The Conservatives’ carbon pricing plan: a tax that wouldn’t even reduce carbon consumption

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The best that can be said for the Conservatives’ new carbon pricing plan is that it will not be with us for long.

I was going to say the best part is that it exists, Conservatives having spent the last dozen years or so savaging carbon pricing as a “tax on everything.” But rather than simply admit they were wrong, the Tories have twisted the idea into something unrecognizable, indeed one might have thought impossible: a carbon tax that does not reduce carbon consumption.

Take a bow, “personal carbon savings accounts.” You’d still pay the carbon tax, only instead of the money going to the government, it would be deposited into your PCSA. That sounds vaguely like the existing Liberal scheme, which sends every household a rebate, ostensibly to cover the cost of the tax.

But, in fact, the Liberal rebate is a fixed amount. You get the same cheque, no matter whether you pay a lot of carbon tax or a little. So although it’s true, as a matter of fact, that most households receive more in the rebate than they pay in the tax, what’s necessarily true of every household is that the more tax they pay, the less they get to keep of the rebate. Ergo, they always have an incentive to reduce their consumption of carbon.

Under the Conservative plan, by contrast, the amount you receive is exactly equal to the amount you pay. If you pay $100 in tax, $100 is deposited in your personal carbon savings account. If you pay $1,000, you get $1,000. You’re only getting back your own money, of course: the government wouldn’t actually be paying you to consume carbon. But neither would you have any incentive not to.

Well, maybe a small incentive. For whereas under the Liberal scheme you get to spend the rebate on whatever you like, the money in your PCSA could be spent only on the things the government allowed you to spend it on: a transit pass, a bicycle, an energy-efficient furnace, and other climate-friendly purchases.

So far as you’d prefer to spend that money on other things, you’d have an incentive to keep it out of the PCSA, ie. by reducing your carbon consumption and avoiding the tax. But it’s pretty weak stuff, compared to the Liberal scheme.

Moreover, the Conservatives would cap the tax at $50 per tonne, compared to the $170 to which it would rise under the Liberal plan. And all at the (probably immense) cost of tracking every carbon-related purchase and adding the tax paid on it to the purchaser’s carbon savings account.

The Conservatives claim their plan would achieve the same reduction in greenhouse gas emissions as the Liberals’. But because the Tories rely less on carbon pricing to get there, they are obliged to rely more on other, costlier approaches, such as subsidies and regulations – the kinds of things carbon pricing was invented to replace.

It is, in short, a mess: a plan that would cost more to do less, with much added complexity. The Tories were forced into this contorted position by the political needs of the leader: to present a plan that was both a carbon tax and not a carbon tax at the same time, to reassure centrist voters for whom carbon pricing is table stakes without infuriating the base. In fact, this is probably likely to do the reverse: infuriate the base, without persuading centrists to give them a look.

And yet it would only take a slight tweaking to come up with a plan that works. Rather than adding the tax incrementally to people’s carbon savings accounts, why not start everyone off with a fixed amount in their accounts, say $500 or $1,000, and subtract the tax from it as it came in? Incentives to curb consumption would be preserved, while still allowing Conservatives to claim their tax wasn’t really a tax.

Too complex? Okay. Rather than record every purchase in some central database, issue everyone a “carbon credit card,” like a prepaid phone card, with a fixed amount credited to it annually. Every time you filled up at the pumps, the balance would be drawn down.

Alas, that is not going to happen. The Conservatives don’t want a plan that works, still less one they might actually have to implement. They just want a plan they can wave around for a while, then discard.

Hence the thought with which we began. The Conservatives are probably not going to win the next federal election. Meanwhile, the provinces that have until now refused to collect the tax are likely to do so soon, rather than cede the revenues to Ottawa.

If and when the Tories eventually arrive in power, then, they will find there is no longer any federal tax to pretend to replace. Which may have been the real plan all along.

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