The climate policy certainty gap and how to fill it

The authors argue that uncertainty regarding the future of Canada's carbon price—scheduled to reach $170 per tonne by 2030—discourages firms from investing in expensive, long-lived low-carbon projects. To close this 'certainty gap,' they propose that the Canada Infrastructure Bank (CIB) act as a partner to share risk, effectively providing insurance against policy reversals. This could be achieved through payment exchanges based on actual versus expected policy costs or by making loan payback obligations conditional on future policy stringency. The authors contend this approach is superior to grants or subsidies because it targets the specific market failure of government risk and creates a financial deterrent for future governments that might seek to weaken carbon pricing.

• A 'certainty gap' exists in Canada where firms hesitate to invest in low-carbon projects despite a planned carbon price of $170 per tonne by 2030, because they lack confidence that future governments will maintain this policy course.
• The Canada Infrastructure Bank (CIB) could resolve this uncertainty by acting as a partner that bears the risk of government policy change, essentially creating a 'forward contract on government policy.'
• The CIB could operationalize this risk-sharing through two primary methods: exchanging payments based on the difference between expected and actual policy costs, or providing upfront capital with payback obligations conditional on future policy stringency.
• This proposal is presented as more efficient than grants, subsidies, or tax credits, which the authors describe as 'blunt tools' that require governments to 'pick winners' and do not address the discounting of future costs due to uncertainty.
• The proposed mechanism would increase policy durability by imposing a direct cost on any future government that chooses to weaken carbon pricing, thereby creating a 'credible commitment' to the current path.

APA

Beugin, D., & Shaffer, B. (2021). The climate policy certainty gap and how to fill it. Canadian Climate Institute. https://climateinstitute.ca/the-climate-policy-certainty-gap-and-how-to-fill-it/

Chicago

Beugin, Dale, and Blake Shaffer. The climate policy certainty gap and how to fill it. Canadian Climate Institute, 2021. https://climateinstitute.ca/the-climate-policy-certainty-gap-and-how-to-fill-it/.

Wikipedia

{{cite press release |last1=Beugin |first1=Dale |last2=Shaffer |first2=Blake |title=The climate policy certainty gap and how to fill it |publisher=Canadian Climate Institute |date=28 June 2021 |url=https://climateinstitute.ca/the-climate-policy-certainty-gap-and-how-to-fill-it/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{beugin2021climate, author = {Beugin, Dale and Shaffer, Blake}, title = {{The climate policy certainty gap and how to fill it}}, publisher = {Canadian Climate Institute}, year = {2021}, month = jun, url = {https://climateinstitute.ca/the-climate-policy-certainty-gap-and-how-to-fill-it/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }