February 12, 2014Sustainable Energy Policy1

 actions, policies, governance  actions – behavioural actions ▪ energy choices by firms, consumers  policies – rules produced by government that influence actions ▪ Objectives (increase renewable electricity) ▪ Instruments (renewable portfolio standard) ▪ Settings (10% by 2012)  governance – who decides the rules February 12, 2014Energy Sustainable Energy Policy2

 externalities  public goods  monopoly  Information  equity  Jaccard*  weak rationale for endurance  strong rationale for cleanliness *pp that you were not assigned February 12, 2014sustainable energy policy

 command and control regulation  financial disincentives (taxes)  financial incentives (subsidies)  voluntarism and information  market oriented regulations – emissions cap and trade  market oriented regulations – artificial niche market regulations February 12, 2014sustainable energy policy

 environmental effectiveness  economic efficiency  administrative feasibility  political feasibility February 12, 2014sustainable energy policy

 Legally binding  forces particular action  does not encourage actions beyond that required  require same actions from actors with different marginal costs of control February 12, 2014sustainable energy policy

 Performance standard: coal plants can’t exceed 425 kg of CO2 per Megawatt-hour  Currently not possible without carbon capture and storage (CCS)  Starts in 2015 for new plants + those 50 yrs old February 12, 2014sustainable energy policy

 Does not prohibit action, but taxes it  Gives price certainty  Can’t guarantee a particular outcome  Sensitive to diversity of producer costs and consumer preferences  Example: tax on tonne of carbon emitted – BCBC  2010: $20 per tonne of CO2 equivalent  2011: $25  2012: $30 February 12, 2014sustainable energy policy

 Government spending reduces cost of action  Examples:  rebate for fuel efficient cars (Canada’s ended)ended  Feed-In Tariffs  Royalty breaks for fossil fuel productionbreaks  Research February 12, 2014sustainable energy policy

 Can produce more informed decisions about costs and efficacy  Example: One Tonne Challenge February 12, 2014sustainable energy policy

 Caps total amount of emissions  Distributes allowances (permits) to polluters  Polluters can trade permits  Effective in that you get greater certainty over emissions  Design issues in startup – should initial permits be auctioned off or “grandparented”  Example:  European Uni0n’s Emission Trading SystemEmission Trading System  California California February 12, 2014sustainable energy policy

February 12, 2014Sustainable Energy Policy12

 Ceiling or safety valve at upper end of price  Floor on price  The more restrictive the ceiling and floors the more it becomes like a carbon tax February 12, 2014Sustainable Energy Policy13

 Require a certain % of the market to have performance characteristics  Can “force” innovation  Examples  Renewable portfolio standard Renewable portfolio standard  To be discussed under renewables February 12, 2014sustainable energy policy

 direct provision  “Crown” corporations  National Oil Companies increasingly important  Klare: 81% of proven reserves controlled by NOCs February 12, 2014sustainable energy policy 1990: Mulroney privatized, but kept 19% share 2004: fully privatized

 Gradual trajectory of emission reductions  Tradeable allowances  Upstream regulation with economy-wide effects  Mechanisms to reduce cost uncertainty  Allowance allocation  Provisions for offsets  Linkage with other countries February 12, 2014Sustainable Energy Policy16

 environmental effectiveness  economic efficiency  administrative feasibility  political feasibility February 12, 2014sustainable energy policy

February 12, 2014Sustainable Energy Policy18 Pre-mitigationRegulation: 30% reduction Cap and trade: 30% reduction Coal Plant Costs: $20/t Emissions: 1000 t/yr Costs: 0 Emissions: 700 t/yr Costs: $6,000 Emissions: 400 t/yr Costs: $0 Cement Plant Costs: $40/t Emissions: 1000 t/yr Costs: 0 Emissions: 700 t/yr Costs: $12,000 Emissions: 1000 t/yr Costs: $12,000 (to coal plant) TotalEmissions: 2000 t/yr Costs: 0 Emissions: 1,400 t/yr Cost: $18,000 Emissions: 1,400 t/yr Cost: $12,000

February 12, 2014Sustainable Energy Policy19 effectivenessefficiency Administrative feasibility political feasibility Info/persuasion subsidy Emission tax Cap and trade C&C Regulation

January 21, 2010

 “I believe that good policy is good politics” Stephane Dion  Humiliating loss, resignation as party leader  Message, or messenger? Sustainable Energy Policy21

Sustainable Energy Policy22 NDP “axe the tax” campaign Campbell and BC Liberals win 3 rd majority government

 Harper promised regulations  Repeated Harper government attacks on NDP for supporting a carbon tax  NDP’s position is cap and trade January 30, 2014Sustainable Energy Policy23

 Politicians prefer non-compulsory policies  History shows us they are insufficient  Market-based instruments are more cost effective  Policy trend:  Failure of Congress to enact cap and trade leading US to pursue regs  Canada committed to harmonizing  Canada slowly pursuing regs Sustainable Energy Policy24