 Environment - January 19, 2008 |
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Carbon tax is not just a "Liberal idea"
Industry won’t change its practices if it can continue polluting for free |
By Kevin Ma
Staff Writer
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Canada needs a carbon tax to get greenhouse gas emissions under control.
Earlier this month, the National Roundtable on the Environment and the Economy, a federal think-tank staffed by some of the country’s top business and environmental leaders, published a report showing how Canada could cut its greenhouse gas emissions by 65 per cent by 2050 — the Harper government’s target. It found the best way to do this was to create an "economy-wide price signal," one where people would pay for greenhouse gas pollution via a carbon tax, a cap-and-trade system, or both.
The government tossed the report mere hours after its publication. Environment Minister John Baird dismissed a carbon tax as "a Liberal idea," one that went against the principle of polluter-pays. This was wrong on both counts: the Liberals also opposed the idea and the tax, unlike a cap-and-trade system, would make all carbon polluters — i.e. everyone — pay.
Canada cannot afford to ignore the valuable advice in this report. A carbon tax is the fairest, most effective tool available in the fight against climate change.
Tax and caps
A carbon tax is essentially a fuel tax, according to Mark Jaccard, economist at Simon Fraser University and member of the Intergovernmental Panel on Climate Change and the national roundtable. So long as people can pollute for free, he says, they will not change their habits. Place a tax on all carbon-rich fuels — gasoline, natural gas, and coal — and you show consumers there is a price to pay for polluting and push them towards more efficient cars, homes and power sources.
"The price drives the transformation of the economy," says Clare Demerse, climate change analyst with the Pembina Institute. Oil companies don’t bother with $40-a-tonne carbon-sequestration technology right now because they can pollute for free. Slap a $100 a tonne price tag on carbon, however, and that technology — seen by most as a vital part in Canada’s greenhouse strategy — suddenly becomes viable.
Demerse favours carbon taxes and cap-and-trade markets. "They’ll get you to the same place if done right," she says. Cap-and-trade systems work by setting an upper limit on the total amount of pollution and doling out pollution permits to major emitters. Those companies can reduce their emissions via efficiency improvements or buy permits from each other.
Fair and effective
While a cap-and-trade system has a direct effect on big industry, it leaves out everyone else. Residential heating and transportation (light cars and tucks) account for 17 per cent of Canada’s emissions, almost twice the amount caused by all oil, gas and coal production. Even the business moguls at the Canadian Council of Chief Executives acknowledge this. "All Canadians contribute to the creation of greenhouse gas emission," they write in an October 2007 statement, "and nothing meaningful will happen unless we all accept our share of the responsibility." That means the roundtable’s price signal needs to get to consumers, too.
Cap-and-trade systems are popular, the council found, but can also be unfair, if permits are not carefully allocated, and can be subject to large price swings. "Environmental levers such as a carbon tax are transparent, making the price of emissions clear and consistent," they found, and can encourage investment in efficient technologies.
The council, Demerse and Jaccard agree a carbon tax works best if it is income-neutral: as carbon taxes rise, others, such as income, should fall accordingly. Jaccard recommends the tax money be reinvested in the regions it came from so it does not become a tax grab. The money could also fund incentive programs to help consumers afford home and car replacements to cut their emissions.
Carbon taxes have already been implemented in Quebec and Norway. In Quebec, drivers pay 0.8 cents extra on every litre of gas — probably a little low to change behaviour, say observers, but it’s a start. Norway has had a tax since 1991, Jaccard says, and since then has cut its emissions and grown its oil industry more than Canada.
Right tool, right job
Previous studies by the national roundtable have found the federal government’s climate change plan — with its intensity-based cap-and-trade system — will not meet its targets. The C.D. Howe Institute estimates it will not reduce emissions below current levels and will miss its 2020 target by about 200 megatonnes — a little less than all the emissions of Alberta.
The roundtable’s report emphasizes two points. First, that we need to make big cuts to our emissions if we want to reach our reduction targets. Alberta would have to cut its emissions by 45 per cent, with the refining and upgrading sector cutting back by 75 per cent. Second, it is in Canada’s interest to start this transition as soon as possible. Businesses and consumers need time to replace products and change habits, and the more time they have, the cheaper it will be.
The roundtable found a carbon tax, combined with a cap-and-trade system based on absolute emission targets, was the most effective way of reducing Canada’s emissions, and would cost us at most two years of economic growth — in other words, we’ll have to wait until 2052 to be as rich as we would have been in 2050. Right now, the government has rejected one half of this proposal — the tax — and poorly implemented the other — the trade system, because it uses intensity-based targets.
Stopping climate change requires changing people’s lives: the cars they buy, the places they work and the homes they live in. And the path to a person’s heart is through their pocketbook: change the price and you change behaviour. Carbon taxes might not be popular, but they work, and if we’re going to get anywhere in the fight against climate change, we’ll need them. |
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