Carbon taxes are political castor oil: good for what ails us but hard to swallow.
A price on carbon emissions makes many products more expensive, since every aisle in Walmart has a sizable carbon footprint.
It also risks looking like a vice tax on common behaviours, such as driving. No politician wants to make piling the kids into the minivan for soccer practice feel shameful.
The payoffs of a carbon tax, meanwhile, are remote and speculative. Voters are asked to pay more now to head off ecological disaster decades in the future. Human beings are generally not good at such trade-offs.
The political equation is even trickier in Canada.
Since we do not produce a big share of the world’s carbon emissions, our climate actions, for good and ill, can feel unimportant. And as one of the nations that might be expected to suffer the least from a global rise in temperatures (as a rich, cold, spacious country), the threat of climate change has a troubling way of looking manageable from here. Glib politicians even joke about enjoying a little warming in the depths of February.
Meanwhile, we are a suburban land, and higher fuel costs are hard for many of us: 67 per cent of Canadians live in the suburbs, according to the Council for Canadian Urbanism. That’s a lot of minivans.
The dilemma for conscientious Canadian politicians is that, despite its political gag factor, a carbon tax is the most efficient way for us to do our part in tackling the world’s most pressing collective challenge. In other words, it’s the right thing to do.
How, then, do you stir in enough incentives to make it palatable? That is the question facing Justin Trudeau’s Liberal government as it tries to implement a default national carbon tax by imposing a backstop levy on provinces that won’t do the job themselves. On Tuesday, it went a long way toward answering that question.
The biggest spoonful of sugar will come in the form of a generous rebate delivered directly to individuals in provinces that have refused to implement an adequate carbon-pricing regime: namely, New Brunswick, Ontario, Manitoba and Saskatchewan.
Canadians in those provinces will get money back regardless of their personal carbon output or their income. Rather, nine-tenths of each province’s carbon-tax revenue will be divided up according to how many adults and children are in each household, with Canadians living outside of cities getting a little more. Ottawa estimates that 70 per cent of households will get more back then they spent on the carbon tax.
The remaining 10 per cent of revenue is going to help universities, small businesses and other entities that might struggle with the tax, in some cases because it is harder for them to pass on the cost to customers.
The policy rollout has been savvy. It was announced in the riding of Ontario Premier Doug Ford, a carbon-tax opponent whose populist bombast makes him an attractive foil in a national battle.
And Mr. Trudeau framed the carbon tax as a “price on pollution” – a tagline that can claim to be more than political spin, since his tax is designed not to raise federal revenue but to internalize some of the social costs of emitting greenhouse gases into the atmosphere.
Above all, it’s politically smart to hand carbon revenues directly to people, rather than to intransigent provincial governments. Doing so helps counter the federal Conservative talking point that the carbon tax is a revenue grab.
The Liberal strategy could end up being too clever by half. Voters might see their election-year rebate cheques as a kind of unseemly bribe – or, even worse, they might feel more burdened by higher prices all year than they feel gratified by the annual federal cash infusion.
A more coherent and economically sound carbon tax would have been national in scope from the start and come with a corresponding cut in federal income taxes, in order to encourage economic growth and work, rather than consumer spending.
But considering the lay of the land as the Liberals found it – big provinces like Quebec and British Columbia already pricing carbon; a demagogic campaign on the right to smear carbon taxes as a big-government scheme – their rebate approach is harder to fault.