Canada faces “major challenges” in overcoming its “carbon entanglement,” the Organisation of Economic Co-operation and Development (OECD) Secretary-General, Mexican Ángel Gurría, said in Toronto. The OECD has just completed an environmental assessment of the country and will present its conclusions to the Canadian government in two or three weeks. Canada is the fourth biggest emitter of greenhouse gases in the 35-state organisation, with continuously growing consumption of fossil fuels in transport and a number of controversial, carbon-intensive oil sands projects.
Gurría was in town for the Toronto Global Forum held under the auspices of the International Economic Forum of the Americas (IEFA). He appeared on Wednesday, November 1, at the University of Toronto’s Munk School of Global Affairs in order to present the OECD’s recent report Investing in Climate, Investing in Growth, which stresses the need to step up efforts to combat climate change and argues that these efforts can go hand in hand with inclusive economic growth.
While the “progressive climate agenda” of Prime Minister Justin Trudeau, the awareness of the transitional challenges shown by Minister of Environment and Climate Change Catherine McKenna in a recent interview for the Financial Times, and Canada’s commitment to work with Indigenous societies are all seen as “promising,” plans need to be turned into action, Gurría insisted.
Trump’s withdrawal, “not greatest concern”
Transition to a less carbon-intensive economy may be high on Trudeau’s agenda, but the results are yet missing. In fact, Canada is currently proving less effective in curbing carbon emissions than the US, whose withdrawal from the Paris Agreement announced in June 2017 has so shaken the international community.
“My greatest concern is not about the US itself,” commented Gurría. “In fact, … you have one of the most committed governments in Canada, [but] your emissions are still moving much faster than you would like. In the United States, you have a government that pulled out of Paris, and their emissions are going down. So it’s a bit of a paradox…”
The US pull-out was certainly regrettable and the OECD will try to convince the administration that climate action is “good business,” but the country will anyway continue to reduce its emissions because the US states and cities are “heavily committed to do that,” and the schools and universities are committed to educating their students about the issue, Gurría believes.
“It could be more efficient, it could be better and less bumpy if you had the federal government helping out, or at least not trying to revert and move the clock back. But effectively, it’s happening.”
What Gurría does find worrying about the US President Donald Trump’s decision is the potential effect of “a relaxing of the discipline” for any smaller country that will want to find an excuse to drop out, but so far the reaction has been the opposite. “Everybody else … was galvanized by this to say: ‘We’ll go through, we’ll do it.'”
And with a three-year withdrawal period, the US may yet change its mind.
“I hope that the US administration might find it possible to reconsider its decision to leave the agreement and, perhaps, as we go along, as we disseminate this information that it’s good for growth, good for jobs, good for investment etc., good for technology, perhaps they may take another look at their decision,” Secretary-General said. “They have three years to pull out. In that time more things will happen and perhaps in that period they will reconsider.”
Paris Agreement: Too little, too slow
Under the Paris Agreement, which took effect a year ago and has so far been ratified by 169 countries, nations pledge carbon emission reduction targets beyond 2020 (so-called Nationally Determined Contributions or NDCs) that are supposed to cap the increase in global temperature to well below 2 degrees Celsius, hopefully to 1.5 degrees.
It is now clear, however, that the implementation of NDCs pledged so far will be insufficient to achieve the goal. An increase of 2.6 to 3.1 degrees is now projected for the end of the century unless more and faster action is taken. And even if the below 2 degrees goal were achievable, it would no longer suffice to prevent extreme weather events such as floods, droughts and wildfires from becoming even more extreme and more frequent.
These findings have just been corroborated by “two very timely and very useful indicators by two independent international organizations, which are adding to the OECD’s call for urgency, maybe even emergency,” Gurría said in Toronto.
Concentrations of carbon dioxide in the atmosphere in 2016 grew to the highest level in 800,000 years
The United Nations Environment Programme (UNEP), which monitors the gap between the reductions necessary to achieve the Paris Agreement targets and the likely reductions resulting from the full implementation of the NDCs, has just released its newest Emissions Gap Report. The document, dated October 31, says that if the current speed of reduction is maintained, “come 2030, which is the time when we’re going to measure how we’re doing, and we’re going to be 30% above the target in terms of emissions,” the OECD head noted.
Another piece of bad news came out on October 30 from the World Meteorological Organization (WMO), which announced that concentrations of carbon dioxide in the atmosphere in 2016 grew by 3.3% to the highest level in 800,000 years, on “a combination of human activities and a strong El Niño event.” The speed of growth in concentrations increased by 50% as compared to the average growth rate for the previous ten years, Gurría noted.
Concentrations of carbon dioxide are now 145% of pre-industrial (before 1750) levels, according to the WMO bulletin. Apart from the atmosphere, the gas is stored even longer in the oceans. “The last time the Earth experienced a comparable concentration of CO2 was 3-5 million years ago, the temperature was 2-3°C warmer and sea level was 10-20 meters higher than now.”
Big, fat carbon tax
Actions by states and multiple non-state actors are needed globally to respond to the challenge, but the main tool recommended by the OECD is the introduction of universal carbon-pricing mechanisms.
In Canada, four provinces (B.C., Quebec, Alberta and Ontario) that are home to 85% of the population already have the mechanisms in place and a country-wide levy is due by 2018. The federal government has proposed a starting price of CAD 10 per tonne in 2018 and a CAD 10 increase every year to CAD 50 in 2022. The levy on industrial facilities will take effect in 2019 and will only apply to those emitting 50 kilotonnes or more of greenhouse gases a year.
High hopes are tied to new technologies in wind and solar power as well as carbon capture and storage
Convergence on a global scale should be the next step, according to the OECD, as it could halve the cost of achieving the Paris Agreement targets. “The economic efficiency of the Paris Agreement could be significantly improved if the international community could establish a process of convergence of carbon prices across countries,” Secretary-General said. “I mean … put a big fat tax on carbon. Simple.”
The response of the states to date has varied. Few countries have imposed high carbon emission taxes, but over 90% of emissions are priced at less than EUR 30 per ton, and some governments continue to subsidize fossil fuels – globally to the tune of USD 0.5 tln a year, according to estimates of the International Energy Agency.
Businesses that rely on global supply chains will likely be quicker to accept the need to act, Gurria suggested, recalling the disruption to the world’s car industry from the Fukushima nuclear power plant disaster. The destruction of a factory producing one particular component ground the industry to a halt. The production was then moved to Thailand, which, in turn, suffered flooding a few weeks later.
“And actually for that quarter Canadian GDP, I remember very well, was not growing,” he said. “What’s the matter in Canada? The car industry in Canada … had not been able to operate because of Fukushima and then because of Thailand. That was a very dramatic example.”
High hopes are tied to new technologies in wind and solar power as well as carbon capture and storage (CCS), whose forbidding costs are expected to fall down the road. Canada’s CCS facilities in Saskatchewan and Alberta got a mention as a case in point, although the costs of the Boundary Dam project by SaskPower or Alberta developments have turned out much higher than initially expected, stirring controversy.
The OECD is an international organization with 35 member-states set up in Paris in 1961 for the development of economic and social policy. Ángel Gurría, a former Mexican Minister of Foreign Affairs and Minister of Finance and Public Credit, has held the Secretary-General function since 2006.
Alicja Minda is a Polish journalist whose interests span international affairs, globalization, world development, social enterprise and economic relations. She has spent over eight years as a reporter and editor for the Polish Press Agency’s English-language economic and financial newswire Market Insider. Her work has also appeared in nationwide magazines in Poland.