National Post (Latest Edition) - - FRONT PAGE - TER­ENCE COR­CO­RAN

Touted by econ­o­mists as a won­drous mar­ket mech­a­nism that will de­liver Canada from the evils of cli­mate change, car­bon pric­ing is emerg­ing out of the political swamps as a reg­u­la­tory night­mare. It is also shap­ing up as the Great Cana­dian Car­bon Tax Grab. In ad­vance of a first min­is­ters’ meet­ing next week with Prime Min­is­ter Trudeau in Van­cou­ver to be­gin set­ting na­tional car­bon ob­jec­tives, On­tario Premier Kath­leen Wynne an­nounced that — just as con­sumers are be­gin­ning to ben­e­fit from lower oil prices — her prov­ince’s cap-and-trade ver­sion of a car­bon tax will add 4.3 cents to the price of a litre of gaso­line. Nat­u­ral gas prices will also go up $60 a year per house­hold.

More fis­cal de­tails are to come in a bud­get Thurs­day, but a Globe and Mail re­port says the govern­ment will ul­ti­mately col­lect $1.3 bil­lion a year in fresh rev­enue from its cap-and­trade taxes on gaso­line and nat­u­ral gas. The money will slosh around a Green­house Gas Re­duc­tion Ac­count to be dis­trib­uted by a green­house cen­tral plan­ning au­thor­ity to fund in­dus­trial and other ini­tia­tives deemed es­sen­tial to give On­tario a new, green low-car­bon eco­nomic nir­vana.

On Wed­nes­day, the prov­ince also in­tro­duced its cap-and­trade leg­is­la­tion, grandly ti­tled the Cli­mate Change Mit­i­ga­tion and Low Car­bon Econ­omy Act. On­tar­i­ans should get ready to pay.

The prov­ince al­ready has a low-car­bon elec­tric­ity regime, im­posed at a high cost of $ 9.2 bil­lion in long- term in­di­rect taxes on elec­tric­ity con­sumers, to fund wind and so­lar. Elec­tric­ity prices are soar­ing. The prov­ince also clearly in­tends to do the same to fos­sil fuel con­sumers, only more so.

As the eco­nomic braini­acs at an or­ga­ni­za­tion self- styled as Canada’s Ecofis­cal Com­mis­sion never fail to men­tion, 4.3 cents a litre at the gas pumps — equiv­a­lent to a car­bon tax of maybe $ 20 a bar­rel — would be es­sen­tially use­less as a car­bon-re­duc­tion in­cen­tive. This is just the be­gin­ning. Much more is needed.

Paul Booth, a Western Univer­sity econ­o­mist and an Ecofis­cal “com­mis­sioner,” said dur­ing a Google Hang­out this week that Canada will need a car­bon tax of “$150 to $200” if it is to have any hope of meet­ing the car­bon re­duc­tion tar­gets the Trudeau govern­ment agreed to at the Paris sum­mit. Math: A $200 car­bon tax would mean 43 cents per litre at the gas pumps. To­tal an­nual On­tario govern­ment rev­enue grab at that level: $13 bil­lion.

That’s a lot of an­nual dol­lars when mul­ti­plied across Canada. If the car­bon tax were to even­tu­ally rise to $200 a bar­rel na­tion­ally, the an­nual na­tional car­bon tax bur­den could soar to $40 bil­lion or more.

A $40 bil­lion an­nual car­bon price bur­den may seem like a po­lit­i­cally im­pos­si­ble tax grab, but fis­cal re­al­ity might force such dras­tic ac­tion. For­mer Bank of Canada gov­er­nor David Dodge told CBC Ra­dio last month that, as Ottawa and the provinces run into grow­ing spend­ing deficits, the crunch will come. “At some point the govern­ment of Canada, as has the govern­ment of Al­berta, for ex­am­ple, will have to look at rev­enue in­creases. Then some­thing like a car­bon tax or an in­crease in GST would be the most eco­nom­i­cally sen­si­ble way to go about do­ing it.”

Us­ing en­ergy as a cash cow is noth­ing new for gov­ern­ments. Dress­ing up such taxes as a car­bon re­duc­tion scheme takes tax grab­bing to a whole new level of moral fak­ery. Said Premier Wynne: “We need to deal with cli­mate change. The cost of do­ing noth­ing is much, much higher than the cost of go­ing for­ward and re­duc­ing green­house-gas emis­sions.”

The On­tario car­bon tax rev­enues will come from join­ing a cap-and-trade sys­tem that al­ready ex­ists in Cal­i­for­nia and Que­bec. In­dus­trial firms will have to buy per­mits to emit car­bon, oth­ers will be able to sell. With the Cana­dian dol­lar in a slump, the cost of Cal­i­for­nia per­mits is now much higher. The On­tario sys­tem, more­over, will also give some in­dus­tries car­bon price hol­i­days by al­low­ing “for tran­si­tional al­lowances to large in­dus­trial emit­ters.” The al­lowances will be phased out over time, but it is clear the car­bon tax will be a new com­pet­i­tive bur­den to On­tario in­dus­try.

Car­bon tax the­o­rists, and ap­par­ently the Trudeau govern­ment, be­lieve Canada needs the equiv­a­lent of a na­tional car­bon tax floor price set by Ottawa or at least by in­ter­provin­cial agree­ment.

If pric­ing car­bon were all it took to chase away the car­bon dragon, such a tax might be tol­er­a­ble, as­sum­ing cli­mate change is a global cri­sis and On­tario can help. But econ­o­mists who for years have been tout­ing a car­bon tax as a slick and ef­fi­cient use of mar­ket forces to bring in a low- car­bon econ­omy are now back­track­ing fu­ri­ously. We need more that a sim­ple car­bon tax. What we need, they now say, is a big car­bon tax that ratch­ets up dra­mat­i­cally over the next few years plus a truck­load of regulation, govern­ment eco­nomic med­dling, in­cen­tives, win­ner-pick­ing, con­trols and lim­its, com­pli­ance sys­tems, sub­si­dies and penal­ties, grants and in­cen­tives.

The orig­i­nal claim was that car­bon tax rev­enue was to be rev­enue neu­tral and given back to con­sumers. As Philip Cross notes in an oped on this page, “cash-strapped gov­ern­ments in Al­berta, On­tario and Que­bec are sim­ply rais­ing car­bon taxes with no off­set­ting tax cuts else­where.”

The new ob­jec­tive of the green state is to man­age car­bon emis­sions down. Growth, they say, will come if gov­ern­ments plow the car­bon tax cash back into govern­ment- planned green de­vel­op­ment to en­cour­age low- car­bon growth. That means govern­ment con­trols the na­ture of the growth, the tech­nol­ogy de­vel­oped, the fu­ture of the en­ergy, the fu­ture of the econ­omy.



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