Two years have gone by since that study was published and Canada still has no coherent plan to deal with its carbon emissions, a point stressed this May in a scathing report by federal Environment Commissioner Scott Vaughan.

Shadowing future risk

Absent a national climate strategy, many oil sands companies, including Nexen, Shell, Suncor and Cenovus, now factor a range of potential future carbon prices into their medium and long-term strategic planning.

The practice, known as "carbon shadow pricing," provides a degree of confidence that their operations, current and planned, will be able to survive more stringent limits on greenhouse gas emissions.

"We want certainty as business people because we're making big investments, and our shareholders would like certainly as well," Suncor's VP of sustainable development, Gordon Lambert, told the Tyee Solutions Society.

Lambert's Suncor models carbon prices as high as $45 per tonne, $15 higher than B.C.'s internationally-lauded carbon tax. According to a recent corporate update, Suncor is confident that a price in the upper range wouldn't "cause material disadvantage to the company." Cenovus thinks it could handle a carbon price of $65.

Even so, both companies, and their investors, would breathe more easily if they knew for sure the requirements that a Canadian climate policy would place on them.

And the leading oil sands producer has no qualms about how that should be done. "We think a price should be put on carbon," Suncor's Lambert said. "Ideally the model would be a national carbon tax."

The same message went repeatedly to Prime Minister Stephen Harper from the National Round Table on the Environment and the Economy (NRTEE). Not only would a carbon price be the most effective way to achieve Canada's greenhouse targets, the arms-length, multi-stakeholder panel advised, it would also be the most cost-efficient. Indeed, the NRTEE concluded, the current patchwork of provincial climate policies will cost Canada's economy 20 per cent more than a national pricing policy would by 2035.

The 2012 federal budget eliminated the NRTEE. Conservative ministers later revealed that its push for a "carbon tax" was a major factor in its demise.

"Why should taxpayers have to pay for more than 10 reports promoting a carbon tax, something that the people of Canada have repeatedly rejected?" Foreign Affairs Minister Baird told Parliament in May. "It should agree with Canadians. It should agree with the government. No discussion of a carbon tax that would kill and hurt Canadian families."

The federal government instead plans to regulate emissions from each of Canada's industrial sectors separately. It has promised to roll out oil and gas regulations by early 2013.

Reward the innovators

For an oil sands producer, there are several reasons to prefer a carbon tax. One is that it inherently rewards economic activity that is carbon efficient and punishes activities that aren't.

On the surface, that would seem to hurt Alberta's oil sands, widely identified as Canada's fastest-growing source of carbon emissions. What is not often acknowledged, though, is that from an economic perspective, many bitumen operations are actually quite efficient with their CO2.

"They may be a new, large and growing source of emissions," wrote University of Alberta business professor Andrew Leach on his blog, "but they are also among the highest value uses of carbon, at least among industrial activities, in the country."

Leach has calculated that one tonne of CO2 released during coal production is tied to about $20 to $30 in profits. Compare that to the oil sands, he estimates, where each tonne of emissions generates profits in the range of $400 to $500.

"If you think that an investment with that kind of value proposition is going to dry up in the face of a $30-$50 (or even much higher) per tonne carbon tax," Leach argues, "think again."

Carbon pricing would still be expensive for the oil sands. At that upper $50 range, it could cost a company such as Suncor more than $1 billion per year, Leach estimates.

But attacking emissions through government regulation instead could effectively nullify any chance for competitive advantages between or within industries. Typically such brute-force regulations impose blanket limits on all operators within a sector, then penalize companies for not meeting them.

"It's not clear to me how regulation drives innovation," Kirk Andries, executive director of Alberta's Climate Change and Emissions Management Corporation, told the Tyee Solutions Society. "Regulation is really good at bringing up the laggards to a minimum, but it doesn't promote leadership."

An economy-wide price on carbon, in contrast, leverages the power of the market. Companies and industries that develop the most cost-effective ways of reducing their emissions first, gain a competitive advantage.

For a major oil sands producer such as Cenovus, which claims to have some of the most carbon-efficient operations in the industry, that's an appealing proposition.

"If you're going to regulate carbon, it should be done through economic measures rather than regulation," Jon Mitchell, Cenovus's team lead for environmental strategy and policy, told the Tyee Solutions Society. "I think the most efficient way to do it is economy-wide and with a price."

Sources I reached could only speculate about why the Harper government prefers regulation, traditionally anathema to free-market conservatives, to an industry-supported tax. One called it "the $64,000 question."

But perhaps it's because a true "economy-wide" price on emissions would impact ordinary Canadians, not just industrial producers. Instituting a national carbon tax would raise transportation and heating fuel prices for everyone -- a politically dicey proposition that may explain the claim that such a tax would "kill and hurt Canadian families."

CEOs: Bring on a tax

Others, though, think more expensive energy is exactly what Canada needs.

"The most effective means of promoting energy conservation is to allow energy prices to rise," read one non-governmental organization's report from December 2011. "Governments must resist the temptation to shield Canadians from higher energy prices."

That forceful statement didn't come from any environmental group. Nor was it written by any of the parties opposing the government in Parliament. Rather, the views were those of the Canadian Council of Chief Executives, a group representing more than 150 of Canada's largest corporations.

"The present trend is unsustainable," these CEOs concluded. "It is time for Canadians to get serious about energy conservation, for the health of our economy as well as the environment."

Tomorrow: When it comes to putting a price on carbon, B.C. and Alberta have much to teach each other. For the whole series to date, go here.