Canadian conservatives are renewing their love-to-hate relationship with carbon pricing as the rising cost of crude drives up pump prices.
The federal Conservatives, led by Erin O’Toole, gingerly embraced carbon pricing to a degree during the recent election, proposing to freeze the levy at current levels and create personalized rebate accounts for consumers.
But Mr. O’Toole’s acceptance of carbon pricing is far from universal. Ontario Premier Doug Ford on Friday resurfaced his three-year-old pledge to cut gasoline prices, while taking some time to bash federal carbon pricing, which currently adds 8.8 cents to the cost of a litre of gas in the province.
Jenni Byrne, conservative commentator and campaign manager for the federal Conservatives in the 2015 election, took a swipe at British Columbia’s carbon tax on Twitter, writing that “there’s no evidence carbon taxes decrease GHG emissions.”
First, to state the obvious: Economists accept the basic premise that carbon pricing does reduce demand for fossil fuels. There are caveats, including the fact that demand for fossil fuels is price inelastic, so it takes a while for even elevated prices to shift behaviour. But shift behaviour they do.
Still, Ms. Byrne and others do point to British Columbia’s recent rise in greenhouse gas emissions as supposed proof for the ineffectiveness of carbon pricing. B.C.’s emissions fell in the first seven years after carbon pricing was introduced in 2008, but have risen from 2016 through to 2019. (Figures for 2020 are slated to arrive next spring.)
That criticism omits a few critical details, the most important being that the B.C. Liberal government froze the carbon tax between 2012 and 2018. There were other factors pushing down B.C.’s emissions in the early years of the carbon tax, including the economic fallout from the 2008-09 financial crisis. But it is no coincidence that emissions began their rise after the government froze the tax, thereby limiting its power to motivate changes in consumer behaviour.
Similarly, the fastest increasing emissions between 2007 and 2019 were from the agricultural sector’s on-farm fuel use; that sector received broad exemptions from the carbon tax from 2012 onward.
Lastly, there is abundant proof from the 2019 data that carbon pricing (now that the B.C. NDP government has resumed its increase) is having an effect. Overall emissions barely rose. Emissions from transportation declined slightly. And emissions from light-duty gasoline vehicles dropped by 5 per cent, to their lowest level since 2014. That sector would include cars driven by consumers.
And there are other measures that point to the effectiveness of carbon taxes in B.C.: per capita emissions have trended down, as have the amount of emissions generated per dollar of GDP.
Of course, Canada’s climate-change goal is not to reduce emissions intensity, but the absolute amount of greenhouse gases this country generates.
Carbon pricing, so far, hasn’t accomplished that goal. But it was never meant to on its own. Clean-fuel standards and other regulations are central parts of the federal government’s plan.
But political rhetoric from conservatives – and progressives – have obscured that basic fact. Progressives have made carbon pricing into a litmus test for environmental virtue, even though that policy is going to have a circumscribed impact at currently contemplated levels. That distortion opens the door for conservatives to lay the blame for Canada’s slow progress on emissions reduction, wrongly, on carbon pricing.
There are claims galore that Quebec gets preferential treatment under the federal equalization program in the runup to Monday’s referendum in Alberta aimed at triggering changes to the federal program. One of those came from former Liberal MP Dan McTeague, who tweeted on Friday that Quebec’s hydro revenues aren’t included in equalization calculations.
It would be horribly unfair to include Alberta’s fossil-fuel energy revenues and exclude Quebec’s renewable energy revenues. Unfair – if that were actually happening. University of Calgary economics professor Trevor Tombe lays out the details in a thread refuting Mr. McTeague’s assertion.
That said, there are some distortions that result from the amount that Quebec records for its electricity revenues, reflecting the below-market prices that are charged to customers within the province. If electricity prices floated near what the free market would indicate, it’s likely that Quebec would lose billions of dollars in annual equalization payments.
In an odd twist, the main beneficiary would be Ontario, not Alberta. That’s because of the floor created for annual increases in equalization that is tied to economic growth rather than the needs of the provinces. Less money for Quebec would result in those surplus funds being distributed to other provinces. And under the complex rules for the equalization program, Ontario (which would not otherwise receive equalization payments) would end up getting the lion’s share of those funds.
Counting costs, and then some: Inflation-adjusted federal program spending per capita will remain far above prepandemic levels this year, concludes a new study from the Fraser Institute. The levels of the spending in the 2021 spring budget alone would be enough to leave real per-capita program spending elevated. But the institute also adds on the cost of both Liberal campaign commitments, as a lower bound to its estimates, and NDP campaign commitments, as an upper bound. The study’s authors argue that the Liberals will likely need to adopt some of their rival’s platform to win support in a minority Parliament.
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