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Alykhan Velshi

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Let Them Eat Carbon

Posted: 10/09/11 04:02 PM ET

All around us, there are growing signs of environmental devastation and destruction: coal power plants in China spewing toxic chemicals into the air and water; deforestation and illegal poaching across the African continent; environmentally short-sighted, government-mandated sprawl, which has made walkable urbanism illegal in much of North America. Unfortunately, the policy response has been uninspired. More taxes, more subsidy, more regulations. And when the medicine fails to work? More taxes, more subsidy, more regulations. It's time for some fresh ideas.

Let Them Eat Carbon, the provocative new book by my friend Matthew Sinclair of the UK Taxpayers' Alliance, injects a welcome dose of original thinking into contemporary environmental debates. It is a wake-up call for those of us who care about the natural and built environment, but worry that we are paying more for less; those of us who, despite handing over more and more in green taxes and fees, see our communities becoming less liveable, the natural environment more polluted.

Written primarily for a British and European audience, Let Them Eat Carbon has managed to discredit programs popular with Britain's modish cultural elites, driving a wedge between them on the one hand and ordinary Britons worried about pocketbook issues on the other, with London's populist tabloids -- the Sun, the Daily Mail, and the Express -- of course leading the charge. (Warning: Picture not safe for work).

In particular, British media coverage has focused on Let Them Eat Carbon's extensive research tracking how "much of the money so-called green policies cost us goes straight into the pockets of a bewildering range of special interests. Around the world companies are making billions out of the schemes governments have put in place saying they will curb global warming and protect us from the threat of climate change. There is little evidence that those policies are an efficient way to cut emissions."

And this is not exclusively a British phenomenon. In the United States, similar schemes have forced taxpayers to finance questionable initiatives that line the pockets of special interests but do little to benefit the environment. And in Canada, example of scandalous green rent-seeking abound, including the controversy surrounding Ontario premier Dalton McGuinty's multi-billion-dollar handout to Samsung.

In addition to providing us with many reasons to be skeptical of this entanglement of big business and big government, Let Them Eat Carbon also includes extensive commentary on public policy debates currently taking place in Canada.

High-speed Rail to Nowhere

For starters, Let Them Eat Carbon tackles head-on the obsession of many in the media and political class with high-speed rail and other forms of train travel.

"The main argument you hear from proponents of high speed rail", explains Mr. Sinclair, "is an appeal to train envy. Continental European countries have trains that go up to 200 miles per hour and Japan has the bullet train, surely [we] can't afford to be left behind?"

For a Canadian example of "train envy", one need only to read this headline - "Now even the French go faster than us" -- from a pro-high-speed rail article in Maclean's. (The French may be going faster than us with high-speed rail, but faster in the right direction? Two and a quarter centuries ago, France moved equally fast in embracing decimal time and other dubious, radical reforms.)

Canada isn't France. Nor is it Japan.

In a country like Canada, explains Mr. Sinclair, "populations are too dispersed and railways can't compete with the flexibility of cars." Not only is high-speed rail, using current technology, expensive and impractical in a vast country like Canada, there is ample evidence showing that "demand [for high-speed rail is often] overstated. Danish researchers have looked at the issue and found that nine out of ten rail projects overestimated demand and the average overestimation is 106 per cent."

Additionally, the massive government "investments" any high-speed rail project requires also represent a pernicious cross-subsidy from the working poor to the upper-middle class. High-speed rail is, according to Let Them Eat Carbon's research, "a rich man's train paid for with poor people's taxes. Long distance trains are overwhelmingly used by people on high incomes."

The relevance of class to transit policy debates doesn't end there. For example, those who demand that the government pay for their high-speed train travel also tend to want the government to fund light-rail transit projects to move them within the city. Yet these train enthusiasts are loathe to ride the bus. Why? Well, to put it in the language of Paul Fussell's still-excellent Class: A Guide Through the American Status Symbol, bus travel is "prole" travel. Buses are unfashionable. Taking the bus instead of the train is, to these modern-day Frognalites, like eating iceberg lettuce instead of arugula, reading the Toronto Sun instead of the Toronto Star, or having legible sentences on one's t-shirt.

Yet, for the purposes of mass transit, buses are both cheaper to build and, unlike trains, their routes can be easily changed along existing road networks to accommodate shifts in demand, including those spurred on by rapid population growth. In fact, depending on the public's appetite for reserved bus lanes, greater distances between stops, and traffic signals priority, buses can actually move large numbers of people within a city very fast -- faster even than cars. The flexibility and scalability of buses are true both for travel within cities and for travel between them -- illustrated by the rapid, private-sector-led expansion of inter-city bus service in the United States as an inexpensive alternative to unreliable and expensive train travel.

Unfortunately, in debates about where to spend the incremental transit dollar, style and status-signaling seem destined to overtake substance and common sense.

A Permanent Tax on Everything

Let Them East Carbon also discusses carbon tax policy and politics in the Canadian context through what I think is a very sophisticated analysis of the 2008 federal election campaign. The book even reproduces a picture of the Permanent Tax on Everything ad the Conservative Party used to brand the Liberal Party's carbon tax in voters' minds prior to and during that election campaign. The book's author also interviews Patrick Muttart, one of the main architects of the branding strategy.

"The strategy was two-fold", Let Them Eat Carbon quotes Mr. Muttart as saying, "attack the Liberals' motives and drive the economic consequences. Attacking their motives meant leveraging the public's tremendous skepticism about 'good cause' taxes (e.g. road taxes never seem to improve roads, income tax was a temporary measure to pay for WWI, the GST was supposed to be revenue-neutral, etc...) Driving consequences meant focusing like a laser on real world expenses: petrol, electricity, home heating fuel, groceries, etc... The Green Shift was initially very popular but it didn't take long to move public opinion. Quite simply nobody believed in the capacity of Government to actually deliver. But they did believe they would pay more."

Let Them East Carbon's very accessible charts and graphs -- as well as other evidence the book marshals -- do an excellent job showing the Canadian public was right to be skeptical that a carbon tax would efficiently allocate the costs of pollution without doing significant damage to the economy. Indeed, as Mr. Sinclair shows using examples from Britain and Europe, politicians and bureaucrats are not above cynically employing the language of market failure to transfer taxpayers' hard-earned money to well-connected special interests while doing very little to help the environment.

A (second) Permanent Tax on Everything

The carbon tax having been -- for now, at least -- discredited in Canada, it has I suppose become de rigueur to embrace emissions trading schemes. This is the policy currently favoured by the federal New Democratic Party. While most supporters of cap and trade schemes, like the advocates of a carbon tax before them, believe that they are helping the environment by using market mechanisms and price signals to correct a market failure, Mr. Sinclair persuasively argues that their preferred emissions trading schemes will harm the economy by raising the price of everything, including taxes, and make families worse off.

As Mr. Sinclair observes, compared to a carbon tax, "emission trading is more complex and less direct. As a result, it is easier to obscure the connection between the emissions trading scheme and higher prices. But emission trading does make things more expensive. If it isn't a tax on everything, it is at least a tax on everything it touches, particularly electricity. It also presents some significant opportunities for companies to profit at the expense of their consumers...Cap and trade has the potential to be a tax on almost everything, because fossil fuels are so important to modern industrialised economies."

To their credit, Prime Minister Harper's Conservatives, during the 2011 election campaign, closed the door on a cap and trade scheme. At a time when economic growth is slow and the unemployment rate a significant concern, raising taxes through an emissions trading scheme would inevitably lead to a drop in aggregate demand for goods and services as well as put Canada at a competitive disadvantage relative to the United States, which has no such tax. As long as the economic recovery remains fragile, and resources idle, for the Canadian government to pursue a cap and trade policy, especially unilaterally, would be more than just foolish; it would be downright reckless.

In addition to the economics of emissions trading schemes, the politics of it are also quite interesting. In the 2011 federal election campaign the New Democratic Party loudly proclaimed its support for a cap and trade scheme (while also advancing a contradictory -- at least if reducing carbon emissions was their goal -- policy of tax breaks on home heating fuel). While the NDP's support for cap and trade may have helped it push the Green Party to its lowest share of the popular vote since the 2000 federal election, as well as win over environmentally-conscious Liberal Party and Bloc Quebecois supporters, does this mean cap and trade was a net vote-winner for the NDP? Will it be in the future? Or do the champions of cap and trade risk polarising the electorate around an issue where the other side's half is bigger?

There are no clear answers, at this point, to these questions. Nevertheless, I do think we ought not to dismiss the Conservatives' success, particularly in western Canada, in branding the NDP's cap and trade scheme as a policy that would raise the price of gasoline, and that this is why, as one Conservative cabinet minister explained after the election, "the Orange Wave could not displace a Blue Sea of support for Conservatives in areas that had historically been represented by the NDP" - among, that is to say, the many Conservative-NDP swing voters who live in Saskatchewan and British Columbia.

Let Them Eat Carbon makes a persuasive case that the public is right to be skeptical about the effectiveness of various green schemes from politicians and bureaucrats. Canadians should read Mr. Sinclair's book, the better to arm themselves with sound arguments to counter the next dubious scheme when, inevitably, some politician proposes it; and, just as important, to identify those common sense solutions that might actually help the environment without doing violence to the economy.

Alykhan Velshi is on the Board of Directors of the Toronto Atmospheric Fund, a City of Toronto agency. The views expressed are his own.