Trudeau’s car­bon-pric­ing fix­a­tion out of step

The Guardian (Charlottetown) - - OPINION - BY KEN GREEN Ken­neth P. Green is se­nior di­rec­tor of the Cen­tre for Nat­u­ral Re­source Stud­ies at the Fraser In­sti­tute.

Cana­di­ans are right to be skep­ti­cal about the fed­eral gov­ern­ment’s car­bon-pric­ing plan.

At the G20 sum­mit in Ham­burg in early July, Prime Min­is­ter Justin Trudeau took a lead­ing role in pro­mot­ing a cli­mate change agree­ment that would reaf­firm the Paris tar­gets. Nine­teen mem­bers of the G20 signed on, with the United States de­clin­ing.

Sev­eral Cana­dian prov­inces have im­ple­mented cli­mate change ac­tion plans con­tain­ing sev­eral key com­po­nents: sub­si­dies to re­new­able power; house­hold, busi­ness and ve­hi­cle ef­fi­ciency pro­grams; and, of course, a car­bon pric­ing pro­gram.

After adopt­ing the Paris cli­mate com­mit­ment, the fed­eral gov­ern­ment an­nounced it would es­tab­lish a “back­stop” price for green­house gas emis­sions start­ing at $10 a tonne in 2018, ris­ing to $50 a tonne in 2022. Prov­inces that don’t adopt equiv­a­lent poli­cies will have that new fed­eral tax im­posed on them.

How­ever, a new poll by the An­gus Reid In­sti­tute sug­gests that the more peo­ple learn about car­bon pric­ing, the less en­am­oured they are of such schemes, par­tic­u­larly at the fed­eral level. Ac­cord­ing to the poll, at least half the pop­u­la­tion (out­side Que­bec) op­pose the fed­eral tax plan.

A large swath of those polled in Al­berta (68 per cent) and Saskatchewan (71 per cent) want their lead­ers to op­pose the fed­eral plan.

And 55 per cent of Cana­di­ans who were polled don’t think Canada should move for­ward with its car­bon-pric­ing plan if it could im­pact our com­pet­i­tive­ness.

A re­cent Fraser In­sti­tute study showed the prov­inces are im­ple­ment­ing car­bon pric­ing in ways that fun­da­men­tally vi­o­late the three key prin­ci­ples of ef­fi­cient and eco­nom­i­cally be­nign car­bon pric­ing, which are:

* the tax must dis­place ex­ist­ing reg­u­la­tions, not be atop them;

* the tax must be fully re­bated to the pub­lic as re­duc­tions in other dis­tor­tionary taxes such as in­come and cor­po­rate taxes;

* and the tax rev­enues must not be used to dis­tort en­ergy sys­tems by sup­port­ing one form of pro­duc­tion over an­other.

No prov­ince meets all three of these prin­ci­ples. Most don’t meet any.

Con­sider On­tario’s cap-and­trade sys­tem. The prov­ince es­ti­mated it would bring in $2 bil­lion in rev­enue per year. Ac­cord­ing to the On­tario au­di­tor gen­eral, out of the $8 bil­lion to be col­lected in four years, $1.32 bil­lion is ear­marked to help with res­i­den­tial and busi­ness elec­tric­ity bills. The rest will be spent on the usual gov­ern­men­tal pref­er­ences, like tran­sit, sub­si­dies to re­new­able en­ergy and du­bi­ous ef­fi­ciency pro­grams.

Al­berta’s new car­bon tax of $30 per tonne is ex­pected to gen­er­ate al­most $3.95.4 bil­lion from 2017 to 2020. Part of that (28 per cent) will be given to low- and mid­dle-in­come Al­ber­tans, os­ten­si­bly to ease the pain of higher power bills, and the in­di­rect im­pact of driv­ing up costs of other goods and ser­vices in Al­berta. The rest will be spent on gov­ern­ment projects.

And then there’s Que­bec, which has a cap-and-trade sys­tem that has brought in $330 mil­lion as of 2016 and is ex­pected to bring in $2.5 bil­lion by 2020 (and per­haps more, if Que­bec matches the es­ca­lat­ing na­tional price floor es­tab­lished by Ot­tawa). Where does the rev­enue go? Free per­mits are given to emit­ters, with the re­main­ing rev­enue to be spent on “pro­grams to fight cli­mate change.”

An­other Fraser In­sti­tute study ver­i­fied that in the B.C. car­bon tax’s early years, it was truly rev­enue neu­tral. Per­sonal and cor­po­rate taxes were re­duced, and ad­di­tional tax re­duc­tions were in­tro­duced to en­sure rev­enue neu­tral­ity.

But by 2014-2015, only five years into the tax sys­tem, the gov­ern­ment had taken to shaky book­keep­ing to pre­serve the ap­pear­ance, but not the re­al­ity, of rev­enue neu­tral­ity. And from year two of the tax, var­i­ous tax cred­its di­verted rev­enues away from gen­eral pub­lic tax re­lief.

De­spite prom­ises to the con­trary, prov­inces with cli­mate ac­tion plans and car­bon pric­ing have ac­tu­ally in­creased both reg­u­la­tion and tin­ker­ing with their en­ergy sys­tems.

Trudeau may have dou­bled down on his Paris pledge and pos­tured as the anti-Don­ald Trump cli­mate war­rior at the G20. But there’s grow­ing ev­i­dence that Cana­di­ans don’t like car­bon taxes and are re­al­iz­ing they’re not the ef­fi­cient and eco­nom­i­cally be­nign eco-tax sold by politi­cians.

In­stead, car­bon taxes are quickly turn­ing into fund­ing mech­a­nisms for ex­panded gov­ern­ment med­dling in Canada’s en­ergy econ­omy.

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