Lower carbon emissions with lower taxes

With polls showing a relatively tight contest between the Liberals and the Conservatives shaping up in next year’s election, the Trudeau government evidently needed to find a defining issue that will carry them to victory in next October’s election.

From the beginning of his mandate, Prime Minister Justin Trudeau has made lowering carbon emissions a centrepiece of his government’s raison d’être. Trudeau promised an approach wherein “fighting climate change and growing the economy go hand-inhand.” Most of the provinces bought-into his “putting a price on carbon” agenda, including Alberta, which did so in exchange for federal support for getting its landlocked oil to tidewater.

Now that harmony has fallen apart. Following his decisive election victory, Ontario Premier Doug Ford joined Saskatchewan Premier Scott Moe’s anti-carbon tax mission. Manitoba Premier Brian Pallister then announced that he too would refuse to impose a provincial carbon tax. New Brunswick now refuses to impose a carbon tax. And in Alberta, Jason Kenney’s United Conservative Party, with its promise to cancel the existing carbon tax there, is still the favourite to win next year’s provincial election.

That would leave a great swath of the country, from the Rockies to the St. Lawrence Seaway stridently opposing Trudeau’s carbonpricing agenda. On the East Coast, New Brunswick may soon be joined in opposition by Newfoundland and even P.E.I.

How could such a divisive situation possibly translate into that election-winning “defining issue” for the Trudeau Liberals? The answer is Trudeau’s announcement this week that Ottawa intends to impose a carbon tax in dissenting provinces, and then return the proceeds to in the form of annual direct rebates to individuals. The Liberals claim those rebates will amount to more than people are paying in carbon tax. That means the scheme is yet another layer of taxes on business who are already overtaxed, all in a cynical attempt to buy votes.

We need only look across our southern border to see the profound damage wrought by election strategies that are deliberately divisive. The Trudeau national carbon-tax plan would pit provinces against our national government and Canadians against Canadians. Those against would be labelled climate deniers, reviled apostates against Trudeau’s sacred carbon-tax religion. So the country is going to pay dearly for this one way or another, but will any of it even help the environment?

The answer to that question is a resounding no. Here’s why. The carbon-tax plan would start at $20 per tonne rising to $50 per tonne in 2022. That corresponds to gasoline and diesel price increases of two cents rising to 11 cents per litre. But federal, provincial and municipal taxes already make up 44 cents of the Canadian average pump price, currently around $1.34 a litre. The reality is that the average Canadian driver already pays the equivalent of a carbon tax of about $200 a tonne, costing more that $28 for a 64-litre fill-up and generating government revenues of $24 billion in 2018.

This is one reason why carbon tax proponents and opponents agree that carbon taxes would need to be vastly higher than $50 a tonne to make a perceptible difference in demand. A leaked federal government-briefing document obtained by the Canadian Taxpayer Federation states that a tax of $300 a tonne (meaning another 68 cents per litre), would need to be added to reach Canada’s greenhouse gas emission targets.

Inverse elasticity of price and demand is a fundamental economic premise but it doesn’t exactly apply to fossil fuels. Why? Because we can’t do without some of them. And when there’s something that people can’t do without, raising the price only forces them to allocate a larger portion of their income to getting it.

Trying to solve a problem with the wrong solution will inevitably lead to failure. That’s why even those most concerned about global warming should oppose carbon taxes.

There is already an existing solution that will not only reduce Canada’s carbon emissions, but also help our economy. Two words: natural gas. Converting gasoline or diesel-fuelled vehicles to natural gas reduces carbon dioxide emissions by roughly a third. And anyone who’s driven behind a natural gaspowered city bus knows that it produces no toxic black particulates or foul nitrogen oxide (NOx) compounds.

Canada is endowed with a virtually limitless supply of low-cost, clean-burning natural gas. Yet we have a minuscule 15,000 naturalgas-fuelled (NGV) vehicles. The top 10 NGV countries may surprise you: China has 5.3 million, Iran 4.0 million, India 3.1 million, Argentina 2.3 million, Brazil 1.8 million, Italy 1.0 million, Colombia, 600,000, Thailand 475,000 and — get this — Uzbekistan 450,000.

Conversion of gasolinepowered vehicles to natural gas isn’t much more complicated than adding a compressed natural-gas (CNG) tank. And it certainly isn’t new technology. When my former company started its first natural gas production in 1976, we had our field service trucks converted so that drivers could change back and forth from natural gas to gasoline at the flick of a switch.

Converting diesel engines to burn natural gas, while more complex, is now mainstream technology. Vancouver-based Westport Systems is a world leader the heavy truck industry. Daimler, Kenworth and Volvo all offer NGV fuelled trucks. BC Ferries is progressively converting its fleet to natural gas. CN and CP are testing converted natural-gas-powered locomotives.

Canadian government data show that transportation produces 28 per cent of total carbon emissions. Coal-fired power produces another six per cent. My engineer calculations show that converting half the vehicle fleet and the remaining coal-fired power to natural gas would reduce Canada’s carbon emissions by eight per cent, compared with virtually nil under the divisive Liberal carbon-tax plan. Moreover, thousands of high-skilled jobs would be created as Canada seizes the opportunity to become the North American leader in NGV technology.

So how can governments encourage this to happen? The answer is the reverse of more taxes. The pre-tax cost of natural gas is already well below diesel or gasoline. Simply exempting natural gas from those high fuel taxes would create a compelling enough incentive. In other words, all governments need to do is to keep their tax-hungry hands off and let it happen.

The choice is clear: a negative, divisive national battle with no net environmental benefits, or harnessing our country’s natural-resource endowment and strong technological know-how to make Canada North America’s NGV leader. Which alternative would you vote for?

SIMPLY EXEMPTING NATURAL GAS FROM HIGH FUEL TAXES WOULD DO IT.