Grapevine: Elections
We will have two elections over the next twelve months and the Carbon Tax is front and centre; it consists of two procedural levels:
(1) a tax per unit (litre, cubic metre, tonne) on 22 categories of fossil fuel including various fuel oils, gasoline (17.61 cents per litre), natural gas, and coal. This is the one that politicians keep hammering away at as it is by far the most visible to voters. It is a regressive tax paid at the same rate by everyone irrespective of income but 90% of the revenue from this tax is returned directly to individual Canadians as a rebate fixed by the province you live in. It is estimated that 80% of citizens receive more in the rebate than they pay in tax. This is the inadvertent redistributive effect.
(2) a tax directly on producers as the Output-based Pricing System (OBPS) which sets limits for carbon production for some industries but not all. Any industry producing less receives credits; any industry producing more must buy credits and/or pay a tax. It is a provincial responsibility to set the limits and thus they differ across Canada; some provinces set them by sector and some, like Alberta, set them by individual factory. All the revenue from this tax is returned to the province for investment in climate change remedies.
In 2008 BC was the first province to install a Carbon Tax under the Liberal government of Gordon Campbell—of which John Rustad was a Parliamentary Secretary and later, under Christy Clark, a Minister. Initially it was ‘revenue neutral’ as the legislation implementing it required that any increase in the tax be offset with a reduction in taxation elsewhere. In 2017 the NDP did away with this requirement. In an earlier piece in the Grapevine I said the Carbon Tax was a redistributive one but in fact, although there is inadvertent redistribution, it is really an ‘incentive’ tax in the hope that as the price of fuels rise people will switch to renewables for transportation, heating, etc. In 2018 the Federal Parliament passed the Greenhouse Gas Pollution Pricing Act which created a mandatory ‘backstop’ program setting base levels for both parts of the Carbon Tax and a schedule for its annual rise over time. If provinces did not introduce programs adhering to both the procedural levels set out in the Act, the Federal government would do so at one or both levels Revenue would still return to the province.
So what will happen if both Carbon Tax procedures are eliminated? Most citizens will lose income, not gain. Most polluting corporations (mining, oil and gas, forestry, etc.) will rejoice—for Conservatives the real payoff with the demise of the tax on their favoured constituency, business. It will be a big win for polluting companies and a huge loss for the government. At present all the OBPS taxation revenue is returned to the provinces to be used on carbon limiting procedures. When the OBPS is gone the companies’ profits will go up and the provincial government revenues for climate change policies will go down.
Pierre Poilievre is setting the pace by reducing the whole question to one of his simple-minded triplets, ‘axe the tax’. He claims he would ‘return’ money to Canadian pockets but in reality he would actually be removing it from the majority of citizens’ pockets—even in the unlikely event that retailers actually did drop prices by the full tax amount. Axing the Federal legislation will leave provinces free to do as they wish to levy a carbon tax or not. Eby will get rid of the tax per unit on fuels if the Feds do but he will keep the OBPS even as the NDP has granted many exceptions to it. John Rustad, like Pierre, will get rid of both levels of taxation for his business friends. Both Conservative leaders firmly believe that climate change is not an ‘existential problem’ and the economy should always take precedence—the economy being seen primarily as aid to business. But there is a good chance that you will not see any diminution of prices when industries are relieved of the OBPS as they will probably take advantage of a small windfall profit.
So does the Carbon Tax work? According to Statistica, Canada’s carbon tax revenues of 5.7 billion US dollars in 2023 were second only to France and jointly their revenues outstripped all other jurisdictions together. BC’s estimated Carbon Tax revenues for 2024-25 will be $2.6 billion of which $1 billion will be returned directly to citizens. Canada’s total tax revenue from ALL sources as a percentage of GDP was 18th of 38 OECD nations—hardly overtaxed as 20 major Western nations are taxed at a greater percentage of GDP. According to the World Bank there are 68 direct carbon pricing instruments operating as of June 2022 in 46 national jurisdictions around the world. These comprise 36 carbon tax regimes and 32 emissions trading systems (ETS). All analyses I can find agree that while not the only way to attack climate change, carbon taxes are effective. Recently the Net-Zero Advisory Body1 published a report backing up these analyses; the report states that the Carbon Tax is part of the Canadian government’s six climate change policies already in place and that all are needed to have any hope of making a dent in emissions.
As a CCPA Policynote states: For all of the talk of climate action and leadership—now going back 17 years—very little has actually occurred in BC to move the needle on phasing out fossil fuel consumption or production. With both major political parties seeking to end BC’s carbon tax, neither has stated alternative policies that will get the province on track to meet its GHG reduction targets. The Green Party is the only party taking climate change seriously as an ‘existential’ threat. Unfortunately we are all culpable in making sure they will never form a government to implement climate policies that are existentially necessary for our children’s environmental well-being.
Oakley Rankin
1. https://www.nzab2050.ca/publications/climates-bottom-line-carbon-budgeting-and-canadas-2035-target
