Carbon taxes are back on centre stage in Canada, after a new "bipartisan" Ecofiscal Commission came out in favour of the idea. Ontario Premier Kathleen Wynne is also talking about carbon taxes as is Quebec Premier Philippe Couillard. That makes this an opportune time to review some of the problems with the idea of Canada engaging in unilateral carbon pricing.
Since proponents of carbon taxes justify the tax primarily on the grounds that it will protect the environment, we should consider that argument first. According to Environment Canada, Canada emitted about 1.8 per cent of the world's greenhouse gas emissions in 2012 and emissions are expected to continue to decline. Given that Canada is such a small emitter (in a global context), Canadian emission reductions -- even if they were dramatic -- would have no measurable impact on the trajectory of the future climate. With regard to conventional air pollutants, Canada's air quality has been improving for decades, and will continue to do so. Thus carbon taxes in Canada are not about achieving environmental improvements.
So if it isn't about environmental protection, what is a carbon tax about? Essentially, it is about changing people's behaviours in ways that drive them away from activities that produce greenhouse gas emissions, activities that are, overwhelmingly, related to how we consume energy -- energy in our homes, in our cars, in our workplace, in our schools, hospitals, and in our diet. And given that we are all quite different in our preferences, we will all be affected differently.
Do you prefer a free-standing home to a small apartment? Sorry, you'll have to pay up -- you almost certainly emit more "carbon" than the urbanite in the micro-condo (and that doesn't include your commute).
Do you have health issues that require you to maintain a particularly cool home in summer, and warm in winter? Sorry, you'll have to pay the tax or pay more for insulation.
Is your family spread across Canada, requiring travel to visit? Sorry, but you'll pay more for all forms of transportation when you go to visit Grandma.
Do you take a lot of prescription drugs, or use a lot of medical procedures? Sorry, get out your wallet; energy costs are a significant component on the final health care bill.
Do you like meat? Sorry, expect the price of your meat to go up more than other foods that produce less greenhouse gas emissions (that also will apply to your pet food, by the way).
Do you like fashionable clothing and buy new clothes annually? Expect the price of those new threads to increase under the new carbon price.
The list of people who'll be hit by the carbon tax is pretty much endless. Do you want to have, or want to build, a gourmet kitchen? Handicapped and need a car? Need a large car for your family's hockey gear? Want that big-screen TV to display your DVD collection? Like bottled water? Wash your clothes in hot water? Prefer a heated dishwasher to lukewarm hand washing? Sorry, but all these choices are going to cost you more under a carbon tax.
Now, not everyone will feel the pain. Generally, when carbon taxes have been implemented, as in BC, some of the tax is rebated to those in lower-income brackets. And in still other versions, such as Alberta's, carbon taxes generate some winners in the form of those research groups or companies that the government pays to conduct research into greenhouse gas emission control.
But by and large, if you're an energy-user, a carbon tax will not simply take taxes from you in a different way, they will subtly re-structure your life in uncountable ways.
Some economists support carbon pricing because they're primarily concerned with matters of economic efficiency, rather than considering the question of whether or not one ought to engage in an activity in the first place. Some will point out that academically, on a black board, one can design a carbon tax that doesn't cause economic harms, that is fair, and that imitates a consumption tax. Realists would point out that such perfect economic theories are much like battle plans, and never survive even first contact with their opposition.
Carbon pricing tends to be one of those favoured options when governments (or NGOs) declare the road to greenhouse gas emission reduction. And yes, carbon taxes are theoretically "more efficient" economically than regulations or emission trading systems might be, but unless they're global, they are not efficient at producing environmental benefits. They're most efficient at expanding governmental influence over people's lifestyle preferences.
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