Elections always matter. Canada’s federal election, now just days away, will be followed by the U.S. election in November of 2020. Canadian voters have to decide whether to elect a government which will take progressive action on the climate or choose a return to the Stephen Harper years of climate inaction—a Canada chastised as a climate villain on the world stage. Americans too will be faced with exactly the same choice—a return to the Obama years of climate action or the continuation of Donald Trump’s war against the environment.
The future is Green or it’s Gone
As we approach the last decade of actions to avoid catastrophic climate change, we need to own up to their immense privilege, power and influence to make the changes needed to save our planet from ourselves. The future is not Left or Right – its green or its gone.
A greener future isn’t about scarcity and sacrifice. In fact, it could be a much healthier, happier world if we plan and act on climate change, rather than panic and react to its consequences. Canada has taken a significant step in the right direction and is showing leadership by implementing carbon pricing. All but one political party supports carbon pricing and for good reason: it is the most efficient, low-cost solution to accelerating the shift to greener energy systems. How? Making pollution more costly (rather than free) encourages consumers and producers to reduce their own pollution in order to save or make money. It’s that simple.
Against Carbon Pricing? Think Again
Let’s review the six most common arguments against Canada’s carbon tax and see how they hold up to scrutiny.
Argument 1: Canada emits only 2% of emissions worldwide – even if we meet our targets we won’t make a difference on climate change
On a per capita basis, only the average Australian or American emit more
Context matters here. At 2% of emissions, Canada is in the top ten polluters worldwide. Canada is the fourth largest emitter among its OECD counterparts and the ninth largest emitter globally. When you measure GHG emissions on a per capita basis, only the average Australian or American emit more. Clearly, Canadians can make a difference on climate change.
Argument 2: carbon taxes don’t reduce emissions
The oldest carbon tax was introduced by Sweden in 1991. At that time, the price was EUR 24 per tonne and has risen steadily to today’s price of EUR 114 per tonne. Since 1991, Sweden’s GDP has increased 78% and its GHG emissions have been reduced by 26% from 1990 levels. In 2008, British Columbia introduced the first carbon tax in North America where the price went from $10 per tonne to $30 per tonne in 2012 (and continues at $30 until the rest of Canada catches up). As of 2015, the carbon tax in BC had reduced emissions by 5-15% with little impact on economic activity. In 2018, William D. Nordhaus won the Nobel Prize for economics for his analysis on the effectiveness of carbon pricing in reducing emissions; most governments, economists and industry leaders are convinced of its merits.
Argument 3: carbon taxes make life unaffordable and hit the poorest hardest
First of all, there are no zero-cost options. Climate change will make life unaffordable and hit the poorest hardest. Estimates on the cost of climate change for Canada are outdated (from 2011) but are in the range of between $21 to $43 billion annually by 2050 and greater than $91 billion annually in the worst case scenarios[1]. A more recent U.S. government report (2018) estimated a 10% shrinking of the US economy and the following annual costs from climate change by the end of century: $118 billion for coastal property losses, $141 billion for heat-related deaths, $155 billion in lost wages in outdoor industries due to heat waves, and $26 billion for air quality related deaths. The report notes that costs can be curtailed significantly even with modest actions to reduce emissions.
Now that we have made that point, let’s get to the affordability of a carbon tax for households in Canada. The cost will vary by province and territory based on the electricity mix and fuel consumption habits. Overall, the cost of a $50 per tonne carbon tax will be about $600/year for the average Canadian household.[2]
Revenue-neutrality is key
Politicians know that citizens do not like increased living costs, which is why many carbon-pricing policies are designed to be revenue-neutral. This means that the revenue generated is matched by a reduction in revenue elsewhere, helping society to adapt to the costs. The simplest example of this is the “fee and dividend” model, which the federal government wisely chose as their approach to enforcing a fair minimum national standard. This “federal backstop” means that in provinces that refuse to comply, the federal government will tax citizens and send over 90% of the revenue back to households directly at tax time (remember those climate action incentives?). Poorer households tend to consume less electricity and gas than richer households and therefore are expected to pocket more of the dividend. Households in rural and small communities are eligible for an additional 10% on their dividend to compensate for increased gas mileage. Sending the revenue back to citizens helps households adjust to higher prices, which, by the way, should decrease over time as new non-polluting technologies, services and products are adopted and made available. Competition to lower pollution and save money, along with a steadily rising carbon price, will help businesses justify aggressive investments in clean innovations.
Argument 4: the carbon tax is a cash grab! Why would the government take money and give it back?
It may seem odd at first that carbon prices are often revenue neutral. However, when you look at the actual goal of the policy—to create a price signal in the marketplace that informs consumers and producers that they lose money when they pollute (and save money if they don’t)—then one realizes that the revenue is just gravy (or icing if you have a sweet tooth). The Canadian political debate should not be about whether to tax but rather what to do with that revenue.
Generally speaking there are four approaches to that question: a) offset costs of a carbon tax on consumers, producers, communities and the broader economy (e.g. returning revenues to households), b) support further efforts to reduce greenhouse gas emissions (e.g. putting solar panels on schools), c) ameliorate the harms of climate disruption (e.g. use the money for disaster relief, climate adaptation, or just transition); and, 4) fund public priorities unrelated to climate change (e.g. in Chile they use carbon tax revenues for much needed investments in the public education system.[3]
Argument 5: we will lose our economic competitiveness
Twenty percent of global economies are already either implementing a carbon price (like Canada) or working on it.[4] This includes 46 countries and 28 sub-national governments including China, Chile, California, Brazil, Mexico, South Africa, Turkey, Vietnam, Australia, and Japan. Even in the United States, large corporations, including oil and gas giants, are starting to lobby Congress to implement a national carbon tax.[5] Several bills, including bi-partisan proposals, have been introduced this year. The number of carbon pricing initiatives have surged since the Paris Agreement because everyone is racing to: a) reduce emissions, and b) get the green jobs and technology of the future to secure market share for the 21st century. China too has a plan—a cap-and-trade carbon pricing system, a circular economy policy, a 2030 ban on gasoline vehicles, and nine of the top ten solar panel producers worldwide. The only non-Chinese solar company on that list is Canadian thanks to Ontario’s successful micro-fit program.
While society as a whole wins from reducing emissions, disruptive change is inevitable for carbon intensive industries this century. This is why governments worldwide are focusing on something called a “just transition”—helping vulnerable workers, industries and communities adapt to new opportunities. Canada needs to plan for how oil workers are going to shift their skills, jobs, and pensions to the fast growing clean economy. As solar and wind prices fall substantially, international banks are already advising against investments in new fossil fuel projects—not because of climate change—but because they won’t be able to compete.
If Canada fails to shift toward a greener economy, we lose out big time.
Argument 6: the feds have no right to impose a carbon tax on provinces – it’s unconstitutional!
Two courts have already disagreed. All 10 judges in Ontario and SasKatchewan agreed that the federal government has the constitutional authority to price carbon, and 7 of the 10 have held that the Greenhouse Gas Pollution Pricing Act is constitutional. The Ontario court ruled that the Act is within Parliament’s jurisdiction in relation to matters of “national concern”.
Chief Justice George Strathy wrote: “Parliament has determined that atmospheric accumulation of greenhouse gases causes climate changes that pose an existential threat to human civilization and the global ecosystem…the need for a collective approach to a matter of national concern, and the risk of non-participation by one or more provinces, permits Canada to adopt minimum national standards to reduce [greenhouse gas] emissions”.
Think Again
We don’t want to be the generation that failed all generations.
When the Pan-Canadian Framework for Clean Growth and Climate Change was launched in 2016, 80% of Canadians already had carbon pricing policies in place (BC, Alberta, Ontario and Quebec). The intention behind the Greenhouse Gas Pollution Pricing Act was simply to create a fair national minimum standard and a predictable schedule for raising prices so that Canadian consumers and producers could act and invest appropriately. Climate change is not something we want to politicize or gamble on anymore. It’s time to make the investments necessary for that healthier, happier future we all want and can be proud of.
We don’t want to be the generation that failed all generations.
References:
[1] National Round Table on the Economy and Environment (NRT)
[2] https://www.macleans.ca/economy/economicanalysis/heres-how-much-carbon-pricing-will-likely-cost-households/
[3] https://www.brookings.edu/wp-content/uploads/2016/07/howtousecarbontaxrevenuemarronmorris.pdf
[4] See updated statistics at: https://www.carbonpricingleadership.org/who/
[5] Bloomberg News, May 20, 2019 “Oil Companies Join Corporate Lobbying Push for U.S. Carbon Tax” see: https://www.bloomberg.com/news/articles/2019-05-20/oil-companies-join-corporate-lobbying-push-for-u-s-carbon-tax
Related articles:
Carbon Pricing Works
The Debunking of 10 Carbon Pricing Myths
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