Carbon taxes and hiding from reality

Well, there you have it. Even Justin Trudeau’s federal government now concedes that carbon taxes pose a significant threat to Canada’s economy.

In case you missed it, last week the federal government announced plans to roll back its plan for carbon taxes on major industries. The taxes on all major emitters are to be reduced, with special exemptions announced for iron and steel manufacturing, as well as producers of cement, lime, and nitrogen fertilizers.

Why is the federal government’s retreat on carbon taxes important? While this small step will have no effect on the direct cost to Canadian families, it marks the first time the Trudeau government has acknowledged economic reality. In reducing the tax, the federal government is admitting that Canada is poised to lose thousands of jobs, millions in exports, and billions in investment as our economy becomes less competitive with the United States.

When it comes to economic clout, tiny Canada (population 37 million, GDP less than $2 trillion) is dwarfed by the United States (population 327 million, GDP nearing $20 trillion). We have benefitted greatly from close economic integration with the U.S. but with such a powerhouse neighbour, we face significant challenges in attracting and retaining business. Why would an international company choose Canada when it can benefit from lower taxes, cheaper labour, and fewer regulatory burdens south of the 49th parallel?

This is a running battle, and we are losing. Canada’s inability to renew a long standing trade agreement with the U.S. is just one cloud on the horizon. President Trump’s recent tax cuts for corporations extends the American Advantage, while stiff tariffs on Canadian steel, aluminum, newsprint and other products are having a significant effect on some of our major employers. Meanwhile, with the Trans Mountain Pipeline fiasco, Canada is reinforcing the perception that we are a country incapable of large infrastructure projects.

Rolling out a national carbon tax under these circumstances is hubris, and it will do very little for the environment. Instead of reducing emissions, it will simply drive carbon dioxide emitting industries to the U.S. The jobs these industries create, not to mention the tax revenue they generate, will go with them. This is the economic reality that conservatives have been warning about, and that the federal government is just now, at long last, acknowledging. It is worth noting that one major political party that remains in complete denial about the effects of the carbon tax: The NDP. Even with all evidence to the contrary, Premier Rachel Notley’s administration continues to proclaim that the carbon tax will benefit our economy and create jobs. What’s worse, the NDP continues to maintain that Albertans want a carbon tax, even as poll after poll proves otherwise.

Both economically and politically, the NDP is hiding from reality. It’s a fool’s game. The funny thing about reality is that it will find you.

(Drew Barnes is MLA (UCP) for Cypress-Medicine Hat constituency.)