The Conservative leader, Pierre Poilievre, wants to axe the carbon tax without telling us what alternative policy, if any, a Conservative government would introduce to reduce carbon emissions.
While many will undoubtedly endorse his proposed policy. It is short-sighted and will risk our children’s and grandchildren’s future for his short-term political gain.
The price on pollution, as it is more accurately labelled, is widely misunderstood and Poilievre has no intention of clearing up the misunderstanding.
What Canadians need to understand, however, is what the tax aims to achieve, what the costs are, who bears them, and what alternatives we will face if the tax is axed by Poilievre or, indeed, anyone else.
The Conservative leader seems to be incapable of being forthright in discussing alternatives. Perhaps he fears voter reaction since he has painted the price on pollution as a tax grab rather than a rational policy.
So, how does it really work? The carbon tax as it applies to gasoline, diesel fuel and natural gas is a cost-effective way of reducing the use of these fuels.
The Parliamentary Budget Office has calculated the fiscal impact of the tax on the eight provinces adhering to the federal legislation – B.C. and Quebec have their own pollution pricing systems.
The PBO found the majority of consumers in these jurisdictions receive rebates worth more than the tax they pay and that the tax is broadly progressive (that is, it falls more heavily on the wealthy than on the less-well-off.)
The PBO also calculated the overall economic cost of the tax by determining the total cost of the tax compared to doing nothing.
It found that, under this comparison, there is a small negative economic cost that will leave most Canadians slightly worse off even if they get a rebate worth more than their carbon tax. So (spoiler alert!) there is no free lunch. If we reduce emissions using a tax on pollution it does reduce our collective prosperity, but only marginally.
What are we getting for this small sacrifice? It is estimated that the carbon tax will produce somewhere between 8 and 14 per cent of Canada’s budgeted reduction in emissions from now until 2030.
Further, the price that industry pays for carbon production is estimated to reduce pollution by between 20 and 48 per cent over the same period and industry does not receive rebates.
So, what are the alternatives to the carbon tax? There are subsidies and regulations.
For example, there are subsidies for buying electric cars and subsidies to the oil industry to make cleaner fuels and for carbon capture and storage and (to date) almost $40 billion to electric car manufacturers. And let’s be clear – these subsidies are paid by all taxpayers.
But, administering subsidies and regulations also involves administrative costs. All in, compared to putting a price on pollution, these alternatives end up being more expensive for taxpayers.
The visibility of pricing pollution makes it economically and ecologically effective. But this very visibility is also why opportunistic politicians such as Poilievre and several premiers find it so attractive to campaign on axing the tax. But if they are successful, will it mean that carbon pollution will sky-rocket?
The bottom line on all this: It is possible to lower pollution by incurring hidden costs but, while the political costs may be lower, the economic and fiscal costs are higher. The carbon tax is a better deal for taxpayers.
Looking at the big picture, there is a problem with carbon pollution in that no one country is responsible for it – though China and the US are biggest polluters. Canada is responsible for about 1.5 per cent. Dealing with the problem successfully requires collective action but those who produce only a small portion of total global pollution have an incentive to try to become a free rider. Perhaps this is Poilievre’s objective.
But if Canada shirks our responsibility, there is an obvious rationale for other nations to avoid taking climate action because their political leaders fear adverse consumer backlash. They will try to do less rather than more.
Canada needs to step up and be the example they need to follow.
DAVID BOND - David Bond is a retired economist who lives in Kelowna.