Contributed by Robert Lyman © 2016 Robert Lyman is an energy economist, former public servant, and diplomat.
On October 3, the Trudeau government announced the broad outlines of its proposed carbon tax regime. It is a tax that will be designed to apply in areas of Canada in which the provincial or territorial government has not established a carbon tax or implemented a carbon cap and trade system that has the equivalent effect of a carbon tax. The rate of the tax will be uniform nationally, starting at $10 per tonne in 2017 and rising by $10 per year each year to $50 per tonne in 2022.
This is an enormous tax
According to the National Emissions Inventory published by Environment Canada, national greenhouse gas (GHG) emissions in 2014, the most recent year for which figures are available, were 732 million tonnes per year. Assuming a carbon tax applied to all emissions, and ignoring the growth in emissions almost certain to occur, this means that the annual revenue from a carbon tax to governments would increase from $7.32 billion in 2017 to $36.6 billion in 2022. This makes the proposed carbon tax, by 2022, roughly equal to the federal portion of the HST.
The promise of revenue neutrality cannot be believed
The only regime that has honoured its promise to return to taxpayers all the revenues raised from carbon taxes is British Columbia. The Federal Finance Department and the provincial treasuries of provinces like Ontario and Quebec will be certain to use the funds from a carbon tax to supplement general tax revenues. Almost all provinces are incurring huge deficits as a result of profligate spending and desperately want an additional source of funds so that politicians can spread them among favoured programs, projects and lobby groups. Ontario, for example, has already promised to spend the funds on transit and other programs that have little or no bearing on GHG emissions and that should be funded by the municipalities in any case.
The claim that this will create jobs ignores the experience of other countries.
The effect of a carbon tax will be to take revenues from individual taxpayers and from companies that are efficient and profitable and transfer them to certain favoured “green” enterprises that are uneconomic or that sell products based on immature technologies. Studies of experience in the United Kingdom, Germany, Spain and Italy show that the effect of increased electricity prices due to subsidies to wind, solar and biomass plants was to reduce employment by two to three jobs for every one created in the renewables industries. Further, the claim that higher taxes on carbon will increase employment completely ignores the likely adverse competitive effects on Canadian companies that must pay the higher costs while competing with companies in other countries that do not bear this burden. To impose such major costs on Canadian companies without even waiting to find out what our competitors, especially in the United States, will do is irresponsible.
Even onerous carbon taxes will not meet the government’s emission goals.
No GHG emission reduction goal set by governments since they began doing so in 1988 has yet been met. The current Canadian government goal is to reduce emissions from 2005 levels by 30%, which amounts to 186 million tonnes per year, or 26% from current levels. That is equivalent to completely eliminating emissions from electricity generation and from energy intensive industries like mining, steel, auto manufacturing and petrochemicals, as well as sharply reducing transportation emissions. Contrary to the claims of the New Democratic Party and some journalists, this is not a “moderate” goal. Yet, even a tax of $50 per tonne, which is equivalent to 11.5 cents per liter, will have only small effects on energy consumption and emissions, especially in transportation. This is why the Ecofiscal Commission and others who accept the global warming thesis have called for a tax of $300 per tonne or more. The present tax is just a “foot in the door” to much more onerous levies in future. The goals proposed cannot be achieved without severe damage to Canada’s economy.
It is all for nothing.
The reality is that not one single claim of environmental catastrophe made by those who believe in human-induced global warming has yet turned out to be true. The relatively small increases in average global temperatures over the past 25 years are far below what the modelers of the Intergovernmental Panel on Climate Change have projected. Even if this were not so, the best analysis available from the International Energy Agency, the U.S. Energy information Administration and authoritative industry sources like British Petroleum and Exxon-Mobil indicates that, in the period to 2040, almost all the growth in global GHG emissions will occur in the developing countries like China, India and Southeast Asia. Canada’s emissions constitute 1.65% of global emissions and are declining over time. Canada literally could disappear overnight and it would have a small effect on current global emissions, while those emissions continued their inevitable upward trend. The Asian countries and others, in judging whether to incur economic costs to reduce emissions, care not one bit what Canada does or does not do. Carbon taxes, like so many expensive “green” measures, are nothing more than extremely costly symbolism.