Starting next year, the Trudeau government’s national carbon tax is scheduled to be implemented across the country, regardless of whether the people of the provinces like it or not. While some provinces like Saskatchewan and Ontario are taking the government to court on this, for the time being, it looks like the carbon tax is here to stay. The rationale for this Canadian carbon tax from the Liberal government has been that climate change is a substantial threat to humanity's future; the possible effects of global warming are dire and for the sake of our children and grandchildren, we need to do something about it.
The Canadian government's first solution: a nationwide carbon tax
The best solution, according to the federal government, is to implement a nation-wide carbon tax that can be customized by individual provinces and would ideally be revenue neutral. To reduce the cost for the average Canadian household and to help big corporations stay competitive, the government will provide rebates. However, if big businesses and average taxpayers aren’t bearing the cost, this means small and medium-sized businesses will be left to shoulder the burden. Regardless of who pays for it, the Prime Minister has made himself very clear on the matter, saying “The science is unequivocal: putting a price on pollution is one of the best ways to move forward."However, is that really the case? Is a carbon tax truly the best solution for reducing GHGs and fighting climate change?
Carbon tax pros and cons
British Columbia has seen some degree of success issuing a carbon tax in 2008 at $10 per tonne of carbon dioxide to $30 per tonne by 2012. While many businesses and individuals originally disapproved of the tax, by 2009 only 32% of voters opposed the tax. Benefits included a 5-15% reduction in carbon emissions, and the British Columbia government was able to lower the corporate tax rate from 12% to 10% while offering generous rebates to corporations and families alike. That being said, the carbon tax in British Columbia was not without issues. Even with one of the world's steepest carbon taxes, B.C is projected to fall short of its goal to cut greenhouse gas emissions by one third from 2007 to 2020 and is on track to fall short of its 80% greenhouse gas emission reduction by 2050. Recently, Dr. Bjorn Lomborg, noted climate author and president of the Copenhagen Consensus Center, was on the Jordan B. Peterson Podcast discussing this very issue of a carbon tax.While Dr. Lomborg has advocated for a carbon tax in the past, he has also warned of the pitfalls of an improperly implemented carbon tax.According to Dr. Lomborg, in order for a carbon tax to be successful, it needs to be implemented evenly across all industries (a tonne of C02 is the same regardless of industry), prevent carbon leakage to other less regulated areas (ie. a global standard), and must be revenue neutral in order to be politically palpable. The Canadian carbon tax fails on at least two of these accounts and is tottering on the third. It is set at different levels for different sectors and it fails to prevent carbon leakage, as a business seeking to avoid the tax can simply transfer to the U.S.The political will, which earlier this year was much weaker, has improved thanks to the government’s announcement of the rebates for individual households. However, because it is not being substantially countered over the long term with a reduction in income or sales taxes, this current goodwill is certainly not a sure thing. If the national carbon tax follows the path of the one implemented in B.C., pro-carbon tax politicians could soon find themselves in hot water as Canadians tire of this supposed revenue-neutral tax becoming just another avenue of government revenue.
What about reducing emissions?
But what about the GHG emissions? After all, that is the point of this tax. If it were to at least meet our targets set out in the Paris Climate Accord, maybe Canadians would accept it then? Unfortunately, that’s not the case. Neither Canada nor any of the other G20 nations have a climate plan strong enough to meet their Paris targets. Nevertheless, let's extend some grace to the carbon tax. Perhaps the Prime Minister is re-elected and continues with his plan to raise the cost of the carbon tax. Let’s assume that this is just enough to reach our Paris targets. Even if Canada and every other nation who signed on to the Paris agreement met their targets, it would only be enough to reduce global temperatures by 0.048°C of the 2.7°C needed by 2100.
A better solution to the Canadian carbon tax
So if a carbon tax isn’t going to cut it, what will? Well, according to Lomborg’s Copenhagen Consensus Center, a think tank featuring 27 of world’s top climate scientist and three Nobel Laureates, in order to have the best possible chance at mitigating the worst effects of climate change, governments should invest in green tech R&D. The Center found that for every dollar spent on green R&D, $11 dollars of climate damage could be avoided. For every dollar spent on emission reduction schemes like the carbon tax, less than a dollar of climate damage could be avoided. As much as the Prime Minister likes to bemoan the Conservatives for not having a climate change plan, the problem in Canada is not political will. The issue is that we don’t have the technology to compete with carbon-intensive fossil fuels. If Canada truly wants to be a leader in fighting climate change, we should put an end to our wasteful E.V. and fossil fuel subsidies, and focus on investing our valuable taxpayer dollars into something that will actually lead to results.