Try Additive Approach to Climate Policy
Incentivizing big investments in clean energy may be both more politically popular and more effective than pricing emissions.
By Ryan McGreal.
577 words. Approximately a 1 to 3 minute read.
Posted January 19, 2025 in Blog.
Here’s a proposed analogy for how we might try to think about moving to a net-zero carbon economy: an additive approach works better than a subtractive approach.
I’ve been an on-and-off vegetarian for around 30 years (these days my diet is plant-based but not exclusively). When I started, I didn’t do it by cutting out meat dishes.
I did it by adding more and more vegetarian dishes until the meat dishes were all displaced from my diet. I never felt like I was giving something up - I felt like I was gaining something.
It was an additive approach, not subtractive. It felt like an expansion of my options, not a sacrifice.
So what’s my analogy to the climate crisis? I increasingly find myself thinking we should try taking a more additive approach to decarbonizing our economy.
For years I have felt that a consumer carbon price was inadequate but at least it’s something. It’s actually a classically conservative approach: use price signals in the market to incentivize a shift in demand toward lower-carbon consume goods.
And I thought the Liberals were smart to make it revenue-neutral and paid back as a flat rebate. That way, the more you reduce emissions in your consumer spending, the bigger net benefit you get to keep.
Unfortunately, they did a piss-poor job of explaining the policy to Canadians. In fact, they pretty much entirely ceded to the Conservatives, who successfully (and shamelessly) misrepresented it as a net cost when it’s actually a net benefit to the overwhelming majority of Canadians.
Carbon pricing is an economically efficient policy tool, but approximately half of Canadians have been convinced to despise it, and basically no one in politics is coming to its defence any more.
In any case, carbon pricing alone is not enough to move us to a low-carbon economy. For one thing, a lot of the consumer durables that lock in higher or lower future carbon emissions are manufactured in other countries, so shifts in Canadian consumer demand have less impact on market offerings.
A tiny number of corporations are directly responsible for most global carbon emissions. Squeezing consumers as a way of incentivizing demand for lower-GHG market offerings is one way to drive down emissions, but it subjectively feels both painful and futile to individuals.
And individuals vote.
As a corollary, the stick-first approach makes it easy and appealing for opportunistic politicians to demagogue against carbon pricing, since simple messaging can tap into near-universal public dislike of taxes - even though wanting to avoid paying the carbon tax is precisely the point.
In contrast, the Biden administration’s signature policy achievement, the Inflation Reduction Act, uses public policy and public investment to drive new low-emissions technologies on an industrial scale, addressing the climate crisis on the supply side rather than the demand side.
It has already driven so much new industrial investment and job creation - especially in red states - that it is quite likely to survive the incoming administration in at least some form.
If a Canadian political party came forward with an IRA-style approach to climate policy, I would embrace it enthusiastically - especially if it was coupled with permitting reform to stop environmental laws from being abused to block environmentally-positive investments.
Consumer carbon pricing is almost certainly DOA by the time our next federal election is over (if not sooner). That can be a source of despair, or it can be an occasion to try a new, bold policy that feels additive rather than subtractive.