Carbon tax blues


author: nick giokas contributor 

Credit: abdallahh and Andrew Hart

Credit: abdallahh and Andrew Hart

The Trudeau government’s proposed Carbon Pricing Plan is, simply put, absolutely god-awful. While I’m happy that the Trudeau government is following through on its commitment to tackle climate change, their Carbon Pricing Plan is just another example of the Liberals failing to translate solid ideas into sound policy. What Trudeau is proposing is a flat tax on carbon emissions with the tax rate rising from $10/tonne in 2018 to $50/tonne by 2022.

The main issue with this plan is that a flat tax on carbon works fine when implementing it during a period of economic growth because when you’re experiencing economic growth the negative effect of taxes are mitigated by rising consumption and production. This is the axiom that a lot of the policy analysis was done under: a growing economy; however, we’re not experiencing a growing economy, and instead we’re in a period of relative recession. That means that there’s nothing mitigating the increase in consumer prices due to taxes, which means that the consumers (i.e. everyday Canadians) are the ones facing all the costs. What’s more, this tax will have a massive negative effect on the economy.

An even bigger failure with Trudeau’s proposal is that it affects certain sections of society disproportionately. While people in Toronto or Montreal wouldn’t see too much change due to the carbon tax, those in rural Saskatchewan or Alberta would face a much, much larger burden. Consumer goods such as food would rise at a much higher rate in rural communities than urban ones, and while urbanites can cut fuel costs by taking public transit, those living in the country who have to drive to and from work will face a much steeper cost of living.

Furthermore, this tax proposal punishes provinces whose energy grids rely on fossil fuels and does not allow them to offset costs in the short term to transition to a more “green” energy grid. Essentially with a rising flat tax on carbon, instead of helping provinces that are behind the curve invest in green energy, they are doled out increasingly punitive taxes that only restrict their ability to do so. To say this Carbon Pricing Plan is counterintuitive is a severe understatement.

A far more equitable policy would be that of a federal cap and trade system. It would allow provinces that are behind the curve technologically or who have a more rural population spread out long run costs by buying up cap room on emissions from provinces that are ahead of the curve. This would also offset the inefficiency of having a federal cost on carbon that is below the relative carbon tax level of provinces such as BC, Ontario, or Quebec. By correcting this inefficiency, the overall carbon footprint of the nation would decrease at a much more even rate in the long run; furthermore, a cap and trade system allows itself to adjust to market forces meaning that the negative impact on economic growth levied by the tax can be mitigated. Overall, a cap and trade system is a far better fit for our current economic situation.

So why would Trudeau’s Liberals propose a tax system that doesn’t fit Canada’s economic circumstances? The answer is equal parts straightforward and infuriating. The rollout of the tax is structured so that Trudeau’s proposal incurs no taxes on carbon for Ontario, Quebec, or BC before the next election, since their pre-existing carbon taxes are greater than the proposed federal rate would be by that point. It’s no coincidence that the provinces that are exempt before the next election are also those with a great deal of swing ridings. It is a completely transparent and disgusting case of the Liberals seeing staying in power as more important than effective policy. If this were the only case of the Liberals putting the cart before the horse I might give them the benefit of the doubt, but the past year has shown that public opinion polls are more important to the Liberal government than policy.

Make no mistake, this is cowardice on the part of the Trudeau government, as there are plenty of examples of those on the left pushing the envelope with damn good policy that was unpopular at first but resulted in re-election (Blair and Obama being the most notable recent examples). The Liberals have no vision for Canada beyond the Liberals maintaining a majority in Parliament. They see government not as driven by policy, but as a popularity contest where it’s perfectly fine to throw people under the bus.

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