Liberals’ carbon price hardly a drastic imposition

Is there a less costly way? No, there is not

RADICAL ISLAMISTS ALSO WANT TO OBLITERATE THE PAST. — FULFORD THE COSTS OF ACTION NEED TO BE RECKONED AGAINST THE COSTS OF INACTION.

Well, that escalated quickly. If there were ever any prospect of a civilized national debate about how to reduce Canada’s carbon emissions, it ended about five minutes after Justin Trudeau stood in the House of Commons Monday to announce what everyone already knew: that there would be a minimum national price on carbon, and that if the provinces did not impose such a price, the federal government would do it for them.

The rhetoric since then from certain premiers and Tory leadership candidates has been so scandalized that you would think there was something either new or shocking in the announcement. But a $10-a-tonne carbon price starting in 2018, rising to $ 50 in 2022, is neither. B.C. is already charging $30; Alberta will be charging $20 as of Jan. 1, rising to $30 in 2018; Quebec and Ontario have cap- and- trade systems either in place or in the works worth roughly similar amounts.

The provinces that are now being forced into the pool, then, are not being asked to do anything that the four largest provinces are not already doing. Neither is there anything particularly draconian about it. A $ 50- a- tonne carbon price — remember, that’s six years from now — would add about 10 per cent to the price of gas, with smaller increases on most other goods and services, depending on their carbon content.

Granted, that will still be a fraction of what is required to hit the emission reductions target we set for ourselves at the Paris cl i mate conference l ast December. The economist Mark Jaccard calculates that a pure carbon- price regime would require the price to hit $ 200 a tonne by 2030. But to summon the kind of outrage we have seen this week requires one to believe, or hope others believe, there is a less costly alternative.

One less costly alternative, so it might appear, is to do nothing. That’s a logically consistent position, if you believe there is no problem to be solved. But if you accept, even as a probability, that global warming is real and that it imposes costs of its own, potentially catastrophic, then the costs of action need to be reckoned against the costs of inaction. Put simply, the world cannot do nothing — nor can Canada, if it wishes to maintain its position as a member of the world community, avoid doing its part.

If doing nothing is ruled out, is there a less costly way to reduce our carbon emissions than pricing? No, there is not. If you think $ 200 a tonne is costly, have a look at the per-tonne costs of achieving the same reductions via regulation and subsidy, which are in many cases multiples of that. Indeed, Canadians are already paying some of these costs, even if they don’t realize it. Though the regulations apply to corporations, the costs, as always, are paid by people: the corporation’s consumers, workers and shareholders.

The lowest-cost solution, then, would be for carbon pricing to replace these costlier, though less visible alternatives. In that sense the Liberal proposal is second- best: provinces can simply layer the price on top of their existing regulatory schemes, as those provinces that already price carbon have done. But the worst, most costly alternative would be to layer regulations on top of regulations, as many opponents are proposing.

The campaign against carbon pricing, then, while it might appear to make certain arguments on the surface, in fact appeals to a number of other unspoken arguments, or rather assumptions: that we can just do nothing; that taxes that aren’t visible aren’t real, and so on. In the same vein, the Conservatives have begun to play on the alleged regressiveness of carbon pricing, invoking the hardship to hockey moms driving their kids to games.

This will be persuasive to you, if you ignore a) that families in most of the country are already paying carbon taxes in one form or another, b) the availability of offsetting transfers, such as the rebates British Columbia provides to lowincome families, and c) that the same concern would argue just as well for suppressing every other cost. If the costs of releasing carbon into the atmosphere should not be included in the price, why should the cost of extracting the oil from the ground? Maybe gas should be free.

A more obvious dodge underlies the complaint, heard in certain provincial capitals, that any federal carbon tax would be a “tax grab.” That might have some substance to it if the feds were proposing to keep the revenues for themselves. But as the plan is explicitly to return them, in their entirety, to the provinces in which they were collected, it has none. Whether it proves to be a tax grab or not is entirely up to the provinces.

For example, if Brad Wall is concerned that a carbon tax would take, as he calculates, $ 2.5 billion out of the pockets of Saskatchewanians, he has a very simple remedy open to him: cut taxes by the same amount. As a friendly suggestion, I note the province will collect roughly $ 2.8 billion in personal income taxes this year. I suspect that many in the province would accept a carbon tax if it meant they never had to pay provincial income tax again.