Listening to some conservative politicians attack the Trudeau government’s carbon pricing plan has been intellectually painful. Their arguments may find political resonance but, on environmental and economic grounds, they just don’t add up.
For anyone other than climate-change deniers, significantly reducing greenhouse-gas emissions is a necessity. Unless you think we shouldn’t bother cutting carbon emissions, the most economically logical way of doing so is by putting a price on carbon. That’s Economics 101 – you know, the course conservatives usually accuse folks to their left of having skipped. It’s a solution involving free markets and price signals, rather than top-down meddling in the individual decisions of millions of people and firms. What’s more, higher taxes on carbon can be used to fund things like lower business or personal income tax rates – something conservatives constantly clamour for.
Economically speaking, the Trudeau government’s approach is the right one. Environmentally speaking, too. The question is whether, over the long run, it can be sustained politically. That’s up to you, dear reader and dear voter.
Ottawa is creating a national standard and leaving it up to each province to decide how to meet it. Beginning in 2018, carbon will have to be priced at $10 a tonne, with the price rising by $10 a year until it hits $50 in 2022.
What’s all that in plain English? A $10 tax on a tonne of carbon is equivalent to a tax on gasoline of 2 cents per litre. A $50 per tonne price means a gas tax of 11 cents a litre.
British Columbia, Quebec, Ontario and Alberta already have carbon taxes or cap-and-trade, or are introducing them. Eighty per cent of the population lives in a province that either already exceeds the 2018 federal standard – in the case of B.C. and Quebec – or is in the midst of implementing its plan to get there (Alberta and Ontario).
Saskatchewan Environment Minister Scott Moe recently described the Trudeau government’s announcement as “National Energy Program 2.0.” Premier Brad Wall argues it’s going to siphon $2.5-billion out of the province and $1,250 a year out of the pockets of the average family. We don’t see how that arithmetic adds up.
Yes, any extra tax, no matter how small, is deplorable if the levy is unnecessary, or the money wasted. But in the case of the carbon levy, every cent raised remains within the province. Each province can design its own system and use the money however it likes. Not one red cent has to go to Ottawa.
A conservative provincial government, like Mr. Wall’s Saskatchewan Party, could decide to take advantage of higher taxes on gasoline, diesel, natural gas and coal to lower taxes on things everyone wants more of, like income and investment. A conservative-minded premier could promise to turn every dollar of carbon levy into a dollar in tax cuts. That would make for an interesting contrast to Alberta and Ontario, which are largely planning on spending their carbon billions.
The idea of making a carbon tax “revenue-neutral” was pioneered by B.C. The $1.2-billion a year raised by its $30-a-tonne carbon tax is used to lower the province’s middle-class income tax rate and provide benefits for lower-income British Columbians. Some carbon-tax cash is also used to support the province’s film industry – so, no, it’s not perfectly revenue-neutral. But it’s close.
Consider the opportunity for a province like Saskatchewan. A middle-class taxpayer there currently pays more basic provincial income tax than someone with the same income in B.C., Alberta or Ontario. A carbon levy would allow the province to lower income tax rates, as B.C. did – with no need for spending cuts or deficit financing.
Or Saskatchewan could cut its provincial sales tax, currently 5 per cent. That would not be economically wise, but it might be politically popular. (The Harper government, which lowered the federal GST from 7 to 5 per cent, certainly thought so.)
Some Canadian conservatives have grasped that the political opportunity is not in standing against effective action on climate change, but rather in trying to come up with economically better solutions.
In Manitoba, Progressive Conservative Premier Brian Pallister was elected earlier this year on a platform that included support for “carbon pricing that fosters emissions reduction.” This week he scrapped the previous NDP government’s plan to introduce cap-and-trade, while promising that his province would soon bring forward a plan that would meet the federal standard and timetable.
In Ontario, Progressive Conservative Leader Patrick Brown favours a carbon tax and wants to use it to lower other taxes. B.C., governed by the hybrid conservative-liberal Liberal Party of Christy Clark, has had such a system in place for years.
The Trudeau government’s opponents on the left say its targets are insufficiently ambitious and its timetable is too slow. Its Paris Accord goal – reducing Canadian GHG emissions by 30 per cent by 2030 – was the Harper government’s. Critics say a carbon price of $50 is not high enough to meet that target. The critics are almost certainly right.
But give the Liberals credit. With one simple move, they’ve built a foundation for action. Carbon pricing is the way to go, for the economy and the environment.
But what about the politics? That’s the trillion-dollar question. The intersection of 10 provinces, three territories, multitudes of shifting and competing interests, politicians attempting to tie agreements to other issues from health funding to pipelines, plus the need to annually increase the carbon price mean the years to come could be very politically challenging indeed.
All of which means that, to borrow from Churchill, the Trudeau government’s imposition of a national carbon price is not the end of the issue. It is not even the beginning of the end. Years of debate are still to come. But a real and significant step has been taken. For Canada’s greenhouse-gas policy it is, finally, the end of the beginning.Report Typo/Error
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