National carbon price will likely raise costs for Canadians, damage overall economy


Yesterday the Liberal government revealed plans to impose a national carbon price on the provinces, aimed at reducing greenhouse gas emissions. The plan requires provinces to adopt a carbon tax or cap-and-trade scheme.

There is, in theory, efficient and benign carbon pricing. But no jurisdiction in Canada (or elsewhere) has such pricing.

To avoid damaging an already weak economy, carbon taxes must be 100 per cent dollar-for-dollar rebated to taxpayers to reduce other distortionary taxes, such as income taxes. This isn’t even on the table in Alberta and Ontario, which plan to spend the revenues on pet projects and favoured industries. And while British Columbia started well, it now uses carbon tax revenues to subsidize favoured sectors in agriculture and entertainment, rather than rebating all revenues to taxpayers.

To avoid damaging our struggling economy, carbon taxes must replace existing regulations that curb greenhouse gas emissions.

Again, this isn’t even on the table.

Appliance standards, vehicle fuel economy standards, building efficiency standards—all would have to go to protect the economy (consumers as well as producers) from the new tax.

Without these conditions, “carbon pricing” is just a new energy tax, which will potentially raise the cost of goods and services.

And what about competitiveness?

Is the United States going to match this? Are we going to levy carbon tariffs at the U.S. border?

Finally, it has to be said: the new energy tax will not significantly offset predicted future global warming. Shutting down Canada entirely wouldn’t do that. Instead, we will have a new National Energy Program, and a new National Energy Tax, that will make Canadians poorer, will savage Prairie provinces less-blessed with cheap hydro, and make Canada less-competitive in world markets.

This is a lose-lose proposition.

Kenneth P. Green is the Senior Director of Natural Resource Studies at the Fraser Institute.

Story: Fraser Forum