you know... i have an idea.
Pros and cons of carbon tax
Bruce Johnstone, The Leader-Post
Published: Saturday, July 05, 2008
To hear some people talk, the Liberal green plan is nothing more or less than the National Energy Plan updated for 2008.
Calgary Herald columnist Lorne Gunter recently attacked Stephane Dion's Green Shift carbon tax proposals as "a Green Shaft for western energy-producing provinces."
Gunter comes to this conclusion based on the assumption that the carbon tax will be placed on energy producers rather than consumers
With Saskatchewan and Alberta producing 40 per cent of Canada's carbon emissions, ergo, the two provinces will pay the 40 per cent of the carbon tax levy, Gunter tells us.
He claims Alberta's tab for the carbon tax will be $4 billion a year -- roughly one-quarter of the total tax take for the whole country.
I'm not sure where Gunter gets his numbers. But I'm sure of one thing. This is not the way carbon taxes work.
The carbon tax, as proposed by the Liberals, is broad-based, revenue-neutral tax that would be placed on fossil fuels, like coal and natural gas, at the wholesale level.
(Gasoline would be exempt because the 10-cent-a-litre excise tax is the equivalent of a $42 per tonne carbon tax, which is already higher than $40 per tonne carbon tax proposed by the Liberals in year four.)
As such, the carbon tax is a tax on consumption, rather than production.
Don't take my word for it, or even Stephane Dion's.
Former C.D. Howe president and University of Calgary public policy professor Jack Mintz says one of the advantages of the Liberal carbon tax is the broad base of the tax.
"An advantage of the Liberal plan is that it will price carbon more generally rather than being applied to certain sectors and large facilities.''
Moreover, because the carbon tax is on consumption, it should be relatively region neutral.
"The incidence of the carbon tax will fall on households and energy-using industry, so it generally affects all regions, especially those with resource and manufacturing sectors.''
It's important to note that the tax will not be applied to exports, which represents the overwhelming majority of the oil produced in Saskatchewan and Alberta.
Only oil consumed domestically would be taxed, and only that portion not refined into gasoline or diesel, where the excise tax is currently being applied.
Of course, as Mintz points out, the Liberal plan doesn't exist in a vacuum; it should be compared with the Tory plan to regulate carbon emissions.
The Conservatives green plan would hit large emitters with "intensity targets,'' or emission reductions per unit of production, which would see the "intensity'' of carbon emissions reduced 18 per cent from 2006 by 2010 and 33 per cent by 2020.
Those companies that don't meet the targets could buy exemptions by contributing to the government's technology fund, trading for carbon credits, or making payments to the Kyoto-based Clean Development Mechanism, essentially paying a fine for polluting the air with carbon.
Mintz said the impact of the Conservative green plan will largely fall on consumers and businesses purchasing energy-intensive products. Mintz said if industry isn't able to reduce emissions to meet the intensity targets, they may respond by cutting production.
"Canadians could be faced with brownouts, high fuel costs and lost jobs,'' Mintz says.
So which plan is better? Mintz says both have their pros and cons. The Tory plan is more focused on reducing carbon emissions, while the Liberal plan is more broad-based.
On the con side, the Tory plan could be costly to industry and consumers, without the offsetting tax reductions inherent in the Liberal plan. By the same token, the Liberal plan should target more money towards carbon reduction technology and less towards low-income Canadians, Mintz says.
The point is that neither plan is perfect, both have their advantages and disadvantages.
Consumers and taxpayers need to keep an open mind and compare both plans, and forget about the rhetoric and vitriol from politicians and critics alike.
- Bruce Johnstone is the Leader-Post's financial editor.
Canada.com