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The Painless Carbon Tax

The most important goal for Canadians who want to prevent disastrous climate change is to get a $150/tonne carbon tax. Be clear about that: the price has to be high and comprehensive to do the job.

Without a high tax we are just moving the deck chairs on the Titanic. Once you understand that, everything else falls into place.climate-change

1) We have to give all the money back to consumers. That makes the tax virtually painless for consumers, and if it is painless for consumers, it is painless for politicians. Without a 100% `carbon dividend’ for consumers effective action is politically impossible.

The simple fact is that a carbon tax is free. Talk about how to use carbon tax revenues for various pet projects is foolish, counter-productive and distracting. Naomi Klein, for example, in opposing the Washington State initiative, has done the fight against climate change serious damage.

2) We have to have border tax adjustments (BTAs) to protect our own industries: a) tax the carbon content of all imports unless it has already been taxed, b) rebate the carbon tax to exporters so they can compete. Without BTAs a high carbon tax hurts Canadian producers. With BTAs a high carbon tax has no effect on exports.

Border tax adjustments are legal according to almost all legal analysts. There are some complicated details, but none as difficult as making a self-parking automobile. The trick for Canada, now that we have unilaterally committed to a carbon price is to unilaterally exercise our right to impose defensive carbon taxes on imports.

3) Forget the tar sands. The first two points mean that we tax the carbon on any tar sands oil that is used by Canadians and we let the oil companies keep the carbon tax on oil they export.

This may seem inconsistent from the point of view of reducing fossil fuel consumption. It is not. In the long run it will have no effect on total consumption. If we don’t supply oil there are lots of cheaper suppliers who will. Demand is what will determine how much oil is burned. A tax is the only tool that can significantly reduce demand. If we are to have BTAs for other industries, we have to have BTAs for oil. Life is a lot simpler than it seems.

More important, rebating carbon taxes for exported oil means we don’t have to fight with the oil companies. They simply won’t care if we have a $150/tonne tax. Albertans can’t complain that the carbon tax will hurt them. Brad Wall becomes yesterday’s cuckoo. Properly applying the border tax adjustment to oil is political ju jitsu. It neutralizes the biggest enemy.

Canadian politicians – and I include Ontario’s Premier, Kathleen Wynne and Energy Minister Glenn Thibeault – still have not shown they understand the simple facts about fighting climate change. Either that, or they haven’t understood the simple facts about climate change itself. They are fiddling while Rome burns. They are fiddling while the coral die, while the oceans warm, while 384 million in the coral triangle around Indonesia, Malaysia, the Philippines, Papua New Guinea, Timor Leste and Solomon Islands move closer to starvation. Or maybe it is just that they are afraid that some voters know even less than they do and might not re-elect them if they tell the truth.

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