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It appears Ontarians have lost faith in carbon taxes

The debate on carbon taxes at the May 7 meeting of the Commons finance committee looked like it was frustrating one of the witnesses, University of Alberta economist Andrew Leach. Conservative MPs, and Alberta United Conservative Leader Jason Kenney, suggested a carbon tax won’t really reduce greenhouse-gas emissions, and Mr. Leach slapped back in the most economist way.

“Let me assure you, and put on the record, that demand curves slope downward, despite frequent claims to the contrary,” he said.

That, for an economist, was like telling politicians that two plus two equals four. It was Mr. Leach’s way of saying that carbon taxes obviously reduce emissions, because of the law of demand.

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The law of demand, after all, isn’t some flimsy notion. When the price of butter goes up, people buy less, or substitute margarine or oil – in practice, not just in theory. Economist Keith Chen even taught capuchin monkeys to use money and reported that when he raised the prices of apples, the monkeys bought less. If you raise the price of emitting carbon, carbon emissions will go down. You can debate the size of the effect, or whether it’s the best policy, but not whether it will work.

That’s why an Ipsos poll released Tuesday tells us so much about the politics of climate change policies – and drove a bunch of economists nuts.

The online poll of 1,197 Ontarians didn’t just tell us carbon taxes are unpopular. It found 72 per cent of Ontarians think they’re just a government tax grab – even a majority of Liberal supporters said so; it also found 67.7 per cent think that carbon taxes are “a pointless symbolic gesture that will cost Ontarians a lot of money and do little for the world’s climate.”

The carbon tax, a technical mechanism to reduce greenhouse-gas emissions, is no longer a question of policy – in Ontario, at least, it’s a matter of faith. The Ipsos poll suggests Ontarians have lost faith.

It’s hard to separate how much of that answer is about Ontario’s carbon pricing system from the unpopular Liberal government or Ontarian’s views about carbon taxes generally. (The poll asked about “carbon taxes in Ontario.”)

But it’s enough, given Ontario’s importance, to suggest there could be real political trouble for Prime Minister Justin Trudeau, or any leader, to build solid support for a national carbon-tax plan.

Darrell Bricker, chief executive officer of Ipsos Public Affairs, noted polls regularly find a majority of Canadians are concerned about climate change. But now Ontarians are starting to equate climate issues with actually paying something. “That’s where the rub is coming in,” Mr. Bricker said. In Ontario, climate ranks far lower in voters’ concerns than hydro rates.

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Ontarians don’t seem to believe carbon taxes reduce emissions. Mr. Bricker said people don’t really see the effect, so they see it as tax grab.

The poll sparked a tweet of exasperation from Laval University economist Stephen Gordon. The point of a carbon tax is to encourage the “substitution effect” – when emitting is relatively more expensive, people emit less – and the revenues can be used to cut taxes, spend, or for that matter, it could be thrown in the ocean. So Mr. Gordon said it’s frustrating to see carbon taxes equated with a tax grab. “It could be, but it doesn’t have to be.”

Distrust of the carbon tax is a real problem for Canadian climate policy. It’s the current Liberal plan. But because the Conservatives have vilified it, they have few real options other than ignoring the issue or supporting un-Conservative, heavy-handed regulation.

Former Ontario leader Patrick Brown proposed a carbon tax that would be used to pay for income-tax cuts, but his successor Doug Ford has dumped the idea.

Federal Conservatives have asserted that Mr. Trudeau’s proposed $20-to-$50-a-tonne carbon tax won’t reduce emissions enough to meet Canada’s targets, so there’s no point in carbon taxes at all. But the law of demand kicks in at lower prices, and Mr. Leach said the evidence from B.C. is that a carbon price of $30 can reduce emissions by 5 to 15 per cent. Carbon taxes are an incentive for free-market innovation in technology to reduce emissions, but that’s been chucked aside.

That may be in line with a vein of skepticism. Mr. Leach’s demand curves may describe laws of economics, but in Ontario, at least, it appears the public doesn’t have a lot of faith.

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