Carbon tax. They’re dirty words for most Canadians and especially for former Liberal Party leader Stéphane Dion.
After proposing a revenue-neutral carbon tax in the 2008 election, Dion was swiftly decimated at the polls. But it’s time we look at carbon tax in a positive light.
Seven years later, Canadian opinion on carbon tax has changed considerably. A recent survey by Abacus Data noted that 54 per cent of Canadians believe that Canada should do more to combat climate change, and nearly 70 per cent believe Canada should introduce a policy that provides financial incentive to reduce carbon emissions over time.
At its simplest, a carbon tax is a tax based on greenhouse gas emissions. It’s meant as a means to hold carbon emitters accountable. Extracting fossil fuels isn’t without environmental consequences — emitting carbon contributes to local pollution and exacerbates climate change.
A carbon tax is great for the environment. In the short term, it encourages consumers to emit less carbon, whether by driving less, turning down the thermostat, purchasing more energy-efficient vehicles or re-insulating their homes.
In the long term, a carbon tax unleashes the market forces to develop cleaner, alternative and more sustainable sources of fuel and energy.
The biggest criticism of a carbon tax is that it harms profits, raises cost of production and, as Stephen Harper put it, ultimately “destroys jobs and growth”. But Canada does have somewhere to look at the economic effects of implementing a carbon tax.
Despite national hostility, British Columbia implemented a carbon tax in 2008. The tax was introduced on several principles. First, it was to be revenue neutral: the provincial government couldn’t spend any carbon tax revenue on government programs and was legally required to demonstrate how it was returned to taxpayers.
Second, the tax started low and only increased gradually, affording consumers the opportunity to make adjustments accordingly. Third, B.C. implemented a refundable low income climate change tax credit to offset the carbon tax paid by low-income individuals and families.
So what’s the story in B.C.? Residents pay the lowest personal income tax rate in Canada (with additional cuts for low-income residents) and one of the lowest corporate tax rates on the continent.
Also, where critics were concerned about the tax harming the province’s economy, the province’s GDP has outperformed the rest of the country since 2008. This isn’t an economic nightmare, it’s an economist’s dream.
Since its implementation, the carbon tax has seen B.C.’s fuel use drop by 17 per cent, while in the same time, Canada’s fuel use increased by three per cent. Emissions in B.C. are down by almost as much, while in the rest of Canada, they went up.
Fraser Institute’s Kenneth Green argues that a carbon tax in Canada is virtually meaningless because we only account for two per cent of global emissions.
To the contrary, by implementing a carbon tax, Canada would join countries like South Korea, Japan, France and Switzerland as leaders on advancing climate change.
That two per cent isn’t a negligible amount of the world’s carbon emissions. Of the multiplicity of policies that seek to reduce emissions, a carbon tax is the cheapest to implement administratively.
As B.C. shows, it’s also revenue-neutral and puts us in a position to compete with those countries already making the shift.
Today, while all major federal parties favour some policy commitment to incentivizing reduced carbon emissions, it appears the fear of sharing Dion’s 2008 fate is still alive.
In a recent National Post article, Andrew Coyne criticized federal parties for favouring provincial carbon pricing programs over offering a national plan. A carbon tax plan isn’t just a provincial portfolio where the federal government merely offers oversight and coordination.
At a time when public opinion is both receptive and supportive, and when gas prices are the lowest in four years, an absence of federal leadership on carbon pricing is just as stupid as it is cowardly.
We already listen to the economist. This time, the environmentalist is saying the same thing.
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