Ten truths and no lie

Some straight facts about carbon pricing

Phew – you’d have to be living under a rock to have missed all the recent hype about carbon pricing.  But amid all the chatter, it’s not easy to discern truth.  I suppose that’s because much of the discussion has been politically-driven, not fact driven; and because much of the discussion is happening online on platforms like Facebook, which tend to be terrible places for truth and honesty.

So in the interests of clarity and hopefully enabling more reasoned discussion, here are ten truths (to the best of my knowledge) about carbon pricing.

1. What most call a carbon tax is not actually a ‘tax’; it’s a carbon price, or more accurately a fee-and-dividend system.  ‘Taxes’ are dollars collected by governments and then used to fund services like roads, schools and hospitals.  The carbon price (or fee-and-dividend) is very different: money raised is divided up and rebated back equally to everyone.  And it’s worth noting that no province is penalized to the benefit of another: “All direct proceeds from the federal pricing system are returned to the province or territory where they were collected.”

2. Those who pollute the most will pay the most – a principle I think most Canadians agree with.  For example, those who drive huge and inefficient vehicles; those who live in huge or inefficient homes; those who travel a lot by air; those who burn a lot of fuel in boats and other ‘toys’… all behaviours that need to be discouraged in the battle against climate change.  On the other hand, those who pollute the least will pay the least.  For example, those who walk, bike or take transit; those who drive fuel-efficient vehicles and try to drive as little as possible; those who live in efficient homes; those who generate their own renewable energy… all behaviours that need to be encouraged in the battle against climate change.

3. 80 per cent of Canadians will receive more back by rebate than they pay by fee, according to analysis by Canada’s Parliamentary Budget Officer.  How is that possible?  Because those 80 per cent are essentially being topped up thanks to the other 20 per cent, who pay more fee than they receive back by rebate – and who, coincidentally, are also the wealthiest 20 per cent of our population and thus able to pay without hardship. 

4. Carbon pricing maintains freedom of choice but gives everyone an incentive.  We are blessed to live in a free country that allows us to make our own choices.  However, choices that create more pollution or emissions are clearly detrimental to our society and world.  Carbon pricing gives each of us an incentive to change behaviours and reduce our emissions so we come out further ahead when the rebate check arrives.  Those who don’t wish to change can keep generating all the emissions they want; they’ll just find that society is now asking them to pay for the damage those emissions are doing.

5. Carbon pricing is not a major cause of inflation.  The governor of the Bank of Canada has estimated that carbon pricing is responsible for .15 per cent inflation in Canada – a pretty small impact, considering our inflation rate has been as high as eight per cent in recent years.   An economist at the University of Calgary, factoring all impacts on the food supply chain, including transportation, has concluded that the impact of carbon pricing on food prices is less than one per cent.  If carbon pricing truly were a major cause of inflation, it’s logical that i) inflation rates would not be coming down in Canada (they are); and ii) inflation would not be a problem in countries without a carbon price (it is).

6. Carbon pricing is the cheapest way to reduce emissions because it puts the choice back to us, and we’re very good at being creative and innovative when it’s in our interest.  That’s better – and cheaper – than regulations that tend to be narrow and rigid, and need to be enforced.

7. Economists all over the world agree that carbon pricing is the cheapest, most efficient and best way to reduce emissions: from the prestigious London School of Economics to The Economist magazine to the OECD to the International Monetary Fund to the World Trade Organization to Canada’s EcoFiscal Commission, which last month published an open letter in support of Canada’s current carbon pricing system signed by more than 300 economists from across the country.  The 2018 Nobel Prize for Economics was awarded to William Nordhaus for his work on… carbon pricing!

8. Carbon pricing promotes renewables because every time the cost of fossil fuel energy goes up, the economic case for renewables like wind and solar gets better.

9. Starting small and ramping up slowly makes sense, as it cushions any economic impacts and enables people and businesses to plan ahead – for example, what their next vehicle will be.  Canada’s carbon price started at $20 per tonne of emissions in 2019, and will be rising in an established and predictable way to $170 per tonne in 2030.

10. Doing nothing has an enormous cost.  Here in New Brunswick, a windstorm last December knocked out power for days, wiping out any profit NB Power may have hoped to have for the year; and two torrential downpours of nearly 100 mm in the past month flooded the Town of Sussex and parts of Charlotte County.  As former Quebec Premier Philippe Couillard said a decade ago, “Nobody talks about the cost of not fighting climate change. This cost is passed to citizens too, whether it’s health care, coastal erosion or spectacular weather events. This is hugely expensive for our society.”

It’s true that carbon pricing isn’t a perfect solution – but it’s one of the most important tools in the chest of climate change policy solutions.  Hopefully the points above help make that clear!

Do you have a question not addressed above?  Please let me know, and maybe I can help answer it in a future Green Ideas!