B.C.’s carbon tax comes closest to ideal

Of all the absurdities in the cash-grabbing carbon-pricing schemes being imposed on Canadians by their governments, the biggest one is this.

Why are governments that promise to stop giving billions of dollars annually in public subsidies to major industrial greenhouse-gas (GHG) emitters — for example the fossil-fuel industry — devising carbon pricing schemes that give billions of dollars annually in public subsidies to major industrial greenhouse-gas emitters — for example the fossil-fuel industry?

This is the key feature of both Ontario Premier Kathleen Wynne’s cap-and-trade plan and Alberta Premier Rachel Notley’s carbon-tax plan, both coming Jan. 1, 2017.

Both will pour billions of dollars more annually into their debt-ridden government coffers, paid for by ordinary citizens, who will be charged more for most goods and services, in Alberta through higher taxes and in Ontario with higher prices. Both provinces will then redirect a substantial portion of those moneys back to the same businesses and industries that are major emitters of GHGs linked to climate change. Notley’s government will do it directly, by giving them back a big chunk of the money raised by her carbon tax.

Wynne’s government will do it by handing out free carbon credits to major polluters, covering 100 per cent of their emissions, which under cap-and-trade is the same thing as giving them free money.

Both the Notley and Wynne governments claim they will be doing this for the same reason.

That is, to prevent the so-called “leakage” or exodus of carbon intensive industries from their provinces to other jurisdictions that do not have carbon-pricing programs.

For example, the U.S., our largest trading partner, which, unlike Canada under Prime Minister Justin Trudeau, is nowhere near imposing a national carbon price on its industries, despite the constant rhetoric of its so-called “green” president, Barack Obama. This is why people who understand how carbon pricing works — unlike most Canadian politicians and journalists — have warned for years that it had to be done in conjunction with the U.S., and why rhetoric Canada should “set an example for the world” was idiotic. Now, we’re seeing why.

In order to prevent Canadian industries from fleeing to jurisdictions like the U.S., provinces like Alberta and Ontario are doing exactly the same thing that has undermined carbon pricing everywhere it’s been tried, from Norway’s 25-year-old carbon tax to Europe’s decade-old cap-and-trade market.

That is, handing out huge public subsidies to big polluters, or, alternatively, exempting them from carbon pricing. Statistics Norway concluded 14 years ago that the reason its carbon tax has not been effective at lowering emissions (while very effective at raising money) was that it exempted too many industries.

In Europe’s cap-and-trade market, European governments handed out so many free carbon credits to major industrial polluters, that their market price crashed, making it cheaper for them to buy credits rather than reduce emissions.

The realpolitik, or practical versus theoretical reason for governments to subsidize major industrial carbon-dioxide emitters through carbon pricing, is to buy their political support. That’s why no one who understands how carbon pricing works was surprised big business representatives were happy to stand on the same stage as Notley when she announced her carbon tax.

Of course they were. She’s going to give them billions of dollars in public subsidies from her carbon tax, ostensibly to help them make the transition to a greener economy.

Which brings us to the greatest injustice of Notley’s and Wynne’s carbon-pricing schemes.

Why are major polluters being giving billions of dollars in public subsidies to cope with the impact of carbon pricing, at the expense of ordinary citizens who will be paying for it? This is why the only fair and rational carbon-pricing scheme is known as carbon fee and dividend.

It returns 100 per cent of the money governments raise through any form of carbon pricing, which is essentially a new sales tax on consumption, back to the public in income tax cuts. This simultaneously encourages people to save money by making less carbon-intensive choices in their consumer purchases, while promoting productivity and savings by allowing them to keep more of the money they earn

Unlike what Alberta and Ontario — and the Trudeau government — are planning, carbon fee and dividend is revenue neutral, transparent and eliminates the need for scams like carbon credits. That’s because its purpose is to lower emissions, not increase government revenues. Which is why no government in Canada — although B.C.’s carbon tax comes closest — supports it.

Lorrie Goldstein is a Toronto Sun columnist.