Contributed by Robert Lyman © 2018
Robert Lyman is an Ottawa energy policy consultant, former public servant of 27 years and prior to that a diplomat for 10 years.
On October 23, 2018 the Trudeau government announced that 90% of the revenues that it raises in carbon taxes from provinces that fail to implement their own carbon pricing regimes will be returned to households directly through rebates, starting in April, 2019.
Jane Q. Canadian, who lives in Weyburn, Saskatchewan, is trying to figure what this means, so she goes to her friendly climate expert.
Jane: Can you explain to me what’s going on?
Expert: Sure. Do you have two purses?
Jane: Yes. A black one and a brown one.
Expert: Well, the government is going to put $90 into your black purse.
Jane: Wow! That’s great. Just one question. Where will the money come from?
Expert: Oh, it will come from taxes on the carbon dioxide produced by goods and services sold in the economy.
Jane: What are those?
Expert: The taxes will be imposed on anything that uses oil, natural gas or coal, directly or indirectly.
Jane: I don’t understand. What or who uses oil, natural gas or coal directly?
Expert: Well, you do when you buy gasoline to fuel your car or natural gas to heat your house. So does everyone else, including private businesses.
Jane: What or who uses those fossil fuels indirectly?
Expert: You do when you buy electricity that is generated using coal. You also do when you buy things that have to be manufactured using energy or transported, distributed and marketed to you. Again, so does everyone else, including private businesses.
Jane: Gee, that includes almost everything I buy, even groceries. So, how much will that cost me?
Expert: Well, that depends. On average, the government will collect about $100 per person. It will come out of your brown purse.
Jane: Wait, you said at the beginning that I would get $90 deposited to my black purse. Now, you say that I will get $100 taken out of my brown purse. How does that make me better off?
Expert: I said that these things apply on average. Individuals may be affected differently.
Jane: How so?
Expert: It depends on how much they buy that uses energy, how much they change their buying habits and how companies react.
Jane: How does what the companies do affect me?
Expert: Well, only small companies will get carbon rebates. When other companies are taxed, they will respond in different ways. Some will raise their prices to recover the tax from their customers.
Jane: Customers? You mean me?
Expert: Yes, that’s right. Of course, the companies might try to reduce other costs instead, like salary costs.
Jane: Salary costs? My son works for a store. You mean it might lay him off?
Expert: It could. Of course, the company might accept a lower profit.
Jane: What happens when the carbon taxes go much higher? Can companies go on cutting profits indefinitely?
Expert: Some can for a while. Many, unfortunately, will just have to go out of business.
Jane: Which kinds of companies might have to go out of business?
Expert: The ones that produce a lot of carbon dioxide emissions as part of how they operate and have no way to reduce them with the technology now available.
Jane: Like who, for example?
Expert: Oil producers, natural gas producers, coal producers of any heavy industry that uses a lot of fossils fuels in its production, like mining, steel, or cement.
Jane: I work for the heavy oil plant here. You mean I could lose my job?
Expert: Yes, but it’s all to save the planet.
Jane: How will it save the planet?
Expert: It will reduce Canada’s greenhouse emissions.
Jane: Does that mean that global greenhouse gas emissions will go down?
Expert: No, because emissions are growing too fast in developing countries like India and China.
Jane: So, if global emissions will keep going up regardless of whether the Canadian government imposes carbon taxes, how are we saving the planet?
Expert: It’s the principle of the thing.
Jane: so, let me get this straight. I will get $90 in my black purse, but lose $100 from my brown purse, the prices of almost everything I buy will go up, my son may be laid off, and the company I work for may go out of business. There will be no actual environmental benefit.
Expert: That’s about right. There’s just one more thing.
Jane: What’s that?
Expert: Don’t forget to vote in next year’s federal election.
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