A "neutral" carbon tax would be fine. The Liberal carbon tax isn't a carbon tax:
1) It plays favorites by deeming certain provinces' existing levies to be adequate. The carbon tax should be applied equally across the country
2) It provides politically motivated exemptions to certain activities. Molecules should be taxed equally (except 3 below) regardless of their source
3) It ignores the competitive disadvantage of taxing exports. Like the GST, carbon taxes paid to create exported products and services should be rebated
4) Through tax refunds, it transfers wealth from the corporate sectors to individuals to make the tax more palatable
5) By explicitly providing a tax rebate to individuals tied to the carbon tax, it negates the behavioral impact of the tax, and incurs extra administrative overhead. Instead, the government should have increased the existing GST rebates to compensate low income earners
6) All carbon tax should go into general revenue and not be tagged to alleged green programs, which will be prone to pork-barrel politics, and again dull the behavioral impact of the tax
If the Conservatives take this position - that there should be a uniform, high, and rising carbon tax across the country, with measures taken to protect export competitiveness - I think that'd be great. I suspect that this would be politically unpalatable, though.
On point (1), Dion's "Green Shift" idea back in 2008 was that Ottawa would collect a carbon tax across the country and then use the revenue to cut income taxes, the way BC did. Problem is, that would mean provinces using more fossil fuels (like Alberta) would end up paying a larger share of income tax cuts across the country.
Using a national price floor instead means that each province can do carbon pricing itself, without having to send any money to Ottawa - it just has to match the national price floor. It's a way to coordinate action without requiring any transfers between the provinces.
On point (5), each province is free to set up its own carbon pricing and then decide how to allocate the revenues. BC's used its carbon tax to cut other taxes; when Patrick Brown was leading the Ontario Conservatives he was proposing the same thing.
The reason the federal carbon tax is divided up and returned directly to households in the province is to make it as clear as possible that Ottawa isn't keeping the money for general revenue. The rebate doesn't negate the behavioral impact of the tax. Some people can make changes to cut their fuel consumption (trading in for a more fuel-efficient vehicle, cutting marginal trips, etc.); some can't. For people who can't make any changes at all, most still come out ahead. For people who *can* make changes, their incentive is to collect the rebate *and* cut their fossil fuel consumption. This reduces total consumption.
On point (3), that's already a big part of the existing policy ("OBAs"). This was designed in Alberta as part of Notley's climate plan, and then picked up by the federal plan. Within each high-emitting sector (e.g. oil production), the carbon tax is collected and then divided up and returned based on output, similar to the household rebate. Firms with lower emissions intensity than average come out ahead; firms with higher emissions intensity than average are basically subsidizing them. Both kinds of firms have a strong incentive to make emission cuts that cost less than the carbon price. The overall profitability of the sector doesn't change.
On point (7), at $40/t the carbon price provides a good reason for firms and individuals to look for ways to cut emissions that are worth less than $40/t - any firm which doesn't do so is leaving money on the table. Next year it rises to $50/t, then $65/t, etc. So we're always cutting our cheapest, least valuable emissions.
I understand and agree with the general point of this article. However, I would like to see more examples and specifics when trying to make such a broad point. Apart from EV, fuel mandate, and more red tape, this article does not provide any details on what they term as "wasteful". Expenditure of $40B or more is concerning, so please provide some additional information on where that is going to further provide basis for your point.
It'd be awesome if Conservatives were to switch their critical focus from measures which are unpopular but cost-effective (carbon pricing) to measures which are popular but ineffective (like home retrofits). But despite losing vote share in Ontario and Quebec in the 2019 election, the Conservatives are still committed to scrapping carbon pricing the next time they win an election, as happened in Australia, Ontario, and Alberta.
Given political reality, it's not surprising that the Liberals have included popular measures in the climate plan. As Mark Jaccard points out in "The Citizen's Guide to Climate Action," carbon pricing has the lowest economic cost, but it has a very high political cost. Measures like the Clean Fuel Standard and zero-emission vehicle mandates have a higher economic cost, but there's a far smaller number of people who strongly oppose them.
In short, the Liberal climate plan includes popular measures as well as one that's opposed by a lot of people. Asking them to drop the popular measures and just keep the unpopular one seems pretty unrealistic.
A "neutral" carbon tax would be fine. The Liberal carbon tax isn't a carbon tax:
1) It plays favorites by deeming certain provinces' existing levies to be adequate. The carbon tax should be applied equally across the country
2) It provides politically motivated exemptions to certain activities. Molecules should be taxed equally (except 3 below) regardless of their source
3) It ignores the competitive disadvantage of taxing exports. Like the GST, carbon taxes paid to create exported products and services should be rebated
4) Through tax refunds, it transfers wealth from the corporate sectors to individuals to make the tax more palatable
5) By explicitly providing a tax rebate to individuals tied to the carbon tax, it negates the behavioral impact of the tax, and incurs extra administrative overhead. Instead, the government should have increased the existing GST rebates to compensate low income earners
6) All carbon tax should go into general revenue and not be tagged to alleged green programs, which will be prone to pork-barrel politics, and again dull the behavioral impact of the tax
7) It isn't high enough to change behavior
If the Conservatives take this position - that there should be a uniform, high, and rising carbon tax across the country, with measures taken to protect export competitiveness - I think that'd be great. I suspect that this would be politically unpalatable, though.
On point (1), Dion's "Green Shift" idea back in 2008 was that Ottawa would collect a carbon tax across the country and then use the revenue to cut income taxes, the way BC did. Problem is, that would mean provinces using more fossil fuels (like Alberta) would end up paying a larger share of income tax cuts across the country.
Using a national price floor instead means that each province can do carbon pricing itself, without having to send any money to Ottawa - it just has to match the national price floor. It's a way to coordinate action without requiring any transfers between the provinces.
On point (5), each province is free to set up its own carbon pricing and then decide how to allocate the revenues. BC's used its carbon tax to cut other taxes; when Patrick Brown was leading the Ontario Conservatives he was proposing the same thing.
The reason the federal carbon tax is divided up and returned directly to households in the province is to make it as clear as possible that Ottawa isn't keeping the money for general revenue. The rebate doesn't negate the behavioral impact of the tax. Some people can make changes to cut their fuel consumption (trading in for a more fuel-efficient vehicle, cutting marginal trips, etc.); some can't. For people who can't make any changes at all, most still come out ahead. For people who *can* make changes, their incentive is to collect the rebate *and* cut their fossil fuel consumption. This reduces total consumption.
On point (3), that's already a big part of the existing policy ("OBAs"). This was designed in Alberta as part of Notley's climate plan, and then picked up by the federal plan. Within each high-emitting sector (e.g. oil production), the carbon tax is collected and then divided up and returned based on output, similar to the household rebate. Firms with lower emissions intensity than average come out ahead; firms with higher emissions intensity than average are basically subsidizing them. Both kinds of firms have a strong incentive to make emission cuts that cost less than the carbon price. The overall profitability of the sector doesn't change.
On point (7), at $40/t the carbon price provides a good reason for firms and individuals to look for ways to cut emissions that are worth less than $40/t - any firm which doesn't do so is leaving money on the table. Next year it rises to $50/t, then $65/t, etc. So we're always cutting our cheapest, least valuable emissions.
I understand and agree with the general point of this article. However, I would like to see more examples and specifics when trying to make such a broad point. Apart from EV, fuel mandate, and more red tape, this article does not provide any details on what they term as "wasteful". Expenditure of $40B or more is concerning, so please provide some additional information on where that is going to further provide basis for your point.
It'd be awesome if Conservatives were to switch their critical focus from measures which are unpopular but cost-effective (carbon pricing) to measures which are popular but ineffective (like home retrofits). But despite losing vote share in Ontario and Quebec in the 2019 election, the Conservatives are still committed to scrapping carbon pricing the next time they win an election, as happened in Australia, Ontario, and Alberta.
Given political reality, it's not surprising that the Liberals have included popular measures in the climate plan. As Mark Jaccard points out in "The Citizen's Guide to Climate Action," carbon pricing has the lowest economic cost, but it has a very high political cost. Measures like the Clean Fuel Standard and zero-emission vehicle mandates have a higher economic cost, but there's a far smaller number of people who strongly oppose them.
In short, the Liberal climate plan includes popular measures as well as one that's opposed by a lot of people. Asking them to drop the popular measures and just keep the unpopular one seems pretty unrealistic.
Thanks for the background information and perspective.