Last spring, I called the carbon tax “dead man walking.” The condemned continues its sad march to the executioner’s chamber. Won’t be long now.
Politics lives in the realm of the possible. The carbon tax used to make its home in one of the better neighbourhoods, but not anymore. Now, the eviction notices are pilling up.
The latest were issued by the federal New Democratic Party and the NDP government of British Columbia. Premier David Eby, who heads the first province to bring in a carbon tax, way back in 2008, last week abruptly announced that he’d like to do away with it. He did so while standing next to a grinning Wab Kinew, the NDP Premier of Manitoba, who is also a carbon-tax sceptic.
What is the carbon tax guilty of? Visibility, mostly. To borrow from the Jack Nicholson character in A Few Good Men: You want the truth? You can’t handle the truth.
Voters want politicians to level with them. Except when they don’t.
When consumer carbon pricing was just a promise and a prospect, voters were mostly supportive. Even after it started, tacking just a few small, easy-to-miss cents on a litre of gasoline, it remained popular. Voters said they wanted governments to do something to lower Canada’s carbon emissions, and the carbon tax was the highest-profile something.
The federal Conservative Party went down to two election defeats as it struggled and failed to come up with a carbon-reduction plan that didn’t include a carbon tax.
But as carbon pricing moved from theory to reality, and the price rose, public opinion turned. Winning an election while advocating for a consumer carbon tax is something a growing list of political parties have decided is no longer possible.
It’s notable that the latest converts to the anti-carbon tax clause, the federal and B.C. New Democrats, are unclear on what, if anything, they’d replace it with. Or how much it would cost. Or how they would pay for it. Neither offered any details of what comes next, or why.
That lack of transparency is no oversight.
The consumer carbon tax imposes highly visible costs on consumers. The federally mandated price is currently $80 a tonne of carbon – that’s 17.6 cents on a litre of gasoline – and is scheduled to rise to $170 a tonne in 2030. The visibility of those costs is a key feature that makes the tax beloved of economists and affiliated eggheads.
Quebec uses cap-and-trade, which is non-transparent carbon pricing, but eight other provinces declined to bring in their own systems and so are subject to the federal carbon tax. B.C. operates an equivalent home-grown tax.
The cost of a tax on carbon-based fuels, which hits you in the face every time you fill up the SUV or burn natural gas in a furnace, is designed to make people consider saving money by limiting use of carbon-based fuels. It’s designed to push people to think about alternatives such as driving a more fuel-efficient car, or replacing the furnace with a heat pump.
Because nearly all federal carbon tax revenues are returned to taxpayers in quarterly payments, people with a small carbon footprint end up with more money in their pockets than they pay in tax.
The tax is based on a foundational insight of economics, and one you don’t need a PhD to figure out: People are price-sensitive. Raise the price of something for which there are substitutes, and consumers will try to save money by turning to those substitutes.
But when we leave the department of economics and move over to political science, we discover that, rather than choosing a more fuel-efficient car, voters may choose a less pro-carbon tax government. (Or successfully lobby the government to have certain fuels exempted from carbon tax, as happened last fall with home heating oil.) That might include voters who, just a few years ago, were telling pollsters they liked the idea of a carbon tax, and who even today say they want major emissions reductions.
It’s notable that the one province where carbon pricing is not a lightning rod is Quebec. Carbon pricing there happens through a completely opaque cap-and-trade system. Consumers are paying, but the price is not transparent. Quebec also has no consumer rebates. It’s one possible model for replacing the federal consumer carbon tax.
Another is to ditch consumer-facing carbon pricing, but retain carbon prices and emissions regulations for business. These have costs which are borne by consumers, but are invisible to them.
An analysis from the Canadian Climate Institute, an independent research organization, found that consumer carbon taxes might be responsible for as little as 8 per cent of the country’s emission reductions by 2030. Ditching the tax on gasoline might only be a relatively small environmental negative.
But if the carbon tax disappears, so will the funds for quarterly rebate cheques. That’s why I expect we’ll see some politicians proposing to keep the rebates, without the taxes. Just run up the deficit.
And with the federal NDP now against the consumer carbon tax, might the Trudeau government shift? Or dig in deeper?
And what about the federal Conservatives? With other parties moving towards them, will they double down on their anti-carbon-tax identity, by increasing opposition to other measures that lower emissions but raise the price of gasoline?
The politics of what comes next are just getting started.