Is a new, revenue neutral tax the best way to fight climate change or is artificially increasing the cost of fossil fuels a foolhardy attempt to solve planet’s ills? Elizabeth May and Tom Harris battle the issue.
Elizabeth E. May: No one likes the idea of a new tax. The Beatles turned citizen angst into their song Taxman — “If you drive a car they’ll tax the street, if you try to walk, they’ll tax your feet.”
The tax averse instinct runs strong. No wonder politicians, in general, stay away from the “T” word, unless they are calling for tax cuts.
I am baffled the leaders of other political parties are so afraid of the word that they won’t advocate the most sensible approach to fighting climate change — even when a new tax is entirely offset with new tax cuts.
The Green Party is advocating a tax shift — significant cuts in income taxes, enhanced income supports for low income Canadians and seniors, and cuts in both employer and employee contributions to CPP and EI, all covered through the application of a $50/tonne carbon tax.
Economists and experts agree that a carbon tax is the single most effective way to deliver a consistent signal to the economy. Among those who support a carbon tax are Don Drummond, chief economist at TD Bank, who explained, “Pollution must have a price tag. Currently it is too cheap to pollute, and too expensive not to.”
In response to the Green Party’s call for tax shifting, Environment Minister John Baird denounced the idea. Ignoring the fact we were calling for a revenue neutral proposition of reducing taxes on things we say we want (income and jobs) and shifting them to things we say we do not want (pollution and greenhouse gases) Baird attacked the idea as “the mother of all taxes.” The Harper government avoids facing the facts about the enormous economic damage threatened by climate chaos through wild exaggeration of the economic impact of acting to address the threat.
The former head of the U.S. Federal Reserve, Paul Volcker, noted “(The argument that taxes on oil or carbon emissions would ruin an economy is) fundamentally false. First of all, I don’t think it is going to have that much of an impact on the economy overall. Second of all, if you don’t do it, you can be sure that the economy will go down the drain in the next 30 years.”
This is consistent with the view of the former senior economist at the World Bank, British economist Sir Nicholas Stern, whose detailed analysis of the economic cost of failing to reduce greenhouse gases (GHG) quite rapidly, came to a staggering $7 trillion globally — the equivalent of an economic hit larger than the Depression and two World Wars.
The argument for a carbon tax is clear. We need to have consistent, coherent pricing signals. Consumers and industries will react sensibly to higher energy prices. With more disposable income due to tax cuts, we will find more efficient vehicles, insulate our homes, and make those behavioural changes that reduce the demand for energy and save us money.
A bundle of subsidies (the previous Liberal government’s approach) will not be sufficient. The set of exemptions for the worst polluters coupled with a vague plan based on reducing GHG per unit of production, known as “intensity targets” (the approach of the Harper government and the Bush administration) won’t do anything but take us rapidly in the wrong direction.
Our $50/tonne tax was actually reviewed for the Harper government in a secret report accessed by the Green Party through freedom of information.
The study by Mark Jaccard and Associates found no economic impact from the tax, assuming its revenues were redistributed in the economy.
Following our release of his plan, Dr. Jaccard noted that I was the only politician “being honest” with Canadians.
Action is urgently needed to reduce GHG and avoid atmospheric “tipping points.” We do not have much time. The carbon tax shift is part of any serious and sensible solution.
Elizabeth E. May is leader of the Green Party of Canada
Tom Harris: Carbon taxation is simply a method of artificially increasing the prices of fossil fuels such as coal, oil and natural gas in proportion to their carbon content. The goal is to make these fuels less attractive than less carbon-intensive sources of energy – wind, solar and ethanol, for example, technologies that are mistakenly labelled “environmentally friendly” and are otherwise too costly to displace fossil energy.
Moving society quickly away from carbon-based fossil fuels is dogma for climate activists. They assert that carbon dioxide (CO2) emitted when burning fossil fuels is causing a planet-wide climate catastrophe. Although water vapour is by far the most significant “greenhouse gas,” it is CO2 reductions that are focused on under the Kyoto Protocol and the government’s “Turning the Corner Action Plan”.
CO2 is a natural byproduct of all combustion, no matter how clean. It is not pollution as are effluents such as sulphur dioxide, nitrogen oxides and particulates. Indeed, CO2 is an essential ingredient in plant photosynthesis, without which there would be no life on Earth.
The rise in CO2 over the past 150 years has increased plant productivity worldwide. For example, it has been calculated that wheat yield has risen due to this “aerial fertilization” effect by an average of 60%. Future CO2 increases are expected to result in even greater crop productivity, exactly when burgeoning populations will make efficiency increases crucially important to avert widespread famine.
Activists maintain that “the consensus of world scientists agree” that our CO2 emissions are causing a climate crisis. Nothing could be further from the truth. Climate science is an immature discipline in which intense debate rages among experts about the causes of climate change. Variations in the brightness of the sun and “land use change” are the leading contenders believed to be responsible for most of the past century’s modest warming. For many scientists, the hypothesis that humanity’s relatively insignificant CO2 emissions are a major global climate driver seems absurd.
Nevertheless, politicians have exploited the public’s climate change fears to promote various CO2 reduction schemes, carbon taxation being one of them. This is a serious concern since imposing a high-enough carbon tax to hit Kyoto-level reduction targets would cause a rapid rise in the cost of virtually all goods and services. Some are obvious, such as increased gasoline and fossil fuel-generated electricity costs. Some are less apparent since manufacturing and shipping costs are hidden in the price of essential items such as food, clothing and shelter.
Offsetting these costs by tax shifting — reducing income and payroll taxes, for example – may appear on the surface to compensate, but it does not. Income tax cuts won’t prevent overall negative effects of a Kyoto-size carbon tax; poor households will experience the largest proportional hit and will receive the smallest proportional benefit. The bottom line is that if we as a society are forced to pay artificially higher costs of energy and cut energy use by enough to meet Kyoto-style targets, we will have a smaller economy and lower incomes, period — there is no free lunch.
Environmental taxes should be imposed only when there is reasonable certainty that the environmental benefit to society exceeds the financial penalty of the tax. Carbon taxes clearly do not meet this criterion.
Canada should forget about carbon taxes and other harebrained schemes to stop climate change, something that has occurred since Earth had an atmosphere. Debating the best ways to enable CO2 reduction — carbons taxes, carbon credit trading, etc. — is moot. Bad policy, even carried out efficiently, is still bad policy.
Tom Harris is an Ottawa-based mechanical engineer and executive director of the Natural Resources Stewardship Project (nrsp.com). The group does not release names of its donors.