Canada lets the states lead on climate, should Australia do the same?

Canadian Prime Minister Justin Trudeau showed Australia a thing or two when he announced a new climate change plan last week – and not just because it was delivered impeccably in two languages. Trudeau has decided to leave climate policy to the provinces, while forcing them to act.

Is this state-based approach a model for Australia?

Prime Minister Malcolm Turnbull doesn’t seem keen. He recently blasted state-based renewable energy schemes, linking them to South Australia’s power outage and saying national approaches were best.

But here’s the thing: if Turnbull doesn’t boost his climate policies soon, a state-based system of climate policies is exactly what Australia will have. And unlike Canada, no one will be in charge of it.

What is Canada doing?

Australia and Canada make for a neat comparison – they have similar Westminster political systems, plenty of fossil fuels, and a messy history on climate policy.

In Canada a lack of federal action under Stephen Harper’s Conservative government prompted some states to go it alone. British Columbia, Alberta, Ontario and Quebec have carbon prices in place or coming. These are mostly not compatible. Some are carbon taxes, some are Emissions Trading Schemes (ETS). They have different prices rising at different rates, they cover different things. Plus there’s a range of state schemes on renewables and low-emission cars.

Enter the moderate Trudeau who took office last year. He’d talked the talk on climate change but faced with some states out in front and some recalcitrants, not to mention his own party’s disastrous 2008 push to bring in a national carbon tax, Trudeau trod carefully. He has decided not to bring in a national carbon price.

Rather, in a speech to Parliament last Monday which took many by surprise – and was delivered in both French and English, which is what Trudeau does – he announced every state must bring in its own carbon price by 2018.

Key points:

• The price should be at least C$10 (A$10) per tonne of emissions in 2018 – that’s the “floor price” – and rise to at least C$50 (A$50) by 2022

• States can choose a carbon tax or an ETS; the latter “will need to decrease emissions in line to Canada’s [emissions] target”

• If any state does not implement a carbon price by 2018, the federal government will implement a scheme for them

• The states keep any revenue.

This approach is not one recommended in Economics 101. It’s messy and complex. It won’t be easy comparing different schemes to see if they meet the floor price.

Trudeau has landed in a fight with some states, which could end up in the courts – the case of the PM vs Saskatchewan has already provided high theatre. (Crucially, it happens to be the smaller states which are most outraged, so that’s not necessarily fatal).

Environmentalists are complaining Trudeau didn’t boost Canada’s emissions target under the Paris climate deal, which enters into force next month. Behind the scenes business does not like this approach. They prefer national consistency.

But given where Canada’s at, Trudeau’s approach is seen as pragmatic and stronger than some had expected. A C$50 per tonne carbon price is substantial.

This a signalling exercise; Canada is serious about climate change, and carbon pricing is coming. Trudeau is letting some states take the lead – in Canada’s case it’s those who rely less on fossil fuels and have more progressive governments – while forcing laggard states to tag along.

And both the US and China are, to some degree, relying on provinces and cities to implement climate policies. Are all those countries wrong?

As an aside, Trudeau may be lifting the ambition on carbon pricing in exchange for authorising new fossil fuel infrastructure (pipelines, LNG plants), a cunning plan which could leave everyone unhappy.

So should Australia follow Canada’s lead?

We already are.

Critics accuse the Turnbull government of having no credible path to meet Australia’s Paris pledge to reduce emissions by 26-28% by 2030. Some states – particularly South Australia, Victoria and the Australian Capital Territory – have gone it alone with state-based emissions targets and renewable energy schemes (hence the furore over the SA blackout). No state currently has a carbon price. It’s possible this will change. It’s been done before – New South Wales used to have the well-regarded Greenhouse Gas Reduction Scheme.

In general this state-based trend will become more pronounced, especially if the Turnbull government does not boost its climate policies. A review is due next year and that’s Turnbull’s chance to, for example, ramp up the existing Direct Action scheme into a more effective baseline-and-credit emissions trading scheme. But the biggest hurdle to doing more is Turnbull’s own backbench.

And the biggest potential catalyst for more action is business. More and more senior business figures seriously want – as in, not just some nice words in the annual report – bipartisan, national climate change policy. Business does not want to comply with a messy patchwork of state climate programs.

And with the Paris deal coming into force, countries such as Australia have to have a credible plan to meet their emissions targets. That’s why Trudeau stood up in Parliament and ordered the provinces to bring in carbon pricing.

There’s little chance of an Australian government going the “full Trudeau” and mandating a carbon price floor for the states in the near future. But we may be shambling towards a similar outcome.

Australia’s states have their own health systems, their own education systems, their own road rules. Perhaps they should have their own climate change policies as well.

Cathy Alexander recently returned from four months researching climate change policies in Canada, on an Endeavour Fellowship.