TERENCE CORCORAN ON THE GREAT CANADIAN CARBON TAX GRAB.
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.
ONTARIO LAUNCHES CAP-AND-TRADE REGIME ON EVE OF FED-PROV MEETING ON NATIONAL CARBON TAXATION.