in methodology, nor content. They can be very quantitative and goal-driven, or more conc erned with qualitative assessments of policy needs. Some place more emphasis on mitigation and competitiveness in a low-carbon economy, while others include more of an adaptation focus.
As this is a “yes/no” question (the indicator measures whether a country has an LCGP or not), there is no ranking of any G8 country. Canada does not have an LCGP; only Japan and the U.K. do. The U.K.’s Low-Carbon Transition Plan and Japan’s Action Plan for Achieving a Low-Carbon Society represent the only LCGPs within the G8. The climate bill in the U.S. meets the criteria, but because it has not been passed in both Houses of Congress it does not receive credit in this benchmarking exercise. Other countries, including Canada are at various stages of implementing policies and measures to reduce emissions and stimulate investment in and market penetration of low-carbon technologies, but no comprehensive LCGP has been attempted or initiated.
The U.K. Low-Carbon Transition Plan[57] is one of the most substantive LCGPs produced to date. Sectoral priorities highlighted by the U.K. include power generation; energy use in homes, communities, and workplaces; transportation; agriculture; and waste. Driven by the goal of achieving emission cuts of 18% from 2008 levels by 2020, it includes a five-point plan:
// Protecting the public from immediate risk
// Preparing for the future
// Limiting the severity of future climate change through a new international climate agreement
// Building a low-carbon U.K.
// Supporting individuals, communities, and businesses to play their part
As emerging economies and key trading partners plan for policy development and investment in low-carbon markets, the potential for Canada to lag behind in a carbon-constrained future grows. Development of a Canadian LCGP would offer an opportunity for a collaborative engagement process to assess the country’s vision and to develop the policies required for future low-carbon competitiveness. According to research conducted by the OECD and others, pitfalls to avoid include development of the LCGP by an external body (instead, it should be country-led), lack of integration into mainstream decision making, lack of policy prioritization, poor stakeholder engagement leading to lack of local ownership, and use of out-of-date or inaccurate information.[58] Building on the experiences of others in developing successful plans will help Canada reduce its learning curve and develop strategies and solutions for long-term economic development with a lower emissions profile.
GHG Targets and Accountability Indicator
GHG TARGETS AND ACCOUNTABILITY is a four-level indicator. It is aggregated to assess on a yes/no basis the presence of (1) medium-term GHG targets, (2) a central independent body to measure GHG progress and performance, (3) a public reporting role for the central independent body, and (4) mandatory peer-review of GHG-emission forecasting and measurement.
The foundation of any viable low-carbon performance policy by a country are its GHG reduction targets. These indicate the level of climate ambition by a nation as it creates the focus of policy efforts to achieve those targets. But the mere presence of targets is insufficient; governments and citizens need to know how they are progressing on meeting those targets. Accountability, derived from independent measurement and reporting on target achievement, helps authorities assess the effectiveness of policies and actions. And it helps citizens determine whether their governments are moving in the direction and at the speed they want to reduce greenhouse gas emissions. But effective policy needs equally effective institutions to guide implementation, evaluate instruments and effectiveness, and ensure transparency. This will, in turn, foster greater confidence in the policy itself.
This indicator combines four core elements of strong performing low-carbon policy, linking institutions and accountability to GHG targets and ambition. It builds on previous NRTEE research on best international practices in GHG emission forecasting and the governance chapter of our carbon pricing report Achieving 2050.[59]
Canada scores fifth on this indicator, gaining performance points only for having medium-term GHG emission reduction targets; the UK is the undisputed leader scoring a “yes” on each of the four sub-indicators. Three other countries scored “yes” across three of the four sub-indicators (Germany, Italy, and France), reinforcing the European Union’s attention to this common approach flowing from its history of shared governance and institutions. Canada’s scoring on one of the sub-indicators was matched by two other countries—the U.S. and Japan. Figure 20 sets out the results for all countries across all four sub-indicators.
Carbon Price Coverage and Stringency Indicator
CARBON PRICE COVERAGE AND STRINGENCY measures a country’s use of policy to impose a price on GHG emissions in order to incent emissions reductions. The two most important characteristics of a carbon pricing policy are (1) the stringency of the policy as reflected by the price (a greater price incentive leads to greater reductions) and (2) the coverage of the policy as refl ected by how broadly emissions in a country are priced (the broader the coverage, the more emissions reductions will be incented throughout the economy). This indicator considers both of these factors. It represents the maximum carbon price imposed by a policy as a weighted average according to the emissions covered under the pricing policy as a share of total emissions.
Carbon prices, whether applied through a carbon tax or a cap-and-trade system, are broadly recognized as the most cost-effective policy tool to drive long-term decarbonization. Carbon price coverage and stringency measure a country’s use of policy to impose a price on GHG emissions in order to incent emissions reductions.[60] This indicator is calculated as the maximum carbon price experienced under a pricing regime, multiplied by the percentage of national emissions covered under this regime. Countries with a higher price applied to a greater share of national emissions have a higher score.
The indicator also accounts for sub-national carbon pricing policies. Canada, for example, has different carbon pricing regimes in different provinces. Regional carbon prices contribute to the weighted average according to the share of national emissions covered. Similarly, the U.S. score is calculated by considering the Regional Greenhouse Gas Initiative, a regional cap-and-trade system that applies only to emissions from electricity generation in ten states. For countries with different carbon prices within the country, the indicator can be calculated by summing the score calculated for each distinct sub-national carbon price and corresponding emissions coverage.
Canada ranks fifth on this indicator with a carbon price measure of only $3.70, significantly ahead of the U.S. at $1.06, but well behind the European Union members of the G8; Germany, Italy, the U.K., and France face the most stringent carbon pricing policies within the G8. Germany leads and outpaces Canada by a nearly seven-to-one margin. Japan and Russia do not have functioning trading programs or carbon taxes and thus receive no score on this measure. Canada’s ranking is entirely due to provincial measures as no federal government measures for carbon pricing have yet been adopted.
© 2013