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It may be over- simplification but after reading a
lot about carbon tax and the problems in Canada, the US and Australia I see
that Canada has an external problem while it shares an internal problem with
those two other countries. The external problem is that we have vast oil
reserves and by not taxing our output or extraction energy sufficiently, other countries get
upset. They oppose additional pipelines in the hope that it will curtail our
oil sands production. This won’t happen because rail transport will take over.
They also try to get local environmentalists on their side by proclaiming that
we contribute to the world’s greenhouse gas emission. Until a global carbon tax
has been established, demand for oil will keep rising and if we don’t sell the
oil, other countries will and the world’s GHG emissions will rise just as much.
The
internal problem is that in all 3 countries the word “tax” is interpreted as a
tax grab by the government rather than a tax shift to make green energy more
competitive. Neither the parties in power nor the opposition have been able to
convince the public that a revenue neutral carbon tax system returns all the
money to those who paid the tax and that people who buy below average fossil
fuel actually gain money. Some government officials still claim that the tax
hurts the economy and the poor while the opposite has been proven over and over
again. US president Harry Truman is known to have expressed,
on occasions, a wish for a few one-armed economists. It seems the president was
sick of hearing from advisors of that trade who would tell him, "On the
one hand--but on the other hand. That is the problem which politicians are facing. They
have to base their policies on one hand or the other. Our policies were
established years ago based on the one hand
when “Prime Minister Stephen Harper and several members of his
cabinet and caucus had previously questioned the scientific evidence linking
human activity to global warming, describing the Kyoto Protocol as a “socialist
scheme.” Now that the other hand becomes more pronounced it will require
serious discussions to change course.
Shell, BP, Exxon Mobil, Statoil and Cathay
Pacific demand a global carbon tax because they will profit from it. Other
major multinationals in the petrochemical, food processing, insurance,
construction and computer industries demand it as well. When you read the pro
carbon tax speeches by Rex Tillerson, CEO, ExxonMobil, Jamie Dimon, Chairman and CEO
JPMorgan Chase & Co. Donald E.
Felsinger, Chairman and CEO, Sempra Energy, Jim Gordon, CEO, Energy Management, Inc, Bruce Williamson,
CEO, Dynegy, Robert Olsen, Chairman, ExxonMobil
International Ltd., you see that they all envisage a global carbon tax, which is essential to
stay competitive. Carbon tax causes the cost of all fossil fuels to rise. That
does not only cause higher transportations costs but also the cost of many
goods made from fossil fuels. That is why it is essential to refund all carbon
tax collected to those who paid it so they can afford to pay for the higher
priced goods.
Many
manufacturers are against taxing carbon because unless we go global we will
need complicated import duty arrangements between countries. The coal industry
is dead against it because even when a global agreements has been reached they
will lose. At the BC rate of $ 30 per tonne of CO2 the cost of
thermal coal will rise 70% compared to 9% for crude oil. Even at $ 20 per ton
as recommended in the US Sanders Boxer bill they will suffer. Australia and the
US are major coal suppliers and their governments are under high pressure from
the coal industry not to tax. Due to all this political wrangling carbon tax has become such a dirty word that
even environmentalists appear to shy away from it. They should realize that it
is the most effective tool to combat climate change and bring it up at every
pipeline demonstration.
Apart from a few flaws affecting institutions the BC
carbon tax system seems ideal. It has been praised abroad as being effective,
easy to implement and administer. While the details are shown in posts 1 and 10
it is worthwhile to stress once more that by law the government has to list
each year how much tax has been collected and how it all was refunded. As can
be seen in http://www.fin.gov.bc.ca/tbs/tp/climate/Carbon_Tax_Report_and_Plan_Topic_Box.pdf there are at the moment 17 refund
categories. Note that the 5% reduction of personal income tax at $ 264 million (
22% of all tax collected) is a fair deal
for the 2 lower income groups. The low Income tax credit for people who pay no
income tax but have to live with the higher costs also seems fair, 194 million
( 16% of all tax collected) . Many people are not aware of these refunds
because it is not specifically mentioned on the income tax forms. Some people
complain that the business taxes have been lowered, not realizing that this is
a result of the carbon tax. They can also see that the refunds to businesses
have been reduced over the years while those for individuals and families stayed
the same.
To emphasize once more how far behind we are in taxing carbon
here is another summary:
In
Canada quite some people still believe that a carbon tax will hurt the economy
and the poor, the opposite is true. 73%
of the 103 studies analysed by the World Bank showed that carbon pricing has a
positive impact on employment. Extensive studies for many European countries
showed that England broke even while the rest gained from carbon pricing. 10 US
states have experienced carbon pricing for years and report dramatic
gains.(Post 1). BC experienced a 17% reduction in the use of fossil fuel
without loss of GDP while the consumption in the rest of Canada rose by 1 ½ %.
The poor don’t suffer. Low income people receive 16 % of all carbon tax
collected. In October 2013 Washington and Oregon signed the Pacific Coast Collaborative and will start taxing carbon
based on the BC model. Together with carbon pricing in California and Alaska
carbon pricing will come to four states and one province which have a combined
population of 53 million people, with a gross domestic product of
$2.8-trillion.
For quite a while the government
has proclaimed that we are already half way through in meeting our Copenhagen
agreement. In one of my 2013 emails I asked Mr Harper to consider publishing figures
showing how we will meet the other half. I did not see it but in a recent
article by Mr Jeffrey Simpson of the Globe and Mail I see that we at best we
will see 7% reduction rather than the 17%. This is not an off the cuff estimate
but the findings based on an annual report by Ms Gelfand, who is the Commissioner
of Environmental Development, an offshoot of the Auditor General’s office. The US has an identical agreement which could
have been met by accepting the Waxman Markey bill. It was voted down in part
due to the complex political system but also following publications by the powerful
Heritage Foundation. It claimed that it would cost $ 1500 per household while
the Congressional Budget Office, the EPO and several others put the cost at $
150 per family. The Heritage Foundation just ignored how the tax proceed are
refunded to those who paid the tax. In June 2014 the EPA introduced strict new
regulations forcing coal fired power plants to switch to natural gas, which
emits only half the amount of CO2. Those regulations or the present
revenue neutral carbon tax bill introduced by senators Sanders and Boxer will in
all likelihood allow the US to meet their 17% reduction target.
The US has introduced and debated
at least 5 carbon pricing bills and we have not tabled a single one. No wonder the
French president told us in his speech on November 3d that we are far
behind on fighting climate change.
