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Carbon Taxes: Needs To Be Done Right

May 21, 2008

There has been a lot of talk about carbon taxes lately. Now, I make no secret of my dislike for the BC Liberal carbon tax; however, I’m not against carbon taxes if they are implemented properly.

My biggest beef with the BC and proposed Federal Liberal carbon is this “revenue-neutral” concept, which is where one returns all (or most) of the money raised by the carbon tax to the entities it gathered it from via the use of tax receipts and government payouts. The end result is basically a shell game: you take away money from the consumer when they use energy that creates carbon, then give it back to the consumer so that they can afford to pay the carbon taxes when they buy energy. This doesn’t do much for the environment.

“Ah,” some might respond, “the rise in the price of energy that creates carbon will result in less consumption.” The thing is, however, is that energy is relatively inelastic; that is to say, it is a product that is hard to replace by other products and hard to reduce consumption in the short term. This is why one sees consumers continue to go to the gas pumps, consuming around the same rate, even though prices have risen.

Now, the good thing about a carbon tax is that it places a charge on economic activities that produce negative externalities. For far too long, consumers have been getting products without paying the full price, which would be the damage to the environment.

Therefore, the key is to dump the “revenue-neutral” concept. A portion of the carbon tax needs to go towards projects that will benefit the environment, such as expansion of mass transit, or the creation of programs that allow people to make their homes more environmentally friendly.

Having said that, some money does need to be returned to the entities that pay the tax for a couple of reasons. The first is to allow for corrections for the regressiveness of the tax: for instance, the poor will need a rebate to ensure that they can heat their homes over the winter. The second would be to provide some seed money to allow for environmental-improving choices or innovations on the entity level. While the current BC carbon tax does do this, we do have to remember that in some situations, the ability for a entity to choose an environmentally improved alternative doesn’t exist (ie: taking the non-existent transit system in BC’s North), which is why there must be projects funded by the government to create such choices.

I’ll conclude by saying that a carbon tax – in any form – is not going to improve the environment by itself, and other measures are going to have to be taken.

  1. Billy Smith
    May 22, 2008 at 5:44 am

    Yeah, you’ve got it just about right. It’s a little sad seeing Greens twisting themselves into knots supporting this shift toward flat taxes. I used to think that Greens had some sense of social conscience, but any support for a measure that will disproportionately hit lower-income people is a clear sign that they’ve lost that social conscience. And for all Carole Taylor’s blather about the “revenue neutrality” of it (thanks to her $100 bribe), the fact remains that people who have fewer choices due to geography or to circumstance, will face a greater burden because of this. I don’t see a lot of minimum wage earners rushing out to buy a Prius.

    And, in the accounting that all the pundits are doing, the only thing people are looking at is the cost of the extra gas you put in your car. Well, if you live in the north, you’re going to be paying more for everything that has to be transported, which is pretty much everything, no?

    There’s no question we have to take some action on global warming, but you can’t deal with the environmental issue in a vacuum. Share the burden equitably or the whole thing will backfire.

  1. June 19, 2008 at 5:22 pm
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