A minefield to navigate with care

In theory, carbon taxes can play a useful role in encouraging consumers to reduce greenhouse-gas emissions. People do change their behaviour in response to prices. In practice, the federal Liberals are taking political and economic risks by considering the imposition of new taxes on the carbon in all fuels. The extra revenues would be used to fund personal and corporate income-tax cuts, so the Liberals can depict these measures as a simple reshuffling of the tax system. But carbon taxes require careful calibration to make sure that they don't sideswipe domestic producers and low-income consumers. It is particularly difficult to ensure that they don't make cheap imports from the carbon-spewing developing world even more attractive when compared with the prices of Canadian products, both our exports and those we use ourselves.