It appears that the next federal election is going to be mostly about carbon taxes. As it should be.
Carbon pricing is the most effective, convenient and least expensive means of reducing the greenhouse gas emissions (GHGs) that cause global warming.
It also stimulates economic growth. In 2017, B.C., Quebec and Alberta, each with carbon-pricing systems in place for several years, were the fastest-growing economies in the country.
Canada is a pioneer in carbon pricing. In 2006 and 2007, Alberta and British Columbia, respectively, launched North America’s first carbon-pricing systems. The B.C. model is regarded as perhaps the best in the world. More on that later.
But in the coming federal election campaign, carbon pricing will be demonized in some quarters.
The government of Ontario Premier Doug Ford is running a radio ad that claims your cost of living is about to soar because of the carbon tax imposed by Ottawa on April 1.
Saskatchewan Premier Scott Moe, another of the four so-called “holdout” premiers who opted against creating a carbon pricing program, describes the federal policy as “the ineffective, job-killing Trudeau carbon tax.”
Those are falsehoods. They are no different in kind from the “fake news” that yielded perverse outcomes in the 2016 Brexit referendum and the U.S. presidential election of that year.
Among the most effective ways of getting rid of something we don’t want is to put a price on it. That’s carbon pricing in a nutshell.
Escalating taxes on tobacco products helped shrink the portion of adult Canadians who smoke from a peak of 55 per cent to the current 18 per cent. The crisis of acid rain was solved when the U.S. imposed a tax on the toxic emissions of American power plants. To avoid the tax, the utilities developed innovative technologies to reduce their emissions.
Regardless of the October outcome, the six provinces with carbon-pricing systems in place will keep them. But since the ideal is for all provinces and territories to have effective carbon-pricing programs, let’s review the facts on how carbon pricing works.
1) Most Canadians will enjoy a net financial gain from carbon pricing.
In the four holdout provinces of Ontario, Alberta, Manitoba and New Brunswick, Ottawa has imposed a carbon pricing system that emulates those elsewhere in the country.
For Ontarians, the federal carbon tax effective April 1 will cost the average household $256 this year. That household will receive a rebate at tax-filing time of $300. That’s a Parliamentary Budget Office (PBO) estimate, blending family units of various sizes. (The PBO is independent of the government.)
The carbon tax will rise each year until 2022, and so will the federal rebate. For an Ontario family of four, the average federal rebate will rise from $451 next year to $718 in 2022. The rebate is boosted another 10 per cent for households in small towns and rural areas.
If a carbon tax that’s more than fully refundable is a federal “cash grab,” then Doug Ford is the Michelin Man.
2) Carbon pricing creates a financial incentive to reduce our GHG emissions.
The average Ontario household gets a $300 rebate for 2019, regardless of how much it spends on gasoline and heating fuels. If it spent the average $256 in carbon taxes that year, it comes out a bit ahead with the rebate.
But if it cuts back on carbon-related expenses — by turning down the thermostat, switching to energy efficient light bulbs, commuting by public transit rather than a private vehicle — it reaps the savings and still receives the $300 rebate.
Now that household is coming out substantially ahead, having pocketed the rebate plus whatever it saved in reducing its carbon consumption.
In a hypothetical case, an Ontario family of four that reduces its consumption of carbon subject to tax to zero by 2022 gets a windfall of $718. That’s its reward for curbing carbon use.
3) There is no economic cost to carbon pricing.
The bureaucratic costs of carbon pricing are so low as to be negligible. Carbon pricing is revenue neutral, with all funds collected returned to households and businesses in the jurisdictions in which they were collected.
And upfront investments to avoid paying carbon taxes – from weather-stripping to more energy efficient factory equipment – pay off in permanently lower costs and competitive advantage.
“Pricing carbon,” according to a National Energy Board (NEB) report last month, “will encourage businesses and households to improve efficiencies and reduce emissions while helping to build a more resilient economy.”
Since its introduction of carbon pricing in 2008, B.C. has reduced its per capital GHG emissions by 14 per cent while posting faster GDP growth than the rest of the country.
And by directing investment capital to clean-tech businesses, carbon pricing has helped B.C.’s resources economy become a world leader in environmental technologies. Clean-tech is already a $7.8-billion export business for Canada.
4) The cost of climate change is high and escalating.
The cost to Canada of global warming effects, including floods, heat waves and sea-level rise, has been estimated at $21 billion to $43 billion a year by mid-century. Whether the financial suffering is at the low or high end of that range depends on Canada’s progress in emergency preparedness, which was sadly lacking in the epic flooding this month in Central Canada.
Insurable property losses in Canada that averaged $250 million to $400 million between 1983 and 2008 have more than doubled since 2009. Losses have totaled more than $1 billion in each year since. There is no explanation for that phenomenon, other than the accelerating pace of climate change.
5) Canada’s conservatives are offering no real alternatives.
What they propose is the status quo.
Doug Ford and Alberta Premier Jason Kenney, in scrapping the effective carbon-pricing systems they inherited, propose to replace them with regulations dictating maximum emission levels for industry, and incentive schemes for the biggest industrial polluters.
And Andrew Scheer, the federal Tory leader, who has moved in lockstep with the holdout premiers on this issue, has said nothing so far about his promised climate-change plan except it will involve “incentives for individuals.” Taxpayer-funded subsidies, in other words.
Those remedies do not cover the entire economy, as the B.C. and federal models do.
And they are the same carrot-and-stick approach we’ve been using since the first Earth Day in 1970. GHG emissions have soared since then, of course, and will climb still higher with population growth.
That outdated model is ineffective, bureaucratic, and smacks of “nanny state” government dictates.
By contrast, the B.C. model, which Prime Minister Justin Trudeau has basically copied, is a free-market approach. It leaves to the individual the decision on whether and how she will reduce her carbon footprint.
An example of the stick approach is the long-standing Toronto bylaw against idling your vehicle more than 15 minutes, intended to improve Toronto’s air quality and fight climate change. But have you ever seen it enforced?
As of April 1, you will save money by not idling. You will save money by not chauffeuring your kids to school, by leaving the car at home and taking the bus to work, and by taking the train rather than flying. Carbon pricing gives you scores of ways to reduce your cost of living — and you still get the rebate.
“This is the quintessential conservative way to approach environmental problems,” Dale Beugin, executive director of the Ecofiscal Commission, a privately funded group of business leaders, academics and public policy experts advocating for carbon pricing, told the CBC last month.
“It’s about relying on markets rather than prescriptive regulations or picking winners with subsidies.”
6) Carbon pricing has widespread global support.
The four holdout Canadian premiers are a lonely group.
Worldwide, 74 countries, states, provinces and cities have implemented or scheduled for implementation carbon pricing systems covering about 20 per cent of global GHG emissions. Among the private-sector champions of carbon pricing are Alberta oilpatch giants Suncor Inc., Husky Energy Inc. and Shell Canada; along with Canada’s Big Five banks, Loblaw Cos. Ltd. and Canadian Tire Corp. Ltd. That’s the short list.
Big Business likes carbon pricing for the same reason individuals do: It enables businesses to easily identify and rid themselves of wasteful energy use.
“A carbon price, I think, is critical if we are to achieve that rapid transition to a low-carbon world,” Spencer Dale, group chief economist at Anglo-Dutch oil giant Royal Dutch Shell, told Reuters.
Carbon pricing was pioneered by conservative governments in B.C. and Alberta in the 2000s, and is backed by a conservative government in Quebec. An obvious question is why Doug Ford and three fellow conservative premiers loudly object to a free-market initiative of the Trudeau government.
They seem intent on creating a populist movement against carbon pricing that can be used politically to their advantage.
There are sound arguments for replacing Justin Trudeau as PM. But playing politics with a rescue plan for humanity is pretty low.
David Olive is a business columnist based in Toronto. Follow him on Twitter: @TheGrtRecession