Carbon Taxes

The Canadian Taxpayer Federation wrote an op-ed about carbon taxes a couple of weeks ago, which was picked up by the Waterloo Region Record. My response was published in The Record on 28 April 2018.

Canadians are demanding that governments act decisively

Carbon-tax advocates need to go big or go home — April 13

As a carbon-tax advocate, I need to respond to the challenge of the Canadian Taxpayers federation to go big or to go home. I totally agree that we need a significant carbon tax to change consumer behaviour. The pan-Canadian framework we have now with carbon pricing at $20 a tonne in 2018, increasing to $50 a tonne by 2022, is a start, but it is much too little to meet Canada’s carbon emission reduction targets. We need a tax that is at least $150 a tonne to start making real progress in reducing Canada’s greenhouse gas emissions. For reference, a $150 a tonne carbon pollution tax would increase gasoline prices by 34.8 cents per litre, while the $20 per tonne price that we have for 2018 increases gasoline prices by 4.6 cents per litre.

The question is whether this cost increase is fair to Canadians. We know that a carbon tax will modify consumer behaviour and spur investors and businesses to create alternatives to the use of carbon-intensive energy, through conservation and clean technology. That is a good thing, as it will reduce carbon emissions and position us as global leaders in a clean-technology future. Recently, the Ontario Progressive Conservative Party platform included the replacement of Ontario’s cap-and-trade system with a revenue-neutral carbon tax. It asserted that a carbon tax is more transparent than cap-and-trade, and by making the tax revenue-neutral, it can protect the poor and rural populations from price increases, and not grow government revenues. The PC party has backtracked from that promise, now saying that it would simply dismantle the cap-and-trade system. It is unclear whether that would simply leave Ontario with a backstop carbon tax in 2019 as promised by the federal government, or if a Doug Ford as premier would oppose any plans by the federal government for a carbon tax.

British Columbia has a carbon tax of $30 a tonne. The revenues collected by the B.C. government through the carbon tax are used to protect the poor and rural areas from price increases, and also to fund corporate and individual tax cuts. This is where the debate on carbon taxes needs to go next — how much of a tax we need for climate action and what to do with that tax revenue. Canadians are demanding that governments act decisively with an effective carbon tax that protects the poor and those living in rural areas.

Caterina Lindman
Waterloo Region leader,
Citizens’ Climate Lobby

The Canadian Taxpayer Federation is saying that carbon taxes need to be large to be effective, which is true. The minimum carbon tax level that the Federal government has mandated is a start, but it is too small to be effective. They are also saying that if the tax is large enough to be effective, Canadians will rebel against the price increases. At Citizens’ Climate Lobby, we think the revenues from the tax should be distributed back to households via an equal payment to each adult, with a half-share for children. This will protect low income households from the carbon tax, as low-income households use less fossil fuels than higher income households. Lower income households will get more money in dividends than they pay in carbon fees. As the carbon fee goes up, the difference between the dividend they receive and the fee they pay increases.

Citizens’ Climate Lobby also wants the government to end fossil-fuel subsidies. A subsidy to fossil fuels makes them less expensive relative to other fuels, and therefore, is counter to supporting clean energy. I am watching with concern that the federal government appears to be ready to support the Kinder Morgan Pipeline through guarantees and other subsidies. My friend, Laura Hamilton of Divest Waterloo, had a Letter to the Editor published this week about Kinder Morgan.