Mar. 11 - Mar. 15 2024; 11th week of the winter semester.

In our PPOL607 class, we revisited electoral politics, focusing on how it presents opportunities (or sometimes barriers) for public policy advancement. We discussed tactics within electoral politics and policy levers available within the electoral framework (i.e. policy window).

We were encouraged to consider how engaging in politics and understanding the roles of elected officials can significantly shape policy outcomes. One of the readings by Wesley and Nauta, provided insight into how political messaging and campaign management play an important role in building and executing policy agendas.

Game Theory Continued
Game theory discussions continue in PPOL609: Decision Analysis with a focus on dynamic games. Whereby the timing of decisions matters and game theory shifts from the normal form to the extensive form representation (often visualized as a game tree). This format clarifies who the players are, when each can act, the available choices, the information they have prior to taking action, and the payoffs for every potential outcome. Unlike static games, dynamic games require accounting for the sequence of moves and the influence of timing on strategy.

To avoid outcomes based on non-credible threats, dynamic games utilize the Subgame Perfect Nash Equilibrium (SPNE), which ensures that strategies are optimal in every "subgame" of the main game. A subgame, defined at any decision node, includes all subsequent decisions branching out from that node. For an outcome to qualify as SPNE, it must be a Nash Equilibrium within each of these subgames.

In our SEDV633:Energy and Climate class, we had two guest speakers with the following topics :

Oil and Gas Policy in Canada:

In Canada, the oil and gas sector remains a cornerstone of the economy, contributing around 5% of the national GDP and over 21% in Alberta alone. However, this sector also accounts for 28% of Canada’s total GHG emissions, positioning it as a primary focus for climate policy. Methane emissions are a major concern due to its potency as a GHG, more than 80 times stronger than CO₂ over a 20-yr period. Methane emissions in the sector come from a variety of sources, including wells, valves, pipelines, oil tanks, and engines. Canada has committed to reducing these emissions, targeting a 45% reduction by 2025 (based on 2020 levels) and an even more ambitious 75% reduction by 2030. To achieve these goals, both provincial and federal governments are funding studies and new technologies for better methane monitoring, such as drones, satellites, and trucks, improving accuracy in emissions reporting and targeting specific sources of leaks.

Canada’s approach to reducing oil and gas emissions includes a combination of regulatory "sticks" and incentive "carrots." On the regulatory side, carbon pricing, updated methane regulations, and a proposed cap on oil and gas sector emissions aim to enforce emissions reductions while allowing some flexibility through options like carbon offsets . This cap is designed to reach between 131-137 Mt by 2030, setting a legal upper limit for emissions that is still technically feasible. Additionally, the governments are supporting clean technology and diversification efforts through incentives, such as a 50% of upfront cost investment tax credit for carbon capture and storage (CCS) by the feds and 12% grant via Alberta Carbon Capture Incentive Program by Government of Alberta. There is also tax credits for clean hydrogen, clean electricity, and clean technology manufacturing. These incentives are crucial, as technologies like CCS are still costly, and support is needed to make them economically viable for widespread adoption.

Broad Technical & Policy Pathways to Net-Zero Decarbonization of Industry:

Achieving net-zero decarbonization in industry is a complex challenge that requires aligning business interests, political support, and a just transition for affected communities. To succeed, a robust, multi-level policy commitment is essential, encompassing everything from building codes to material efficiency and circularity standards. A comprehensive transition pathway needs to include all key stakeholders, ensuring that strategic and technical options are thoroughly assessed. Early stages should focus on R&D, commercialization, and the development of lead markets through green procurement and supply chain branding, alongside limited subsidies to build economies of scale. Over time, policies should aim to expose all sectors to full GHG pricing while protecting competitiveness, using mechanisms like carbon border adjustment measures (CBAMs) that avoid penalizing green commodities. Additionally, for high-emission facilities, the policy may consider early retirement to meet climate goals.

Taxes on Personal Income and Consumption in Canada

In PPOL615: Public Finance we discussed Canadian taxes. Personal income taxes are calculated based on income, with adjustments through credits, deductions, and varying provincial rates. Until 2000, provincial income taxes were calculated as a fraction of federal taxes. Since then, provinces have moved to a ‘tax on income’ system, setting their own brackets and credits. Alberta, for example, once had a flat tax rate of 10% but shifted with changing policies over time.

Personal tax liabilities are influenced by numerous factors, including deductions (like childcare or RRSP contributions) and credits (such as the Canada Child Benefit or GST Credit). Different income types, including capital gains and employer benefits, are treated variably, affecting fairness and efficiency within the system. Capital gains, for instance, are only partially taxed, creating a "lock-in" effect as taxes are deferred until realization. Meanwhile, unique mechanisms like RRSPs and TFSAs offer distinct tax advantages, emphasizing strategic planning for long-term wealth.

Canada's approach to taxing gifts and inheritances is notably unique, as it doesn't tax them, unlike many other countries. The system's equity and efficiency are continuously assessed, with debates around family versus individual taxation, income splitting, and the role of credits versus deductions to balance ability-to-pay principles.

*Photo: 1929 Fire Engine at Charlottetown, PEI taken Aug/12 2022

Summit photo