Touted by economists as a wondrous market mechanism that will deliver Canada in the evils of global warming, carbon prices are emerging out of the political swamps as a regulatory nightmare. It is also shaping up as the Great Canadian Carbon Tax Grab.
In advance of a first ministers’ meeting in a few days with Pm Trudeau in Vancouver to begin setting national carbon objectives, Ontario Premier Kathleen Wynne announced that C just as individuals are starting to benefit from lower oil prices C her province’s cap-and-trade form of a carbon tax will add 4.3 cents to the price of a litre of gasoline. Natural gas prices will also go up $60 annually per household.
More fiscal facts are in the future inside a budget Thursday, but a Globe and Mail report says the federal government may ultimately collect $1.3 billion annually in fresh revenue from its cap-and-trade taxes on gasoline and natural gas. The cash will slosh around a Greenhouse Gas Reduction Account to become written by a greenhouse central planning authority to finance industrial along with other initiatives deemed essential to give Ontario a new, green low-carbon economic nirvana.
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On Wednesday, the province also introduced its cap-and-trade legislation, grandly titled the weather Change Mitigation and Low Carbon Economy Act. Ontarians is deserving of ready to pay.
The province already includes a low-carbon electricity regime, imposed at a very high cost $9.2 billion in long-term indirect taxes on electricity consumers, to fund solar and wind power. Electricity costs are soaring. The province also clearly intends to perform the same to fossil fuel consumers, only much more.
As the economical brainiacs in an organization self-styled as Canada’s Ecofiscal Commission never fail to mention, 4.3 cents a litre at the gas pumps C equivalent to a carbon tax of maybe $20 a barrel C would be essentially useless like a carbon-reduction incentive. Case the start. A lot more is needed.
Paul Booth, a Western University economist and an Ecofiscal “commissioner,” said during a Google Hangout now that Canada will require a carbon tax of “$150 to $200” if it’s to possess any hope of meeting the carbon reduction targets the Trudeau government decided to in the Paris summit. Math: A $200 carbon tax would mean 43 cents per litre in the gas pumps. Total annual Ontario government revenue grab at that level: $13 billion.
That’s lots of annual dollars when multiplied across Canada. If the carbon tax were to eventually rise to $200 a barrel nationally, the annual national carbon tax burden could soar to $40 billion or even more.
A $40 billion annual carbon price burden might appear to be a politically impossible tax grab, but fiscal reality might force such drastic action. Former Bank of Canada governor David Dodge told CBC Radio recently that, as Ottawa and also the provinces encounter growing spending deficits, the crunch can come. “At some time the government of Canada, as has got the government of Alberta, for example, will need to look at revenue increases. Then something like a carbon tax or perhaps an rise in GST will be the most economically sensible approach to take about doing it.”
Using energy like a cash cow is certainly not new for governments. Dressing up such taxes as a carbon reduction scheme takes tax grabbing to some whole new degree of moral fakery. Said Premier Wynne: “We need to deal with climate change. The price of not doing anything is a lot, much higher than the cost of going forward and reducing greenhouse-gas emissions.”
The Ontario carbon tax revenues will come from joining a cap-and-trade system that already exists in California and Quebec. Industrial firms will have to buy permits to emit carbon, others can sell. With the Canadian dollar inside a slump, the cost of California permits is now higher. The Ontario system, moreover, will even give some industries carbon price holidays by allowing “for transitional allowances to large industrial emitters.” The allowances is going to be phased out with time, but it’s pay off the carbon tax will be a new competitive burden to Ontario industry.
Carbon tax theorists, and apparently the Trudeau government, believe Canada needs the equivalent of a national carbon tax floor price set by Ottawa or at best by interprovincial agreement.
If pricing carbon counseled me it popularized chase away the carbon dragon, such a tax may be tolerable, assuming climate change is a global crisis and Ontario might help. But economists who for a long time have been touting a carbon tax as a slick and efficient use of market forces to usher in a low-carbon economy are now backtracking furiously. We want more that a simple carbon tax. What we need, they now say, is a huge carbon tax that ratchets up dramatically within the years to come along with a truckload of regulation, government economic meddling, incentives, winner-picking, controls and limits, compliance systems, subsidies and penalties, grants and incentives.
The original claim was that carbon tax revenue ended up being to be revenue neutral and returned to consumers. As Philip Cross notes on an oped today, “cash-strapped governments in Alberta, Ontario and Quebec are simply raising carbon taxes without any offsetting tax cuts elsewhere.”
The new objective of the green state is to manage carbon emissions down. Growth, they say, can come if governments plow the carbon tax cash return into government-planned green development to inspire low-carbon growth. Which means government controls the character of the growth, the technology developed, the future of the power, the way forward for the economy.
