Alan Greenspan, Paul Volcker, Ben Bernanke and Janet Yellen, all former chairs of the U.S. Federal Reserve Board. Plus a dozen former chairs of the U.S. president’s Council of Economic Advisers. And 27 winners, no less, of the Nobel Prize in economics.
They and other blue-chip economists joined together last week to publish a statement in that notorious lefty rag, the Wall Street Journal, endorsing a carbon tax as “the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.”
What could these looney-tunes be thinking? Didn’t they know that giant of economic thought, Premier Doug Ford, was about to refute their arguments with his bold statement that the carbon tax planned by Canada’s Liberal government “will be a total economic disaster”?
Ford went further in a remarkable speech this week to the Economic Club of Canada. “There are already warning signs on the horizon,” he said. “I’m here today to ring the warning bell that the risk of a carbon tax recession is very, very real.”
Consider it rung. The problem, though, is that Ford has essentially no evidence to justify such an inflammatory statement. And there’s a pile of evidence to support the view that if you’re serious about fighting climate change, putting a price on carbon is the best way to go.
On the premier’s side, his office points to a 2017 Conference Board of Canada study saying the federal carbon tax could shrink GDP by $3 billion. Sounds like a lot, but in the context of total GDP touching $2.4 trillion, that works out by our math to a potential hit of about an eighth of 1 per cent. Well, that’s something.
On the other side, there are all those big-name economists who argue that a gradually rising (and revenue-neutral) carbon tax is a way better idea than trying to reduce GHG emissions by imposing regulations on the economy. “Substituting a price signal for cumbersome regulations will promote economic growth,” they write.
There’s also the testimony of multiple Canadian economists who rushed to pour cold water on Ford’s warning about a possible recession.
Canada’s Ecofiscal Commission, a think-tank that supports carbon pricing, said the premier’s statement “is not substantiated by credible evidence.” Any negative effect will be “a very, very far step away from a recession,” it added. Many others echo that view.
Most importantly, there’s the evidence of real life. British Columbia introduced a carbon tax on the eve of the last recession, and its economy has boomed over the past decade. Ontario had strong growth and record-low unemployment while it had carbon pricing under the Wynne government. Ditto Quebec.
So all the evidence is that Ford is plain wrong about the likely effect of the Trudeau government’s plans for a carbon tax. Ninety per cent of the money collected by Ottawa will be sent back directly to Canadian families, with the rest invested in programs to combat climate change. If there’s a recession on the horizon, it won’t be provoked by that.
No, Ford’s statement is pure politics, aimed at fuelling opposition to the Liberals by portraying their carbon price plans as an assault on consumers. It’s not true, but that doesn’t mean it won’t work.
Carbon pricing has the merit — and the problem — of being transparent. People can see and understand it, so it’s easy to demonize it as yet another tax. The alternative is to reduce emissions through more regulation. Those come with costs, too, but conveniently for politicians it’s hard for consumers to figure them out.
Ford’s scare-mongering about a recession means one of two things, neither of them good. Either he’s counting on fooling voters into thinking they can avoid the costs of climate change. Or he simply plans to do nothing about the issue at all.
https://www.thestar.com/opinion/editorials/2019/01/22/doug-ford-is-blowing-smoke-by-warning-about-a-recession.html
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