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Party platforms and climate strategies

A well-intentioned article in the Vancouver Sun seeks to explain carbon taxes and cap-and-trade systems. A worthy objective, but the article really aims to pigeonhole various alternatives in terms of political parties. It ends up taking a far-too-simplified view that goes something like this:

The debate is being played out in British Columbia, where the Liberal government and New Democratic Party opposition are fighting over the two main solutions that are based on financial incentives. The Liberals have implemented a carbon tax that is applied at the pump and the NDP are proposing a cap-and-trade system, which targets industrial polluters.

The situation is mirrored at the federal level, with the Liberals are trying to persuade voters to accept a national carbon tax applied at the refineries. The Liberals claim their tax will raise $15 billion over four years while the NDP is pushing a nationwide cap-and-trade system. Meanwhile, the Conservatives are hoping a technological solution of carbon capture and storage will solve the problem.

If only it was that straightforward, Canadians might be able to better engage the climate debate. But it is not. The author makes these out to be mutually exclusive options, when all are likely to figure into the picture, and political parties have reflected this by endorsing variations of the above. So isolating alternatives and framing them as “Party A supports this” and “Party B supports that” is not helpful, and only risks sowing misinformation in the public mind. It is also misleading to think that carbon capture and storage (CCS) is an alternative to a carbon tax or cap-and-trade; the latter are both forms of carbon pricing that will, so the argument goes, create the economic incentives for CCS to be implemented.

Federally, it is clear that Conservatives want nothing to do with a carbon tax. They do not seem to want to do much of anything, but you could put a tentative check in their box for CCS, and they have made noises about a national cap-and-trade system, although with little to show for it. Ultimately, there will likely be some US national system emerging after 2009, and Canada will participate in it. It may or may not be modelled on the Western Climate Initiative currently under negotiation, and how politics shapes the final result is far from clear – there are enough caveats with cap-and-trade that we may not like how it looks at the end of the day.

The federal Liberals have endorsed a carbon tax, playing up the “tax shift” language (“tax the bad things like pollution, not the good things like income”), which works well in a campaign, but is based on some dubious economics (lowering personal and corporate income taxes is not likely to have much, if any, impact on economic growth). But the Green Shift document also endorses a cap-and-trade model. It is not clear if they support CCS, but I’m betting a big yes, as most of the modeling that gets us near our targets relies on CCS coming on stream at some point in the future.

The federal NDP have more clearly staked out cap-and-trade, alongside the Conservatives. The NDP would auction permits, a really important aspect of a good system, but would not reallocate any of those revenues to households, who will end up paying higher prices as industry passes along the cost increases. I’d also like some clarification on the penalties for not meeting the cap. If their auction price of $35 per tonne also applied to excess emissions, it is effecively a carbon tax, and one that is lower than the proposed $40 a tonne under the Liberals (the “cap” in cap-and-trade does not mean companies will actually meet that cap if the cost of paying the penalty is less than the cost of complying).

Federally, much of this is political posturing in anticipation of the next election, and who will carry the “green vote”. In BC, there is a similar dynamic with the next election in May 2009, but here we have a government who is moving ahead on a major climate action plan, so the politics are playing out more aggressively. Well, perhaps that is just because it is BC, but anyway …

In BC, the governing Liberals have become well-known for their carbon tax, which came in on July 1. But they are also advocating a cap-and-trade system for large industrial emitters, and are collaborating on this on a regional basis through the Western Climate Initiative, which at last count had seven US states plus BC, Manitoba, Quebec and Ontario. The are also very much interested in technological solutions (any new coal power plant in BC must implement CCS), and their green plan has various incentives for energy efficiency, plans for a carbon neutral public sector, regulations and standards, and essentially all of the low-hanging fruit in regards to GHG mitigation.

The BC opposition NDP have honed their critique of the government around the carbon tax with a populist “axe-the-tax” campaign. But according to their Framework for Real Climate Action, they really want to “fix the tax”, arguing that it should be “at source”, and focussed on “big polluters”. They also want a cap-and-trade system, CCS, and tougher regulations on industry. So in actual policy rather than media soundbites, the NDP plan has all of the same elements as the Liberals’ plan.

I have been frustrated that the NDP continues to play the carbon tax as not applying to industry. This is just plain wrong. I have tried to correct them on it and have seen no change in their communications. Similarly, I find arguments that the tax should be applied “at source” disingenous as the tax is applied at the wholesale level on fossil fuels. The carbon tax has a broad base, covering 70% of domestic GHG emissions – there are a few outstanding issues such as process emissions in the aluminum and cement industries (as I understand it these are going to be included either through the tax or a cap-and-trade system) and from emissions from landfills and pipelines (which will be covered by regulations).

The NDP approach would exempt the household sector from the tax. It would not cover fuel used for transportation or for home heating, in effect meaning one-third of emissions would not be covered by the tax. It is not clear how the NDP would address emissions from the household (i.e. voting) sector. On the other hand, the NDP goes beyond the Liberals by proposing that the tax be applied to international aviation and shipping, and it is not entirely clear whether they would support it being applied to exports. These exemptions have a certain logic too them, in that the Liberals are concerned about imbalances with regard to trade if BC taxed these areas and others did not.

Because the NDP have so poorly handled this issue, my criticisms of them have been interpreted as a wholesale endorsement of the Liberals. One obnoxious comment that I had to delete went so far as saying I should run for the Liberals, as if I had absolved them for all of their sins by supporting the carbon tax. I’m trying to stick to policy analysis and I resent being painted by these “with us or against us” brushes. The Liberals’ plan is not perfect, far from it, but it does represent a meaningful first step. I congratulate them on that but think it is time to start pressing for the next steps.

I support the carbon tax because it is relatively well-designed — it flows more money back to low income families than they pay in tax; it is an important signal to other jurisdictions; and it has a broad base. I would do away with the revenue neutrality, aiming half the revenues into a refundable green tax credit with fairly broad coverage (more like the Old Age Security or Child Tax Benefit model than the GST credit upon which the current green credit is based), and would use the remaining funds for major transit expansion, transition programs for workers and energy efficiency improvements for low- to middle-income families.

Is the tax large enough? No; it should eventually be much, much higher. The idea is that it gets phased in over time. But the NDP cannot have it both ways, saying that it is ineffective and also that it is a horrible burden on people. There is a statistical relationship between price and consumption. The behavioural response is very inelastic in the short term, but less so over the long run. So the carbon tax, at prevailing levels is more than nothing but is small enough to be considered symbolic – perhaps a promissary note for the future. Ultimately, facing high marginal costs for activities that threaten life on the planet seem sensible to me, as long as a good credit system is in place. Over the medium term, I am more partial to some form of household carbon accounts (quotas or “rationing”).

No matter what approach you take – carbon tax, cap-and-trade or regulation – there are going to be regressive indirect price effects because industry will pass along those costs (even if direct costs for personal transportation and home heating are exempted, as in the BC NDP approach). In neither the federal nor the BC NDP approaches is there clarity on how these regressive impacts will be addressed. And by going “axe-the-tax” the BC NDP is pandering to the anti-tax sentiments out there that do us no favours as people who want social justice.

Enjoy and share:

Comments

Comment from duncan cameron
Time: July 28, 2008, 7:31 pm

Good stuff Marc. I think it is important to distinguish between an incentive and a disincentive. Offering to abolish fares on buses is an incentive to take the bus. Hiking fares is a disincentive.
A carbon tax like the one in BC is a small disincentive, unlikely to reduce GHC. A set of grants to households to change to more efficient home heating is an incentive. Abolishing fares on public transport is an incentive not to take the car.
The current tax plans of the the Federal Liberals by building on revenue neutrality in fact take away the largest benefit for the environment of the carbon tax, spending new tax money to create programs to reduce GHG emissions directly.
If you want to reduce GHG you need direct regulation, and policing, nothing else works in the short term.

Comment from catherine
Time: July 28, 2008, 7:42 pm

That’s interesting that the BC NDP would “fix the tax” and introduce other measures. I never made it past their front page and main links which highlighted “axe the tax”, letting big polluters of the hook, etc.

This paragraph made me smile:

“If you believe that British Columbians need real climate change solutions now, support Carole James’ plan to axe the gas tax. Click here to sign the petition.”

You’re saying that there is more to Carole James’ plan, but that is not the message she is putting out front.

Comment from Dave T
Time: July 29, 2008, 12:19 pm

Duncan wrote: “If you want to reduce GHG you need direct regulation, and policing, nothing else works in the short term.”

This is simply untrue.

You can acheive GHG reduction goals by a carbon tax, cap-and-trade, or direct regulation. They all impose a cost on producers and consumers, and producers and consumers on the whole will try to avoid costs by adjusting behaviour. We have already seen plenty of evidence of changing behaviour for both producers and consumers as a result of higher market costs for oil.

There is no magic to regulation and policing. Corporations only view regulatory limits and enforcement as costs of doing business. As long as benefits exceed costs, corporations will often break the law. Think Pinto.

Corporate cost = (fine x probability of conviction (<1) x probability of charges being laid (<<1) x probability of detection (<1)) + (lost goodwill x probability of publication of misdeeds (<<1) x probability of detection of misdeeds (<1).

Comment from Max Cameron
Time: July 29, 2008, 1:06 pm

Brilliant piece, Marc. Clearly, the various elements — carbon tax, cap-and-trade, and carbon capture and storage – are all part of the solution. The idea that we have to choose between a cap-and-trade system or a carbon tax is utterly without basis. It is generated not by sound logic but by the perverse logic of our political system. Let me push your argument even further (and respond to those who want you to run for the Liberals!). Whereas we need a national carbon tax, the partisan bickering between the Liberals and NDP, both federally and provincially, could result in no policy change at the federal level (i.e. re-election of Harper). There are a number of three-way races in BC where Conservatives could take seats with a narrow plurality of the vote in the next federal election. Our non-proportional system punishes coordination failures among parties that occupy similar policy space. What we need in BC is a Liberal-NDP alliance against the Tories, an alliance based on the adoption of a full spectrum of climate change policies. No doubt that is an idea that will be warmly embraced by those around Dion and Layton! But I think environmentalists should start thinking strategically…

Comment from duncan cameron
Time: July 29, 2008, 2:08 pm

If you want to reduce GHG by 60 to 80 percent over the next decades, you have to start now. Only direct regulation now will allow the ship to turn in time. If we wait for the market to do its magic, the difficulty of changing direction goes up. But that is if you think global warming is an emergency. If you don’t Dave T is right, we can get there later by indirect measures such as the tiny revenue neutral tax in BC. or the cap and trade which should be in place within the next ten years.
I have been calling for a NDP/Green alliance for years, that is the only way to deal with the issues Max raises. I used to call for a Liberal/NDP alliance. That may once again prove necessary as well. I would not blame the NDP for trying to win seats. Thats what parties do. Why have Campbell and Dion gone for revenue neutral taxes when it defeats the environmental purposes of the taxes?

Comment from Erin Weir
Time: July 29, 2008, 2:16 pm

It is legitimate and useful to take stated party positions at face value and evaluate them, as Marc has done in several blog posts on carbon pricing. Also, I am all for a more proportional election system.

However, when we move into the realm of political strategy, the issue of Liberal credibility is unavoidable. The federal Liberals increased emissions by something like 20% while they were last in government. I would venture to write that they did even less than the Conservatives to limit emissions.

The Liberals are now making some of the right noises (as they typically do in opposition). It is one thing to commend Dion for putting forward the concept of a carbon tax, but quite another to conclude that his particular carbon-tax plan (the Green Shift) is a good one. Yet another giant leap is required to assume that the Liberals would necessarily implement this plan if elected.

The federal NDP, on the other hand, has been consistently advocating the right positions on environmental issues since well before the last Liberal government. The only possible exception is that Layton may have prematurely rejected the concept of a carbon tax, rather than waiting to critique the Green Shift’s specific flaws. However, Layton has been a crusader against climate change since long before this cause was hip or he was party leader.

In BC’s many three-way races, the best environmental strategy is to elect the New Democrat.

Comment from Dave T
Time: July 29, 2008, 4:37 pm

Good point about partisan bickering Max. Stephen Harper is a very dangerous person to have in charge of Canada, and particularly for the energy/environment file. Given his ideology and his financial backing, you can rest assured that if he is re-elected this fall, we will have no significant progress on climate change.

Comment from Dave T
Time: July 29, 2008, 4:41 pm

Duncan, I have never said the BC carbon tax is adequate. I don’t know any serious environmentalist who has said that. It should be much higher.

This said, it’s far, far better than any other jurisdiction in Canada has done.

And sadly it’s far, far better than the NDP did while in power in BC.

Comment from duncan cameron
Time: July 29, 2008, 7:46 pm

Dave T what is the main issue on emissions? I would argue it is stopping the tar sands expansion. That is a regulatory issue. The NDP has not been afraid to regulate. Take a look at the agricultural land reserve brought forward by Dave Barrett. Or medicare under Tommy Douglas and Woodrow Lloyd.
Under Glen Clark we got the Westcoast Express, and the Skytrain. This was more significant than the carbon tax.
Unfortunately the provincial NDP bought into the idea of a balanced budget when they should have been issuing green bonds and investing in green infrastructure. Instead we got people believing it was good to buy mutual funds with 2.5 per cent annual service fees for so-called investors.
I do not understand why it is bad for governments to go into debt in order to meet the needs of the public, and it is a good idea for people to go into debt in order to consume private sector produced goods such as cars.

Comment from catherine
Time: July 30, 2008, 4:55 am

I think a comprehensive strategy for reducing emissions will be more effective than a strategy targetted at the tar sands. Just to give a couple examples. Ontario Power is the largest (or one of the largest) single emitters in Canada. Also, while Canadians can import more oil from Russia and the Middle East where it is easier to extract, it still is a limited resource and still contributes significantly to emissions. A comprehensive carbon tax or cap and trade, with import/export considerations, will address both these examples, as well as the tar sands and others. Stopping tar sands expansion alone is simply not enough and one should aim to change the economic balance for all emissions.

Comment from duncan cameron
Time: July 30, 2008, 7:01 am

I agree that a comprehensive strategy is needed. My point is simply that regulatory action can be taken quickly, market measures take time to implement.

Comment from leon pendleton
Time: July 30, 2008, 7:59 am

you all seem to be missing the point. we can argue till we are blue in the face, which political party has the best ideas for mitigating climate change but until the real masters of our destinies are heeled, the direction of environmental degradation will continue unabated.
for forty odd years now, since i became politically awake, i have watched our capitalist masters manipulate the agenda. keeping us bickering among ourselves and only making small gains in a positive direction. this bickering now, between a carbon tax or a cap and trade, is the same non-poductive discussion that we have been engaged in over that forty years.
although, i haven’t given up the fight to mitigate climate change, i have long ago recognized that most of us are just ‘wildebeest’ following the leader over the path we have followed from time inmemorium. the only thing different about today is our technology has brought us faster, bigger and cheaper toys to keep us from understanding how really controlled our lives really are.
a carbon tax should have been implimented fifteen to twenty years ago when we probably could have done something to mitigate climate change. now, we are going to have to play catch-up and try to mitigate the ‘affects’ of climate change, just where the capitalist want us. by not doing full cost accounting and understanding the carbon footprint of everything do, and charging ourselves for it, we ‘ordinary people’ have basically slit our own throats and will continue to be the slaves of our corporate and economic system instead of it’s master and having it go in the direction we want it to go.
personally, i would like to see cap and trade brought down to the individual level as well as the coropate level maybe then we can begin to properly educate ourselves as to the true scope of the situation in which we find ourselves.

Comment from Dave T
Time: July 30, 2008, 8:02 am

Yes, the tarsands are an environmental disaster. And with coal-to-oil and oil shales coming onstream (due to high oil prices, and the lack of carbon pricing) the disaster is going to get worse.

If there is political will, market measures can be implemented just as quickly as regulation. Regulation requires political will too, and although Stephen Harper is talking about regulation, it hasn’t happened yet.

Comment from Darwin O’Connor
Time: July 30, 2008, 10:40 am

Market measures may take time to implement, but frankly, they are likely to be faster then waiting for an NDP federal government.

Comment from Antoinette Halberstadt
Time: July 30, 2008, 12:21 pm

Marc said
Marc wrote: ‘I have been frustrated that the NDP continues to play the carbon tax as not applying to industry. This is just plain wrong,’ and ‘But according to their Framework for Real Climate Action, they (argue) … that it should be …. focussed on “big polluters”.’
In case Marc has no on-the-ground knowledge of the very gas-extraction industries that have received a $200 million tax subsidy instead of being taxed more for the pollution and GHG’s they emit in the process of exploration and extraction, I invite you to enjoy reading the following, which I wrote in 2002 while working as a First Aider in the Peace gas patch.
Perhaps a scientist or mathematician would care to calculate the GHG emissions from the combustion that took place here, as well as the damage done by the unburned nitrogen described later in the story:
“could produce 8 million std cubic feet of gas a day for 20 years, netting about $10 million per year. During the testing phase that the flare photo’s are of, it was putting out 20 to 50 million standard cubic feet per day!!”

Up North 2002

Having an interesting and fairly fun time: the wide and always-bright and crisp geographical landscape is a breath of fresh air, as is spotting the occasional lynx. Then there’s learning a wealth about the complexity and danger of drilling for natural gas (what’s this for? What do YOU do? Why are they doing that? Oh my GOD, REALLY it could kill everyone on the lease?!”), and observing rig and Up-North culture and politics.

……..Geologists all seem to be the liveliest guys around, some of them quite crazy (my First aid company boss says “It’s from sniffing too many rocks.”) But there’s no geologist now because this is a Service Rig, which is what follows a successful drilling rig.

These Service guys’ job is to safely unplug the cemented-and-sealed hole without it blowing sky high, to cap it with the device (wellhead) that pipelines will tap into if it’s as good a hole as the geologist’s analyses predicted, and to test the quality and quantity of the gas once they have carefully allowed it to flow.

It’s an amazingly complex business, involving first “killing” the well by exploding concentrated heavy fluid such as alkali’s like calcium chloride (i.e. bleach) down in the gas-bearing zone, in order to lower the pressure enough to safely lower various tools, plugs and devices into the hole. Then, when they’re ready, flushing out the alkali with nitrogen and then replacing it with acid, e.g. hydrochloric. (“John, are you Doing Acid this afternoon?” John the Service Rig engineer, that is. When all those wells were on fire in Iraq after the Yanks bombed them during the Gulf war, he was invited to be in the team of Canadian specialists who went over there to “kill” the wells).

If things go wrong during these manouvres, acid or alkali could be detonated while still above ground if anyone operates a radio or cellphone nearby, which is why one of my side-jobs has been to park my ambulance down the road to stop every approaching vehicle and make them turn off all their communications devices. Or the acid or alkali could shoot into the sky and rain down on everyone on the lease, followed by gas (with or without hydrogen sulphide to knock out our brains’ respiratory centres) and, if there is ignition by so much as a sparkplug or even from static electricity, explosion and of course fire. Explosions can also happen if the well ‘kicks” (i.e. sort of burps) at any time and the blow-out-preventer valves (“B.O.P.’s) don’t contain it.

Therefore, we are not allowed to wear synthetic clothing on the lease, also because, in the event of a fire, while our fire-retardant coveralls can slow things down it could still get hot enough to melt synthetics to our skin. Charming, eh?

If things go right and it’s a good well, as was the site that most of these photo’s are of, it’s pretty darn exciting after they drop acid! Acid somehow cleans out guck and creates a clear passage in the porous zone that the gas is in, and wakes up the monster, and so all of a sudden, “GGHHWWHA!” the whole lease is lit up by flame. But it’s controlled ignition, the flame roaring out of the flare stack that has been waiting for the piped gas to come its way.

Pyromaniacs’ heaven! 50 ft flames like a blast furnace, roaring like a Boeing jet, and the ground shaking. Warm on your skin, even 100 yards away. At first the hoar-frost — that had been as far as a metre down – inches up out of the ground like a zillion fluffy needles, until within a day the previously-frozen lease has melted into a sea of the goopiest, stickiest clay I ever did meet. “Gumbo” they call it. Walking in it sucks your boots off if you don’t have the laces tied tight enough.

Some of the guys seem to personally identify with “their” flare: if it’s big they strut around as if it were their own personal ejaculation or something. Check out the “Bessim triumphant” photo: testing-crew member Bessim — an immigrant from Kosovo who is uncharacteristically demonstrative for an oilpatch worker – dancing a leap of joy for “his” flare.

The lightshow goes on for a couple of days, as they measure the flow and the content: how much methane, how much butane, propane, etc etc, so that of course Head Office can calculate the corresponding projected $$$$. John figures that that well (whose name I can’t tell you because it’s a “tight hole”) could produce 8 million std cubic feet of gas a day for 20 years, netting about $10 million per year. During the testing phase that the flare photo’s are of, it was putting out 20 to 50 million standard cubic feet per day!!

One can’t help but think how very much it’s contributing to Global Warming! To think that I don’t idle my car for longer than absolutely necessary, but meanwhile there are these monster furnaces blazing away, not to mention all the unburned other gases that get pumped out into the atmosphere at one helluva rate!

But what a show it was! Utterly awesome. As grand as a fireworks display, with the added advantage of not being all over and gone in a flash like fireworks do.
That one was burning so brilliantly, that at night it beamed way up into the sky, like a stationary orange searchlight. “The finger of God”, I called it.

One night I parked about a kilometre away from it and got out of my truck to just behold it for as long as I could until the –22 degrees Celsius stung my face too much. It was slightly blue where it first came out of the flarestack (propane, John tells me that is), then the rest of it orange (methane), with halo’s. The falling snow flickering orange. Even from that distance, the earth and air quivering. To be able to describe the huge sound of it to you, I tried listening for the details, to break it down into tangible components. Waves of powerful rumbling, a bit like listening to a seashell, and also tones superimposed. On the ‘Doh Ray Me’ scale, I found Low Doh and also — around the outside of it like the halo – a High Doh tone.

About a minute after I turned around and drove back towards camp, my eyes still had spots in them, as if I’d been looking at the sun….

April 2nd
Last night I learned from John that the pilot flame isn’t lit on this flarestack, which is presently belting out nitrogen. He said they’ll light it in the morning — by which time it should be yielding gas — by shooting a flare at it. I said something about how exciting it is when it ignites, and how great it must be to light it.

This morning when I opened my bedroom door , there on my desk was the flaregun … for ME to shoot! The flaregun is the same as my bear-banger in Burton was: the size of a pen, a spring-loaded gadget with a “hammer” in its end that detonates whatever is screwed onto the end of it: for bears, a “blank” big banger. In this case, a burning flare that shoots out when detonated. The kind that’s for sending up distress signals.

When the time came, I handed my camera to John to capture my historic moment. All primed, I aimed for the top of the stack, pulled back on the spring, released it, holding my breath for the breathtaking moment of ignition. Then …. my flare shot up, alright, but no ignition! Another guy tried again in case I just hadn’t been aiming well enough. Still nothing. Then John tried a little while later. Zip. The darn well is not yielding what they had hoped! Just the nitrogen they had piped in was still coming out.

So they fiddled with it a bit, and John and I went off for dinner, and when we returned the flarestack was burning, but not half as well as the one on the other rig. They’re thinking about starting again, pumping more acid into it than before …

Now the above information is precisely what I’m not supposed to tell you, being a “tight hole”, but by the time I get home and send you this it will probably be moot, considering that any spies could have observed for themselves that the flare was pissy until after the Coil specialists came and did more acid.

END OF STORY.

Perhaps Marc will argue that these polluters are about to be addressed, since he said : “But they are also advocating a cap-and-trade system for large industrial emitters, and are collaborating on this on a regional basis through the Western Climate Initiative.”

Well, the Liberals have not yet advocated or committed to any such thing. Instead, they have rewarded the gas-exploration industry to the tune of $200 million in tax subsidies which could otherwise be used to build the economic infrastructures and encourage technologies needed to provide alternatives for gasoline and heating-fuel consumers.

Also, Liberal policies have not discouraged coalbed methane exploration/ extraction, are lifting the moratorium on offshore oil exploration, and promote Gateway which will not only damage our huge carbon sink Burns Bog but will also pave over the Delta area carbon-sinking farms, increasing dependence on fossil fuels to instead import produce from California.

The Liberals’ plan is patently not a Climate Action plan. And in my opinion the tax is not a ‘first step’ Carbon Tax, it’s an end-user gas tax at the pump, whose ‘revenue neutrality’ cancels itself out, doing little if nothing to discourage drivers from stepping on it.

The NDP isn’t saying “fix the tax” at all, but rather proposing to scrap this tax and replace it with an actual “at source” tax that would accurately calculate the full cost of all carbon-emitting activity. This is the only way to ensure a carbon tax is exactly that.

Antoinette Halberstadt
Sustainable BC Principles: Ecosystem protection, Resource Conservation, Biodiversity, Resilience, Protection for the “Commons”, Food Security, Social Equity, Full Cost Economics, exercising the Precautionary Principle, Adaptive Management, Democracy and Due Process, and Just Transition.

Comment from Dave T
Time: July 30, 2008, 1:19 pm

I have seen politicians speak misleadingly about revenue neutrality, and I fear their misinformation is being accepted.

Just to clarify, revenue neutrality does not mean giving the money back to the same people/firms in proportion to what they paid in taxes.

What they pay in taxes depends on their carbon consumption (emissions). What they get back is a completely different formula.

Thus revenue neutrality does not cancel out the incentive effect of the carbon tax.

There is plenty to criticize in the Liberal carbon tax schemes (both provincial and federal) e.g. the tax is too low, it doesn’t give enough money back to lower and middle income people, or to energy conservation measures.

But claiming that the revenue neutral aspect of it somehow cancels out the impact of the tax is simply incorrect.

Comment from duncan cameron
Time: July 30, 2008, 2:45 pm

Revenue neutrality means the government will not take in more revenue as a result of a carbon tax. It implies reducing other taxes, in BC the progressive income tax rate, to achieve neutrality.
By replacing progressive tax revenue with regressive tax revenue the government encourages more consumption from upper income people. The CCPA study c-authored by Hugh Mackenzie shows how income inequality impacts negatively on the environment.
A non-revenue neutral carbon tax, raising new money to be spent on energy conservation makes sense. A revenue neutral carbon tax is a politically motivated excuse to cut income taxes by one per cent for the first two brackets, plus cuts to corporate taxes.

Comment from Mark Crawford
Time: July 31, 2008, 5:11 pm

I have to agree with Duncan Cameron and Dave T that government revenue neutrality is both overrated and misunderstood. (I detail this on my blog at http://markcrawford.blogspot.com/2008/07/more-than-opportunism-lies-behind-ndp.html .) The best way to achieve social equity and fairness to users is to use carbon taxes to replace excise taxes. Admittedly, the feds have more latitude to do this than the provincial government, but the principle is clear: to the extent that an excise tax is replaced by a carbon tax, the effects on consumers should be pareto optimal, since those who can use less carbon will pay less than they would have under the excise tax regime, while those who cannot switch are at least no worse off. If government loses money as a result, what would be wrong with raising (progressive) income taxes or business taxes a little?

Comment from Rod Smelser
Time: August 2, 2008, 8:44 pm

“What we need in BC is a Liberal-NDP alliance against the Tories, an alliance based on the adoption of a full spectrum of climate change policies.”

It’s funny you should say that. The Green-Liberal alliance agreed to by May and Dion was an extension of a strategy that started with David Suzuki hosing May’s first event in her Green leadership campaign in Vancouver. The idea was to put the green shine onto the Liberals. It worked great in the London byelection, rather less well in the Vancouver Quadra one!

“And sadly it’s far, far better than the NDP did while in power in BC.”

Dave, is this a joke? I agree with Duncan that one of the best GHG fighters we have in the Lower Mainland is the West Coast Express, started by Glen Clark and MIke Harcourt. You can see the Express making an appearance in the BC Liberals “Best Place on Earth” TV commercials on climate change, in which it’s stated as doctrine that the average person causes global warming not industry. But Premier Campbell’s $14 billion transit scheme made no mention of any expansion of the WCE service, let alone a second commuter rail line to cities south of the Fraser.

Comment from Dave T
Time: August 4, 2008, 9:05 pm

The CCPA study on income by decile is quite interesting.

Assuming GHG emissions are disproportionately higher for people in higher tax brackets, then would a carbon tax have a progressive effect? Perhaps more progressive than our current income taxes?

Has anyone crunched numbers on this?

PS Income tax rates are not as progressive as some may think. Important to bear in mind that although marginal income tax rates may be progressive, actual income taxes paid may not be very progressive, or progressive at all.

PPS Rod, how much has the WCE reduced GHG emissions, compared to total province-wide emissions?

Comment from Rod Smelser
Time: August 4, 2008, 11:14 pm

PPS Rod, how much has the WCE reduced GHG emissions, compared to total province-wide emissions?

I don’t think Translink or anyone else has a precise figure on that, nor do I think one could be put together without some very detailed surveys of the passengers, much more detailed than have even been undertaken.

The trains carry about 5 to 10 thousand people per weekday, so if one assumes that half those would otherwise be driving, the equivalent of about 4 or 5 thousand cars, but these would be cars travelling longer than average distances, so the GHG and other air pollution savings are a greater percentage than just the percentage of vehicles making any weekday peak period trips to downtown.

What’s really needed, and was glaringly absent from Premier Gordon M. Campbell’s $14 billion tranist announcement, and also from Translink’s 2040 plan was any mention of expanded WCE service. We need trains running to Mission on the CP tracks many more hours of the day and in both directions, and a second WCE service going along the CN tracks to the cities south of the Fraser River. And probably another one along the Arbutus line to the southern suburbs and Washington State and a fourth one going north to Squamish-Whistler.

Comment from duncan cameron
Time: August 5, 2008, 7:41 pm

Very informative Rod. If the Campbell people would use the carbon tax revenue to add to the WCE and build a real transit system it would make sense. As it is using the carbon tax for the $100 social credit stunt, and the income tax cuts, personal and corporate, from where I sit the tax package is not even green, since it likely adds to potential consumption on existing patterns.
That explains why the person who invented the eco-footprint (a prof at UBC) is not happy about the tax package.

Comment from Dave T
Time: August 6, 2008, 8:24 am

Yes, if we raise taxes on goods and services that create carbon emissions and give all the money back, people and firms will spend it. This is true.

But the assumption that everyone will maintain the same patterns of consumption is unjustified; overall there will be less purchasing of carbon-intensive goods and services (because they cost more, relative to other goods and services).

The higher the tax, the more pronounced this shift will be.

The real problem with the BC and Federal schemes is that the proposals is that the level of CO2 taxation is low. This is the result of trying to float a policy that is actually politically acheivable in the next ten years.

Comment from duncan cameron
Time: August 6, 2008, 6:58 pm

There is another problem David T. The global warming issue is not the only environmental problem out there. More consumption of whatever sort, even with a shift due to the tax change, has detrimental effects on the environment.
I agree a higher carbon tax starts to internalize costs that were left out of market calculations and treated as externalities by social science, and that is likely over time to produce positive effects on GHG emissions. But how does the market internalize costs of water depletion, ozone layer problems, air quality, spoiling of land, species reduction, etc., at the same time?
The current fashion among economists is for for micro-economic solutions to macro problems. I suspect a paradigm shift is around the corner.

Comment from Dave T
Time: August 6, 2008, 9:57 pm

Duncan I sure hope you’re right about the paradigm shift coming soon, because currently environmental costs have to be internalized policy instrument by policy instrument. And at our current rate of adopting policy instruments, that is going to take a long, long time. Probably too long.

As for overall levels of consumption, would the carbon tax actually increase it? Significantly? More than higher energy costs decrease it? More than other recent trends, like the decline in our savings rates, low credit costs, and the development of a culture of disposability?

The thing is that as long as we have a market economy, prices are going to pull people and firms towards certain behaviours. If the prices pull them toward greater environmental harm, then getting positive outcomes will be an uphill battle every time. We need comprehensive environmental pricing reform so that the market stops working against the environment.

Comment from Phillip Huggan
Time: August 10, 2008, 8:58 pm

Wow. A CanWest publication being honest about the Conservative environmental “plan”. I’m impressed.
As it mentions, the federal CCS investment is $128 million. The Liberal carbon tax shift takes $16 billion away from carbon emittors. The Conservative infrastructure fund is just over $1 billion/yr.
CCS might not work at all. There is maybe a 1/3 chance it will work temporarily, but outgas sequestered emissions over decades/centuries millenia. Maybe a 1/3 chance it will work as advertised.
The 2nd paragraph summary is wrong: it isn’t $15 billion over 4 years (that was about the spending of P.Martin’s Green Plan), it is about $4,8,12,16=$40 billion over four years.
That’s $40 billion Liberals vs. $5 billion Conservatives, ignoring the utility of the spending. Not even close in the first year let alone the 4th. I’d assume the NDP/Bloc/Green environmental platforms are closer to the wealth transfer of the Liberals than Conservatives.
I’m preparing to account/estimate the social capital of each party’s platform positions; already figured out the optimal level of foreign aid is the income % recent immigrants return to their home countries. But Conservative underinvestment in addressing Global Warming might make a mockery of my rankings.

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