The Green’s carbon tax plan: another gimmick

Chalk up another gimmick for Elizabeth May, with the Green’s carbon tax plan that promises, literally, the world, but falls apart upon examination.

Don’t get me wrong: carbon tax may well be the way to go, because of its ease of administration compared to other schemes. But a major issue is that we have little idea empirically on how large such a tax would have to be in order to have a meaningful impact on behaviour. What’s the price elasticity of carbon? We don’t know, so we need to take claims about effectiveness with a hefty dose of skepticism.

If the response to recent gas price increases is any indication, the 12 cents per litre resulting from the $50 per ton carbon tax May is pushing for will only have a negligible impact on behaviour, and the medium-term proposal is that “if necessary” the carbon tax would rise to $100 per ton by 2020 (assume that is in 2007 dollars, but the document does not say), or 24 cents per litre. The signals thus far in 2007 are at best a mixed bag: prices have more than tripled in recent years, with some claims of increased transit use, but also evidence that Canadians have not exactly stopped buying and driving cars.

Yet, even if the full 24 cents were to come to pass very soon, it would still put Canadian gas at well be low levels in other non-US industrialized countries. In fact, they would put prices in Ontario below current levels in BC, and that difference has made barely a scratch in our massive traffic jams.

So I’m guessing that gas prices would have to be double, if not triple, from current levels before we see some really meaningful changes in behaviour, and all of that revenue would have to be ploughed into public transit with vast service improvements in every major city. Instead, May is calling for the revenue to be used for income and payroll tax cuts (see this post), a triumph of politics over sound policy.

Smart urban planning would also have to be part of the deal, with major investments in affordable housing closer to where people work rather than in the suburbs. As it is right now, the cost of housing plus transportation is roughly equivalent for suburban versus city dwellers. A meaningful carbon tax would put the hurt on those in suburban communities, so we have to figure out how we can offset that while changing the pattern of unsustainable sprawl.

While this plan has major shortcomings and is clearly being oversold, there are some good initiatives in there, such as an industrial strategy that would build electric and hybrid cars. But for the Green Party, which had an opportunity to show what a real plan would look like, they pulled their punches, perhaps because they think they might actually win a seat in the next election by doing so.

Averting Climate Catastrophe: Green Party lays out roadmap to Canada’s low-carbon future

These ideas are decisive and workable.

OTTAWA – Green Party leader Elizabeth May today unveiled the party’s Environment Day gift to Canada – a comprehensive blueprint for a thriving low-carbon economy and a clean, green energy future that will reinstate Canada as a leader in the global campaign to prevent catastrophic climate change.

Ms. May released the Green Party Climate Plan: A New Energy Revolution to Avert Global Catastrophe, in Ottawa today – World Environment Day – with an urgent message for Prime Minister Stephen Harper, Environment Minister John Baird and opposition party leaders:

“Please steal these ideas. They are decisive but workable and they will drive rapid progress towards achieving our Kyoto targets for reducing greenhouse gas emissions and keeping global temperature rise below 2 degrees Celsius. There is no time to lose.”

As the Prime Minister joins leaders of the G-8 industrialized nations in Heiligendamm, Germany – with climate change top of the agenda – Ms. May also urged Mr. Harper to reject the defeatist attitude being promoted by the Bush administration and to reaffirm Canada’s commitment to Kyoto and further medium- and long-term emissions reduction targets.

“This is no time to align ourselves with the laggards of the world,” said Ms. May. “It is a time for vision and ambition. The transition from fossil fuels to renewable energy represents the greatest business opportunity the world has ever seen. The federal government’s dogged refusal to recognize and seize that opportunity is a failure of leadership that puts Canada’s future prosperity in great jeopardy.”

The cornerstone of the Green Party plan is an immediate $50/tonne carbon tax, rising to $100/tonne by 2020 if necessary. Experts agree that a carbon tax is the most efficient and effective way to cut greenhouse gas emissions, but some say it is politically dangerous to enact a carbon tax. (See what experts say in the attached backgrounder.)

A $50 carbon tax adds 12 cents to the cost of a litre of gas at the pump. That revenue will be used to progressively reduce other taxes, including income and payroll taxes, and to provide tax incentives for reducing carbon dioxide (CO2) emissions.

The plan also includes a cap-and-trade CO2 market for Large Final Emitters – the big mining, manufacturing, oil, gas and thermal electricity companies responsible for about half of Canada’s total emissions. Trading of CO2 allocations will be overseen by a non-governmental body.

The Green Party plan also calls for:

  • Rapid development of Canada’s renewable energy sources through tax incentives, research funds and new policies, including carbon conditionality clauses requiring provincial adoption of Advanced Renewables Tariffs.
  • Tax incentives, regulation and funded programs to cut vehicle emissions 30% by 2015 and 85% by 2040, including incentives for the Canadian manufacture of electric and plug-in hybrid electric vehicles.
  • A retrofit of all Canada’s buildings to a high level of energy efficiency by 2025 and zero net energy after 2025 using refundable tax credits, tax-deductible Green Mortgages, 100% Accelerated Capital Cost Allowance, revolving federal loans and changes to Canada’s Building Code.
  • Regulations requiring all appliances to meet Energy Star rating by 2015 with most inefficient appliances and light bulbs phased out by 2010.
  • Adaptation strategies to cope with climatic disruption that is no longer avoidable, including a special task force to prepare area-specific strategies and a Climate Change Adaptation Fund to assist areas hard hit by “natural” disasters linked to global warming.
  • Withdrawal of federal funding for programmes such the Pacific Gateway Programme, that encourage urban sprawl and increase vehicle use.
  • Removal of all subsidies to coal, oil, gas and coalbed methane production, a cap on overall extraction levels of fossil fuels, and phasing out of coal, oil, gas and nuclear electrical generation.
  • Payments to farmers for carbon sequestration in soils within a domestic carbon market.
  • A carbon tax or carbon rebate for forest companies to reflect either the net loss of carbon storage or the net gain of carbon sinks from their lands.
  • A methane tax on all landfills and mandatory methane capture after 2015.
  • Global verification and certification standards for carbon credits and the establishment of a Canadian Carbon Bank along with a federal framework for local and provincial carbon banks to encourage the purchase of local offsets.
  • Expansion of the Kyoto Protocol beyond 2012 to include international aviation and shipping and commitments to ramp up solar energy, electric vehicles and other low carbon technologies.

Supporting Documents:

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