Prepare for single-issue 2019 vote
Carbon tax issue could be settled for good
The Conservatives have made clear their preferred ballot question in the 2019 election — the cost to the average family of Justin Trudeau’s carbon tax.
They filibustered all night last Thursday to highlight their point that finance minister Bill Morneau won’t release that figure, despite having the analysis to hand. Meanwhile, the Conservative Party’s Twitter account has featured a picture of a gas pump sent in by one partisan. “Thank you @ CPC_HQ for standing up for our family and working all night. I can’t live like this. $94.68. This is one fill-up for my minivan,” it read.
Andrew Scheer’s Conservatives have been emboldened by Doug Ford’s victory in Ontario — interpreting the provincial vote as an explicit rejection of the carbon tax, which it may or may not be.
Ford’s declaration that the province’s cap-and-trade system is dead, part of his promise to cut four-and-ahalf cents from the price of a litre of gasoline, has raised a number of questions about what comes next, not least of which is: who is going to compensate the companies that in good faith bought nearly $3 billion of emissions credits? The process of leaving the Western Climate Initiative, set up with California and Quebec, is going to be messy and costly.
From a federal perspective, Ontario’s withdrawal will mean Ottawa is obliged to enforce its backstop. The federal government has said it will introduce a $10-pertonne levy this year, rising to $50 per tonne by 2022 — roughly $0.11 per litre of gas — for those provinces that don’t have their own system. Four provinces already have carbon pricing schemes that exceed $10 per tonne: Alberta ($30), B.C. ($35) and Ontario and Quebec ($1819). Now, however, Ford has indicated Ontario will join Saskatchewan in its court battle with Ottawa, contesting the federal government’s jurisdictional right to impose a carbon tax.
Legally, the Liberals are on solid ground, according to most expert opinion. Politically, though, the prospect of imposing a tax on jurisdictions where the provincial government is openly hostile toward it is a much more dubious proposition.
Since Ford has indicated he is opposed to implementing a rising carbon tax, the federal government will be forced to raise the revenue. Under the Greenhouse Gas Pollution Pricing Act, part of the budget bill that is still before Parliament, the money must be returned to the province where it was raised, but not necessarily to that province’s government. This could be the Liberals’ trump card — the prospect of Government of Canada rebate cheques being sent directly to households.
The Conservatives will take their chances and attempt to make the carbon tax the single issue of the campaign, based on their belief that when the debate is over taxes they win nine times out of 10 (a notion that does not appear to have been disabused by their defeat in 2015, in part because they let themselves be outbid by the Liberals on tax cuts).
That complacency also underestimates the public’s ability to sense when it’s being sold a pig in a poke.
Scheer has committed to meeting Canada’s Paris climate targets — emissions 30 per cent below 2005 levels by 2030 — without a carbon tax. The Conservatives haven’t said how they plan to achieve those targets, but Scheer has promised a “detailed and comprehensive plan because we believe Canada has to be part of the solution.”
With a carbon tax and cap-and-trade off the table, that solution is likely to be a suite of regulations that environmental economists say will almost inevitably be more expensive than the alternative. Nicholas Rivers, Canada Research Chair in climate and energy policy at the University of Ottawa, said regulation is “effectively a carbon tax.”
The difference is that regulating across a range of complex sectors would be less cost-effective than using a simple price mechanism.
“Just as in the rest of the economy, price systems are more cost-effective ways of allocating supply and demand than a central planner rationing goods,” he said.
In a study for the Laurier Centre for Economic Research, Rivers and co-author Randall Wigle found that regulations and subsidies in the transport sector were less noticeable to the public but were far more costly — creating hidden costs that are borne by consumers in the price for fuel and new vehicles.
But public polling suggests opposition is higher to the explicit carbon tax than it is to regulatory approaches, where the costs are less visible.
The Liberals can be relied on to point out that any Conservative climate change plan is also going to prove costly at the pumps — in all likelihood, more expensive than the market-based solution they are proposing. This hints at the dilemma for all centre-right parties, including Ford’s: he has just cut off a lucrative revenue source, while promising to balance the budget and fulfil expensive election commitments. There is not much room to manoeuvre.
By contrast, centre-left parties, liberated from the discipline of living within their means, can tax and spend with abandon.
Just as with the free trade election of 1988, we could be set up for a single-issue tilt that settles the question of the day once and for all.