Stop this Carbon Tax BS Already!


It is March 31st today as I start writing this. I still have a lot of reading to do before I finish it. I fearlessly predict that before I finish this, April 1st will have come and gone and we will all have survived the increase in the carbon tax which will add 3 or 4 cents to the price of a litre of gasoline. When you dig into the reality of the carbon tax, it’s quite astonishing how much ink this is getting, and how much the discussion fails to come to grips with reality. 

I think that Canadians are being denied a sensible and logical discussion about carbon pricing. More importantly, they are being denied an honest discussion. Does Pierre Polievere really believe that the carbon tax increase will dramatically affect inflation? If so he’s an idiot. Does he really not understand that the carbon tax is being rebated and that it doesn’t represent a net loss, especially to the poorest families who are likely to get more in rebates than they remit in carbon taxes? No, I’m sure he understands all that. But what he also understands is that by creating a single-issue sound bite (“axe the tax”) he has captured the public interest and is likely to win the next election. There’s apparently no rule that says he needs to be honest about it.

Doug Ford sees that national picture, and asks “what can it do for me?” In response, he drops the Ontario gas tax, to “make it easier for Ontario families”. In doing that, he deliberately sabotages the Federal government strategy to try to control emissions. I’m sure that Ford is not the sharpest knife in the drawer, but I’m sure he understands that while he is trying to buy your vote with a news-bite about gas tax reduction, he’s also undercutting climate control efforts.

Danielle Smith, Scott Moe and Web Kinew are all jumping on the anti-carbon tax bandwagon. I saw NB Premier Blaine Higgs being interviewed this morning and he said, like so many of the others, that he would be implementing a “grown in NB” program that would keep the cost of emissions controls “off the backs of families” in these difficult times. 

Polievere and Ford and Saskatchewan’s Moe and Alberta’s Danielle Smith are guilty of political opportunism in attacking the carbon tax without clearly and honestly articulating what’s wrong with it and what we should do instead. Justin Trudeau is guilty of failed leadership in not building a national consensus on how to tackle climate change. And Jagmeet Singh has gone from wanting to quadruple the carbon tax to wanting to remove GST from all home heating, which means that he has no real policy on carbon pricing but is simply seeking the best horse to ride.

So, let me put some of my own context and interpretation on the Carbon tax discussion. 

First of all, the federal carbon tax program is an odd duck. When the carbon tax was announced, I was annoyed at the rebate concept. “Whatever is the point,” I asked, “of taking money from my pocket (through an administrative process that is going to cost taxpayer money to implement), and then putting it back in my pocket (through another administrative process that is going to cost taxpayers money to implement)”? Calling this the carbon tax is a misnomer. It really isn’t a tax at all. A tax is when you take money from the populace to pay for goods and services, and that isn’t happening here. 

The government is not trying to raise revenues with the carbon tax. The government is simply trying to influence the choices we make as consumers. If we buy gasoline they take some money from us and then they give it back and they say “this time, try to buy something else. Like food maybe”. For the person who doesn’t drive much and uses energy efficient home heating and air conditioning systems, the scheme is actually rewarding. I think it’s bizarre that so many opposition politicians choose to fight to the death to defend their constituents from a tax that doesn’t take any money from their pockets. This is a case where reality is irrelevant and perception is everything.

The other major plank in the government’s climate action program is the emissions cap imposed on large industrial emitters. While the carbon tax, which isn’t really costing us much, is getting all the ink, the industrial emissions cap is actually imposing some price increases on manufactured products in Canada.

Is it true that the carbon tax is not really costing the individual anything? The carbon tax is now at $80 per ton after the horrific price increase (sarcasm) we’ve just experienced. Google tells me that the average vehicle produces just a little less than 5 tons per year, so the carbon tax requires you to pay about $400 for that. If you’re a two car family and you’re both driving to work, the family will pay about $800 per year. In Ontario, the quarterly rebates for a couple are $840 for a childless couple, and $1120 for a family of four.  So broadly speaking the carbon tax looks like it’s revenue neutral.

It may not be exactly neutral at the individual level. If you’re somewhere near the centre of the bell curve for energy consumption, it’s a saw-off. People at one end of the curve are losing a little money, while people at the other end are saving some. Is that fair? Yes, it is. Remember that the intent is to force a change in energy consumption habits, and if the cost of gasoline is starting to bite, you have the option of looking for ways to drive less, or use a less gas-guzzling vehicle. 

What about inflation? Is Pierre Polievre correct in saying that carbon pricing, both industrial and commercial, is inflationary? The answer is a heavily qualified and somewhat ambiguous yes. Yes, since both the cap and trade system and the direct imposition of an emissions levy raise the prices of products, there is an inherently inflationary impact. But no, it’s not a very significant contributor to inflation.

 Tiff Macklem, the Governor of the Bank of Canada, reported in September 2023 that the April increase in carbon pricing would add 0.15% to annual inflation. Macklem was immediately assailed for a lazy analysis because he accounted only for the direct impacts on gasoline, heating oil and natural gas pricing. There are, of course, indirect impacts (multiplier effects) coming into play. However, Trevor Tombe, a University of Calgary economist, responded to those criticisms by calculating inflation with indirect costs factored in and reported that the inflationary impact was approximately 0.2%. Jason Markusoff, in an article posted on CBC’s website, reported “It’s perfectly correct for opponents of the carbon tax to point out that eliminating it would drop prices,” the economist says.

“It’s equally correct for supporters of it to note that it’s not a driver of inflation.”

Tombe’s conclusion is supported by a study on SUERF – The European Money and Finance Forum. In an article entitled “How Climate Protection Adds to Inflation” it reports “This results in an increase in consumer prices of about 5% for the entire period; per year this means an inflation rate that is higher by about 1/2 percentage point on average.” 

So if carbon pricing isn’t the major driver of inflation, what is? Specific to the Canadian situation, Forbes Magazine offered this explanation: “There were many factors that contributed to the run-up in inflation: global supply chain issues pushed prices higher, Russia’s invasion of Ukraine drove up the prices of energy (and the price at the pumps) as well as food costs, and pent-up demand after many lockdowns caused service price inflation to spike to 5%. While global inflationary pressures have eased, Canada is still grappling with a constrained housing supply, high rents and high mortgage interest rates. Shelter inflation remains one of the most pervasive upward pressures on inflation.” And their outlook for inflation in Canada? “Once the BoC feels confident that inflation is under control (as changes to the overnight rate take time to start working), the Bank can start cutting interest rates. This is widely expected to start in Q2 or Q3 of 2024 (emphasis added).” 

So, you can challenge the government on how well they’re doing combatting inflation, but you shouldn’t base that criticism on a minor contributing factor like the carbon pricing impacts.

Are carbon pricing policies effective? Are they doing the job? Recently a large group of economists and climate action organizations authored a letter defending carbon pricing policies and implicitly criticizing the climate policy attacks by one Pierre Polievre. Also, a detailed analysis was recently published by the Canadian Climate Institute. That analysis tried to estimate the impact of various climate action policies including this list:

  1. Large emitting trader systems
  2. Fuel charge
  3. Oil and gas emissions cap
  4. 75 per cent methane regulation
  5. Waste methane capture
  6. Clean Fuel Regulations
  7. Investment tax credits
  8. Zero emission vehicle standards

The report estimates that by 2030, the whole basket of policies will have brought about a reduction of 33% in greenhouse gas emissions compared to the theoretical parallel universe in which these policies had not been enacted. Furthermore, it identifies that the two biggest contributors to this reduction are the large emitters cap and trade system and the carbon tax. It would be worthwhile discussing whether that’s enough, and what more we can do to decrease emissions, but we don’t seem to be talking about that.

            So, who is the Canadian Climate Institute? Are they a bunch of tree-hugging environmental alarmists? Are they paid apologists for the government? Well, they do in fact get significant funding from the Canadian government. However, they are also supported by private industry donors, including the Ivey Foundation, Scotiabank, Loblaw Companies Limited, QuadReal Property Group, and the Trottier Family Foundation. Their Board of Directors has 16 people pictured on their web-site. The Board Chair has a PhD from Stanford University and was at one time the Special Adviser to the Secretary General of the OECD. The next guy has a Master’s Degree in Atmospheric Science. Another one was formerly Canada’s High Commissioner to the UK. I stopped looking at them then. I concluded that these are serious people with a track record of achievement. They tell me that these policies are working, and I am going to accept that as a truth.

            What? Carbon pricing policies are effective in reducing emissions? Really? An opinion poll in November 2023 tells us that only 21% of the country sees it that way. 56% of Canadians either believe that carbon pricing is ineffective, or they just don’t know and another 23% believe that it has only some limited effectiveness. That’s sad, and it speaks directly to the seriously flawed discussion we’re having in Canada about climate action policies. This is Trump politics in Canada. Tell the big lie and repeat it often enough, and it becomes the accepted alternative to reality.

            Do we really need to have an aggressive climate action program in Cnada? How is Canada doing compared to the rest of the world? I found some fascinating data in Our World in Data. In 2000, Canada had no emssions control regulations at all. At that point, Sweden had 70% of their emissions sources subject to regulation.  Denmark, Finland and Norway weren’t far behind. By 2010, we were up to 1.8%. As of 2021, the last year for which data are available, we were up to 51.5%. In the big picture, we are catching up to the world leaders and we’re ahead of many countries, since many countries haven’t enacted any kind of climate control policies at all. But several other countries, even including poor embattled Ukraine, have more sweeping climate control policies than ours.

            Canada’s share of global emissions has decreased from 1.8% in 2005 to 1.5% in 2020. But despite that improvement, Canadians rank among the world’s worst polluters on a per capita basis. One organization says we’re in 11th place, another says we’re in 7th. It doesn’t matter which is right – both answers are problematic. We know that Canada has some specific problems. We live in a cold climate, so home heating is important. We are thinly scattered across a huge area in this country, so transportation costs are high. We’d like to further electrify the country, but we need a vastly expanded electricity grid to get there. But those reasons, those excuses, really don’t matter. If you believe in the need to regain control of the climate, then yes, we need to have an aggressive climate action program.

            Is the climate action program too aggressive? Well, not if you look at the price of gasoline at the pump. March 2024 data shows that Canadians are spending about $1.22 per litre. (All prices have been converted to US dollars). That’s 33% more than the US which has no recognized carbon pricing policy. But, it’s only about 60% of the price in Europe, where gas runs from $1.85 to $2.31 per litre and appears to average about $2/litre (US). My conclusion is that there’s still room for us to get more aggressive in gas pricing to attempt to alter our driving habits and reduce our greenhouse gas emissions.

            So, we need a climate action program, but we shouldn’t have to pay for it, right? The official Conservative Party of Canada policy on Climate Change (produced under Erin O’Toole’s leadership) says “We will fight climate change and protect the environment, but we won’t do it on the backs of working Canadians or by hurting the economy.” Doug Ford, just this past week wrote to Justin Trudeau (in a letter that must have been accidentally leaked to the press) saying “Ontario Premier Doug Ford wrote, “While we all have a role in protecting the environment, it cannot be done on the backs of hardworking people.” Franco Terrazzano, Federal Director of the Canadian Taxpayer’s Federation, a conservative action group says “Poilievre is right to fight carbon taxes because Canadians should not be punished for fueling our cars and heating our homes.” What appalling bullshit!  Who do these people think will pay? The Tooth Fairy? 

I said previously that the carbon tax by itself isn’t inherently a significant contributor to inflation.  But there’s no doubt that the whole basket of climate control measures imposes a cost on everybody. Clean fuel regulations increase the cost of fuel. Waste methane capture isn’t free and someone has to pay. And especially, the industrial emissions cap raises the cost of products. And since there’s nobody here but us chickens, I guess we’re going to pay.

And by the way, we are going to pay one way or another. The Canadian Climate Institute estimates that by 2025, the cost of climate change losses (wildfires, flooding, hurricanes and the like) will be approximately $25 billion. Queens University’s Institute for Sustainable Finance estimates that a failure to control warming below 2 degrees will cost Canada $2.7 trillion (yes trillion with a T) by the end of this century. So, gang, we can ante up and fund a climate control program or we can sit back and fund a climate catastrophe recovery program. There’s no such thing as a free ride, and it’s irresponsible of politicians to pretend that there is.

            Here’s what I’d like to see. I’d like to see a Federal Government committed to building a national consensus on how to combat climate change. I’d like to hear a reasoned and intelligent debate about how aggressive our climate targets need to be and how we should try to achieve those targets. I’d like to have an honest  data-driven discussion about the economic impact of climate recovery programs. Are we tracking and reporting how much Canada spends each year on wildfire control? On flood management? On hurricane recoveries? We need to be doing that not just for government interventions, but for insurance industry costs etc, because those costs all eventually come back to the homeowner, don’t they?

            It’s time to drop the current totally pointless rhetoric and get back to tackling the real problem of building a cohesive national program for climate change management.  

            As always, I invite your comments.

            Dennis


11 responses to “Stop this Carbon Tax BS Already!”

  1. Very thorough (another way to say long wind). Agree totally.
    In the 90’s, nuclear waste within Ontario hydro tried everything to get stations to reduce waste volumes to no avail. Once OPG started charging Bruce Power for thier waste, it was remarkable how much they reduced. Although nuclear waste also wanted to charge Pickering and Darlington in similar fashion, station management thought it was waste (pun) of time. Waste volumes at OPG remained unchanged. When you hit people’s pockets, their behaviour changes. That is what we need to address climate change. It is a no brainer.

    • Thanks for the comment Harland. It really bothers me that the discussion is not the necessary discussion of climate change, but instead is a discussion of cost-of-living, and inflation, which are not really an issue of the tax they’re fighting. It’s all cynical, hypocritical, political opportunism.
      And yes, the tactic to change behaviours by increasing cost is simple economics.

  2. Your comments are distressingly on point. It is very annoying when you are right. Most societies can’t see past the end of their nose so that myopia is the constant affliction of self-interest. And politicians shamelessly exploit that.
    One other point about why Canada ranks so low in the global rankings may relate to climate and relative affluence. We are rich enough to pay to keep warm in winter and cool off in summer and that energy expenditure piles onto to our geography/population imbalance.
    What was it that Eliot wrote: “This is the way the world will end./ This is the way the world will end. / This is the way the world will end. / Not with a bang but a whimper.” Another reason to not want to be immortal.

    • As always, Ed, I thank you for your comment. This was a funny article to write. I started out trying to understand and to explain the complexity of the carbon tax and the bigger climate change picture. It took me a while to realize that the real story here is the very cynical lack of reasoned discourse.

  3. I concur with Harland but I question general conclusions. The world would be boring if we all agreed! ;o)

    Governments should make sound investments to help society shift away from fossil fuels. Investing in battery plants, expand nuclear energy, and contribute to research towards practical solutions. The carbon tax is neither, and is right up there as being as effective as tax breaks to those who can already afford to drive a Tesla.

    People have short memories. In 2011, when the price of oil was US $140 a bbl, petrol hit a “crazy CDN $1.20 a liter” The price of oil has actually declined by 40% since then, and yet the price of petrol is up by 30%.

    I don’t think you should rely on google for calculations to draw conclusions. I can guaranty you political parties have not or they would be torn apart. I did my own calculation. I pay more in carbon tax than I get back and I drive way less than I ever did (essentially up town for squash, hockey and groceries with the occasional trip to Toronto). I do not heat my house with natural gas like many Canadians. How can anyone who drives let alone heats their house with natural gas not come out behind? Your statement some benefit and others do not is misleading, so is the thinking it changes behavior. I did not factor in propane, boats, leaf blowers, or indirect costs such as increases in transportation that impacts almost every single product I buy, and I am still behind, and it is not impacting my behavior. It is very easy to argue it is a tax (why would they be dumb enough to call it a tax if it wasn’t?), it does not significantly change behavior, and it also incurs costs to implement (and eventually remove).
    The solution is not easy, so I don’t have the solution. Government could be less political (ha) and less myopic, and could have greatly combated climate change and benefitted the country by allowing and encouraging exports of natural gas, which is immensely cleaner than the coal the majority of the world relies on. Take the taxes the country would earn on that, and put it to research or use to subsidize alternatives such as clean energy. This is not a long term solution, but it would have immensely and more significantly contributed towards reducing global climate change in the near term, which is drastically needed. This tax does not. The average Canadian is suffering from this tax and it does little to change their behavior.

    • Thanks for the comments Brian. There’s a lot to unpack here, so let me give it a try.

      I agree with an understated aspect of your comment, which is that there is a lot more to climate change strategy than just the consumer “carbon tax”, and the industrial carbon emissions limits. Electrification, expansion of the country’s electricity grid, significant investment in new clean nuclear power, Hydrogen powered EV (HEV) initiatives, HEV infrastructure, regulations on control of other greenhouse gases (Methane for example) – these things are all part of the whole climate control picture. I have dealt with some of them already, but not with a holistic view of the whole climate change picture.

      I think I’m a fan of the notion to increase our exports of LNG, but I confess I haven’t really run down the pro’s and con’s enough to have reached a conclusion on this issue. LNG would help sideline use of coal in some parts of the world and that would be a very good thing. It would also ease energy pressures in Europe and help them reduce oil imports from Russia and that would greatly benefit Ukraine. I think the government is shy about getting on board with that notion because the mining and transportation of natural gas generates its own greenhouse gas emissions. That gives rise to two questions. First, is large scale exporting of LNG truly a net reduction in greenhouse gas emissions? We just need some facts and figures to understand that technical question. And second, if increased LNG exports gives rise to an increase in Canada’s emissions, even if it leads to a net reduction in global emissions, will Canada get any credit for that on the world stage? I’m guessing that the second question, the political question, is paramount in Canadian climate change policy now. That may sound silly, but it is an important question. If we give ourselves a bigger challenge in reaching our greenhouse gas targets, that will also have an impact on cost of living in Canada. And politically, Canada is still regarded as a polluter because of our high per capita emissions rating.

      To that point I think we’re mostly in agreement. Now let me tackle some of your other assertions.

      “why would they be dumb enough to call it a tax if it wasn’t?” In fact, in the enabling legislation, this thing was never referred to as a tax. It was referred to as a price on pollution, and the “fuel charge”. It has been opposition parties, provincial governments and journalists who have labelled it as the carbon tax. I would say that the federal government has been forced to go along with that because it has become the generally accepted labelling by now.

      “I did my own calculation…. How can anyone who drives let alone heats their house with natural gas not come out behind? …. I am still behind, and it is not impacting my behavior… it does not significantly change behavior.” Here you are guilty of generalizing from the particular. Your behaviors, your personal cost challenges etc may not be reflective of the general picture. I can tell you that I have twenty articles (from “Google”) and I have not seen any article that seriously contends that the fuel charge is not revenue neutral. I don’t think even the Conservative Party contends that it’s not neutral. Their official policy, issued under the Erin O’Toole regime complains not that the government is not returning carbon tax revenue, but that it might choose to do so in some scary future, saying “Carbon pricing should not result in Canadians sending billions of dollars of new tax revenue to the government – revenue which it will be increasingly tempted to spend ” (Emphasis added).

      You said that the average Canadian is suffering from this tax. No they’re not. There are no facts to support that assertion. I’m afraid you’ve drunk the Conservative party Kool-Aid my friend.

      By the way, I think it might be better if the government didn’t give the fuel charge back which would lead to some “suffering”. It would make it a more powerful incentive to change behaviours. One of the points I made in my original article is that there is a cost to be paid for recovering control of climate, and it is unrealistic to assume that we can or should duck that cost.

      As for behaviours, you’re convincing me that you’re simply too pig-headed to adjust! (just kidding). In 2022, the canadianautodealer.ca website published an article on driving habits and it had corrobating evidence from two independent surveys that price changes habit. “In a Leger poll done in March of this year, 54 per cent of Canadians said they were driving less because of the higher prices. Another 15 per cent said they were planning to adjust how much they drive in the near future.
      An American Automobile Association (AAA) poll done in the same month mirrored those results. 59 per cent of US motorists said they would “make changes to their driving habits or lifestyle if the cost of gas rose to $4 per gallon” — a benchmark that has already been smashed in the wake of Russia’s attack on Ukraine.”

      That article made the interesting point that “consumers are less responsive to gasoline prices when price volatility is high.” So the 3 or 4 cent change last week won’t, in the short term change driving habits. But there is evidence that the slow relentless increase in fuel price, from zero in 2018 to $80 per ton in 2024 to $170 per ton in 2030 is having effect, and will have more effects on emissions. Ourworldindata.org tells us that Canada’s per capita emissions in 2000 were 18.2 tons. In 2018 they were 15.6 tons. In 2022 they were 14.2 tons. Admittedly there’s a lot more involved there than just the carbon tax – like a pandemic, for example. But the full basket of climate control efforts in Canada have reduced emissions by 22%, so behaviours are clearly changing. (Carbon pricing started in Alberta in 2003, Quebec in 2006, and BC in 2008).

      Bottom line – I stand by my information supported by the research I’ve done, and I stand by my conclusions that we should be having a climate change discussion not a cost-of-living discussion.

  4. Just a few comments (and adding that I agree with bulk of your observations):

    I take note of your various comments on the carbon tax reducing fuel use but question the actual reliability of the polls, etc. supporting this – I believe fuel use is highly inelastic and hence brings into question the overall effectiveness of a carbon tax.

    You state that “(I)t may not be exactly neutral at the individual level”, which may be understating the reality of the situation. In particular, I have some sympathy for the farm lobby’s concerns that the negative impact of the carbon on farmers is disproportionately high (and this does tie into the cost of living aspect of the debate).

    The federal government didn’t help its credibility when it instituted its 3 year hiatus of the tax on heating oil, which appears to be a politically driven decision to bolster its support in the Maritimes.

    • As always, Peter, thank you for the comment.
      With regard to your comment on the elasticity of fuel use, I think I kind of addressed that in the article. There was an opinion expressed that fuel use was unresponsive to short term price variation, but more likely to respond to sustain price pressure. I think that makes sense. The OPEC oil crisis in 1973 changed the nature of the car industry in North America. Fuel-sensible imports got a foot in the door, and the big land yachts from Detroit became a vanishing breed.
      I agree with you that elevating the cost of fuel for farmers is bound to have an inflationary impact on the price of food.
      The fuel oil carve-out was a great example of terrible communications. It wasn’t a horrible idea, but it was very badly presented.

  5. Totally agree with you Dennis.Climate change is a destiny issue and the Trump like lies by our politicians are distorting reality.I find it very hypocritical that the Ford government on one hand accepts all the funding handouts (ie new auto plants, battery plants and associated supply chain spin offs)but has joined in on the “Axe the tax”bullshit that Pollieve has been spreading across the country.
    I enjoyed reading your article and will be reading some more as time goes on.
    Thanks for your sharing your viewpoints!

    • Thanks for the comment Bill. The Ford government sucking up climate change industry while disparaging climate change policy is about par for the course. It’s an interesting example of how crises always give rise to opportunity though, isn’t it?

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