It’s simple: A tax double-play

Twenty-six years after the Rio Earth Summit, 20 years after the Kyoto Protocol, eight years after the Copenhagen Accord, two years after the Paris Agreement, here is where things stand in Canada, a signatory to all four.

We are nowhere near meeting our commitments for reducing greenhouse gas emissions. Or rather, we are firmly on track to miss them. According to the latest report by the federal Environment Commissioner, we are certain to miss our 2020 target of a 17-per-cent reduction from 2005 levels, and by a wide margin. We are scarcely less certain to miss the 2030 target of a 30-per-cent reduction from the same benchmark.

Not only are we nowhere near our targets, we have no credible plan to get there. In concert with provincial auditors-general, the commissioner found that most provinces did not even have targets for reducing emissions, let alone plans to meet them. Targets, where they existed, differed between provinces, as did baselines, schedules, even how to measure results. What we do know is the programs implemented to date — and lord knows there have been no shortage of those, mostly of the subsidy and regulatory variety — have proved singularly ineffective, often at great cost.

The one approach that has any chance of getting us even near pricing carbon — officially, the Pan-Canadian Framework on Clean Growth and Climate Change — is running into serious political headwinds. While Saskatchewan is the only province currently on record as opposed to the federal plan, by the next federal election it could be joined by Alberta and Ontario. Nominally supportive governments in Manitoba and Atlantic Canada, meanwhile, are dragging their feet. The federal campaign could well become a referendum on the carbon tax.

If so, there should be no presumption that the pro-tax side would win. Public opinion is more than usually confused on this one. Fully 40 per cent of Canadians think climate change is either not happening or is due to natural causes, according to a new poll by Abacus Data. Even among the 60 per cent who think it’s real and manmade, there is no consensus on what, if anything, should be done about it.

The picture grows even cloudier when it comes to the particular solution of carbon pricing. Only 42 per cent claimed to have any understanding of the concept; most could not even say whether their own province had such a plan. And while nearly half (46 per cent) thought it was a good idea, versus 22 per cent opposed, this was very much in the abstract, with carbon pricing yet to be implemented over much of the country, and barely begun to be phased in where it has.

How did we get into such a fix? It’s easy to blame the opposition, and indeed the Conservatives have been prominently mulish on the question. If we take them at their word that they believe climate change is real and requires government intervention, then the benchmark against which to measure the cost of carbon pricing is not, as their every line of rhetoric implies, doing nothing, but doing something else: those other programs I have just described, all of them implying higher costs, per tonne of emissions reduced, than carbon pricing — costs that are just as surely passed onto Canadians as any carbon tax would be.

But if carbon pricing has been misrepresented by its opponents, it has been almost universally mishandled by its sponsors.

Unwilling to charge a price sufficient to spur the needed changes in behaviour for fear of the expected political backlash, they are instead charging a price sufficient merely to annoy — $10 per tonne, rising to $50 by 2022, versus the $200 that has been calculated would be needed to hit our 2030 targets.

Rather than recycle any revenues collected back to the public in the form of cuts in other taxes, moreover, as under B.C.’s pioneering (and successful) carbon tax, they have increasingly used the proceeds to spend on other things, notably the same failed subsidy and regulatory programs carbon taxes were supposed to replace.

Indeed, not only have they kept all the old programs, but they are piling new ones on top, hoping these costlier, but invisible-to-thepublic programs will attract less popular wrath than the cheaper but all-too-visible carbon tax. But the failure to tax carbon at a level that will do much good only invites the public to ask why it is being taxed at all. And, equally, it invites the response: as a revenue grab. We have, in short, the worst of both worlds, saddled with programs that won’t work but will cause maximum public aggravation.

What should the feds do instead? I think this is one of those situations where the bolder course is also the more pragmatic. The strategy of trying to woo the recalcitrant provinces has run its course: even the promise of free money, the feds collecting the tax and rebating it to the provinces, has not succeeded in bringing them round.

Rather, the objective should be, to borrow a phrase, to go over their heads and appeal to the public. How? Not by more lectures about the evils of climate change, but by showing them how a carbon tax can work, and work for them — first, by setting the price at a level that will actually do the job, and second, by giving back every dollar of the revenues raised in cuts to other taxes, the federal income tax in particular.

We are already under pressure, post-Trump, to cut tax rates to stay competitive. This is the rare opportunity in policy to turn the doubleplay.

Michael Chong’s plan during the Conservative leadership campaign, it is worth recalling, would have slashed virtually everyone’s tax rate to 15 per cent, except for a 29-per-cent top rate — and that was based on a mere $100 (by 2030) carbon tax. What a $200 tax could do is too mind-blowing to contemplate.