The dirty little secret anti-carbon tax folks would prefer you did not know

Posted on in Debates – Opinion – You can try to cut emissions by other ways: regulations on business are a particular favourite. But those come with costs just as surely as a carbon tax does
October 5, 2018.   Andrew Coyne

The climate farce continues. To recap: Canada is nowhere near to achieving the reductions in greenhouse gas emissions it agreed to three years ago in Paris, having blown through a series of more ambitious earlier commitments — Kyoto, Copenhagen etc — without so much as taking its foot off the gas pedal.

Not only are we nowhere near to meeting our own declared targets — a 30 per cent reduction below 2005 levels by 2030 — we are nowhere near to being on track to do so. That would be true even if the Pan-Canadian Framework on Clean Growth and Climate Change, including its signature $50 per tonne price (by 2022) on carbon dioxide emissions, were implemented in full. But now that, too, is in doubt.

Though nominally endorsed by all the provinces in Vancouver in 2016 (the “Vancouver Declaration” they called it), several provinces have since either expressly pulled out of the federal plan — Manitoba is the latest, joining Saskatchewan, Ontario, and, for now at least, Alberta — or revealed how little their signatures were worth.

The number of provinces with federally approved carbon pricing plans in place by the Trudeau government’s planned Jan. 1 implementation date may be as few as two: British Columbia and Quebec, both of whom already had plans in place before the federal effort to coax the rest into line began. The premise, that unwilling provinces could be persuaded to impose an unpopular tax on the federal government’s behalf, was always a stretch. It has now been exposed as a fantasy.

That’s the good news. Should the feds have to implement the price themselves, the way is open to install a much simpler, more uniform and cleanly designed carbon tax over much of the country. (B.C. and Quebec might be exempted on the basis of their current plans, with a federal tax kicking in above the level each has reached to date: $30 per tonne in B.C., the equivalent of roughly $20 under Quebec’s cap-and-trade system.)

Better yet, with the provincial clutter cleared away, the feds would be in position to draft a plan that was easier to communicate and had a much greater chance of winning public approval. The original, province-driven plan promised only to return the revenues to provincial governments — the carrot that was supposed to secure their participation. The revenues from a federal tax, on the other hand, could and would be returned directly to taxpayers.

In the absence of such a plan, opponents have been given an open field to rant on about a carbon tax as a “tax on everything” that would drive up prices for “hard-working families,” etc etc. Against such a self-interested message the distant, uncertain prospect of saving the planet cannot hope to compete. The only way to bring Canadians on board is if they can be persuaded it won’t cost them a thing.

Is that possible? Well, it’s not impossible. While a carbon tax, like any tax, would be expected to reduce national output, other things being equal, if it were offset by equivalent (or deeper!) cuts in personal and corporate income taxes the impact could well be negligible — as a report by the Parliamentary Budget Office in fact projected earlier this year.

But Canadians don’t care what it means for the economy at large. They want to know what’s in it for them. So the greater likelihood is that the revenues will be returned, not via productivity-enhancing cuts in tax rates, but a lump-sum rebate of some kind. Would that be enough to ensure, as a report by the lobby group Canadians for Clean Prosperity claimed last month, “the vast majority” of families would get more money back than they paid in carbon taxes?

Probably not. (Again it’s not impossible: it depends how rich you make the cheques.) But that’s not really the question. Critics of the CCP report pointed out its calculations assumed the cost of any carbon tax collected on corporations would not be passed on to families, when in fact they would be. They’re right, of course: ultimately, all taxes are paid by people. But that’s as true of any alternatives to a carbon tax.

This is the dirty little secret the anti-carbon tax folks would prefer you did not know. You can try to cut emissions by other ways: regulations on business are a particular favourite. But those come with costs just as surely as a carbon tax does — every dollar of which would be passed on to the same “hard-working families” the critics pretend to care about.

Canadians want to know what’s in it for them

In fact, for virtually any alternative you can name (subsidies are even worse) the costs are higher — often much higher — per tonne of emissions reduced than for an equivalent carbon tax. It’s just that the costs of regulation aren’t visible to consumers, the way the costs of a carbon tax are. That makes them less “costly” to the politicians that impose them. But it’s also part of what makes them less efficient: it’s the visibility of a carbon tax that drives changes in consumer behaviour.

That’s not the only consequence. Because the costs of regulation are hidden, politicians think they don’t have to compensate you for them; what you don’t know won’t hurt them. Carbon pricing would be cheaper for “hard-working families” than regulation, even without any offsetting rebates or tax cuts. But as it’s also the only approach that includes any, it’s not even close.

Of course, there is one alternative that is cheaper than a carbon tax: doing nothing. If that is in fact what the critics have in mind, they should say so. But if they claim to have any interest in meeting our Paris targets, they will shortly have to compare the costs of their plans with a much more competitive federal option.

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