Marc Lee’s most excellent paper to the PEF session on carbon pricing at the CEA meetings in Vancouver got me thinking. (That whole session was awesome, by the way — including Lars Osberg’s provocative analysis that the vast majority of Canadians, whose real consumption has not grown in recent years, have already met their personal Kyoto targets. It’s only the fat cats who are causing us to bust our Kyoto quotas.)
Marc pointed out that the recent dramatic rise in gasoline prices has had the same impact on both consumer welfare and purchasing decisions as a massive carbon tax. The only difference is that we pay this tax to the oil companies (whose profits at $140/barrel oil are astronomical), and that they use these “tax revenues” to enrich their shareholders rather than fund public services and environmental conservation initiatives.
This logic is irrefutable. Now let’s put some numbers on it. According to a U.S. government web site, one U.S. gallon of gasoline (3.79 litres) contains 2.42 kg of carbon. That’s 0.64 kg per litre.
Since the beginning of 2007, the retail price of gasoline in Canada has surged by 50 cents (or over 50 percent). Some of that reflects the usual summertime seasonal run-up, but let’s not quibble. 50 cents extra for 0.64 kg of carbon equals a carbon tax equivalent of over $750 per tonne.
[NOTE: See comments below. Most of the proposals being debated are for a tax on carbon dioxide-equivalent emissions, not a tax on carbon per se – even though they are called “carbon taxes” (for shorthand). In this case, the equivalent tax that would generate a 50-cent per litre increase in gasoline prices is around $200 per tonne of CO2 equivalent.]
Any reaction to this back-of-the-envelope calculation? (I heard a number of something like $250/tonne thrown around at the PEF panel, but didn’t note the details.)
The Alberta-led Conservatives, of course, aren’t going to mess with this “free-market outcome.” In fact, they’ll reinforce it — for example, with federal corporate income tax reductions that more than offset the effect of the piddling increases in provincial royalties which the Stelmach government has introduced on tar sands production. Yet even as they applaud this unprecedented tax grab by their corporate friends, they’ll stand up and denounce the Liberals’ mild-mannered “green shift” as a tax grab. Go figger. I hope they get struck by lightning today.
Meanwhile, imagine the reaction from ordinary Canadians if the price of gasoline rose 50 cents per litre because of a government tax. Riots in the streets would be an understatement. Yet people accept that oil companies can do the same thing (and use the money for themselves, rather than the public good). Sure, people complain. But they accept it. This is Marx’s “fetishism of the market” raised to a whole new level.
All this certainly puts the debate over carbon taxes in a new context. The real issue shouldn’t be whether or not carbon should become more expensive. It already is — far more dramatically than even the most raving environmentalist would have dared propose two years ago. The real issue is who pockets the tax revenue, and what they do with it. And why on earth people accept as “natural” or “inevitable” this blatant profiteering by private corporations.
- Trudeau, Carbon Pricing, Regional Politics, and Technology Policy (January 23rd, 2015)
- The case against a revenue-neutral carbon tax (January 15th, 2015)
- Low Oil Prices, Good or Bad for Canada? (January 14th, 2015)
- The Ecofiscal Commission and Polluter Pay (December 8th, 2014)
- CGE models and carbon tax incidence (November 24th, 2014)