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Globe editorial

How to fight global warming without destroying the economy? Use a little Econ 101 Add to ...

Imagine if there was something the world was producing a lot of, and it was essential for the future of the planet to figure out how to produce less of it. Now imagine this something wasn’t being created in just one place by just one company, but instead was produced in individually tiny but collectively enormous quantities, by the independent, day-to-day decisions of billions of consumers and companies. Every time someone chose to drive a car to the store, they produced a little bit of that thing we collectively need to produce less of. The type of car they drove or chose not to drive, the distance driven or foregone, the fuel used, how they heated and cooled their home, how much they heated and cooled it, where they lived, the clothes they wore, the food they ate – all of these everyday decisions in some small but measurable way contributed to producing more or less of this problematic thing.

The thing in the story is of course carbon emissions, also known as greenhouse gases. The science appears to be beyond argument: The planet is warming, and human activity producing GHGs is behind that warming. So what can we do to reduce carbon emissions? And is there a way to save the planet without destroying the economy? Yes, there is. But right now, the most effective and efficient solution to the problem is getting the least political attention.

There are basically four sides in the debate. On the left, a growing and vocal group of people believe that the problem is capitalism, free markets and economic growth itself – and that the only way to save the planet is to undermine these, send the economy backward, and make us all poorer. Many people on the right are in fact saying the flip side of the same thing – that meaningful steps to reduce greenhouse gases can’t be taken, because doing so would wreck the economy. The former want to sacrifice the economy for the environment. The latter want to sacrifice the environment for the economy. One side is selling repentance from the sin of economic prosperity as the way to save us from Armageddon; the other says we can save our prosperity only by willfully ignoring the visible consequences of our actions.

The far left and the far right are telling different versions of the same story. One says Change Everything. The other says Do Nothing. They are co-conspirators in a plot to make sure that the only options on the table are radical and extreme – and wrong.

Then there are the liberal meddlers. They think greenhouse-gas pollution can be addressed without destroying the economy – but only if government gets into the business they’ve always wanted government to be in: mega-projects! Create an industrial strategy, with taxpayer billions to invest in clean-tech research and green startups, directed by government. Block this pipeline here, order that windmill to be built there, and pick which solar-cell manufacturer to subsidize so they’ll set up business in your province.

And then there’s the fourth and best option: Use Economics 101. Want less of something? Put a price on it. Tax it. And use the revenues on the thing we want less of – pollution – to lower taxes on things we want more of – investment, income, savings and so on. This is straight out of the textbook. And in some places, it is already reality.

British Columbia has had a carbon tax since 2008. It isn’t large or onerous; for example, the tax on gasoline is 6.67 cents per litre, and on higher-carbon diesel it’s 7.67 cents. The tax, also covering coal, natural gas and other fuels, has had a big impact. Between 2008 and 2012, per capita consumption of the fuels subject to the carbon tax fell by more than 17 per cent in BC, while rising by 1.5 per cent in the rest of Canada, according to an analysis by Stewart Elgie of the University of Ottawa. Per capita greenhouse-gas emissions from sources subject to the BC carbon tax fell 10 per cent, while the rest of the country’s per capita emissions from the same sources were down 1.1 per cent. And even as BC’s path of carbon use was diverging from the rest of Canada, its economic performance was not. The best measure of economic growth – per capita gross domestic product – shows almost no difference between BC and the rest of Canada between 2008 and 2011. In fact, BC’s economic growth, even with a carbon tax, slightly outperformed the rest of the country.

What’s more, BC has used the carbon tax to reduce personal and business taxes. For middle-class and upper-middle income people, BC is now the province with the lowest income-tax burden – lower than Alberta.

In other words, BC has delivered big results, without taking radical steps. A tax on carbon nudged millions of British Columbians into making small decisions to figure out how to lower their carbon-tax burden. And all of those small steps have added up. There have been millions of tiny evolutions – not one giant revolution. The entire province didn’t give up cars or capitalism.

This week, a group of prominent economists headed by Chris Ragan of McGill and backed by big names from across the political spectrum – including former Reform Party leader Preston Manning, former BC NDP premier Mike Harcourt, and former Quebec Liberal premier Jean Charest – launched what they are calling the Ecofiscal Commission. The idea is to bring economic logic – the power and science of markets – to bear on the pollution problems facing the country and the world. It’s an approach that should appeal to all parties – particularly Conservatives. After all, conservatives and Conservatives are supposed to believe in markets. They are also supposed to believe in paying what’s due, whether that’s a debt or an environmental bill. Simply ignoring our greenhouse-gas problem, as a lot of conservatives do, is like eating at a restaurant and then refusing to pick up the tab. Free marketers, more than anyone else, should recognize that there’s never a free lunch.

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