Time to re-ignite talk of a carbon tax; cap-and-trade is a scandal in waiting

I’m in Vancouver today, off to L.A. tomorrow as part of the research effort for my upcoming book on clean energy innovation. Sorry I haven’t posted for a while, but will get back on track when I return to Toronto later this week. I did, however, want to draw attention to my latest Clean Break column in the Toronto Star that calls for serious carbon tax talks in Canada. Yes, yes, I know — controversial, taboo, don’t go there. But we must. I’m not convinced cap-and-trade is the way to go, given the enormous potential and likelihood of abuse. Besides, we’re not anywhere close to implementing a comprehensive cap-and-trade regime in North America. A carbon tax is simpler, more transparent, sends the right signals to consumers and is easier to implement. Most of the folks in industry, government, the financial sector and academia that I talk to privately tell me they favour a carbon tax, but few seem willing to stand up and champion the issue. That’s a shame, because I’m convinced that without this price on carbon — and a meaningful one, I might add — Canada will become less productive over time and will suffer from an innovation deficit. Ultimately, this will harm our global competitiveness while doing nothing to play our part in reducing global CO2 emissions.

And what of the Alberta problem? The feeling from our western cousins is that a federal carbon tax would be a transfer of wealth in disguise, flowing from west to east. But I don’t see why a federally set carbon tax need impose a transfer of wealth. The provinces, charged with collecting this tax, could also be permitted to spend it as they see fit within their own borders. Under the condition, of course, that it be spent on serious carbon-reduction initiatives, and hopefully not just carbon capture and storage. Because such initiatives would be in-province, this would add to economic growth and diversity — it would benefit, not harm Alberta, though I’m under no illusions there will be some transitionary pains and lots of complaining. In any event, it’s doable if we’re willing to talk about it and get creative with how to implement it.

5 thoughts on “Time to re-ignite talk of a carbon tax; cap-and-trade is a scandal in waiting”

  1. What they need to do is start off with a low tax of say 10 cents per tonne of carbon. Then double the rate every year with a two year moratorium every five years. That would allow long term planning and short term action.

  2. Unfortunately a carbon tax would be political suicide for almost anyone that tried to implement it. The only possible way to sell it to the general public is by sending them a cheque to offset the tax. Even then, shortsighted oppositions will make hay by playing to peoples inherent dislike of the word “tax” and will take advantage of some peoples inability to understand the concept of “revenue neutral”.

  3. Bravo! A revenue-neutral carbon tax avoids the evasion and market manipulation of cap and trade while reducing emissions, incentivizing “green” R&D AND returning revenue to families already struggling under the weight of the current economic downturn.

  4. “The Economist” argues much the same point – a carbon tax is transparent, predictable, stable, easy to implement. Economist Jeff Rubin also argues, in his book “Why Your World Is about to get a Whole Lot Smaller”, that a carbon-tax tariff can be imposed on imports from countries without a carbon tax. This cap-and-trade is a flawed mechanism, which will be more difficult for businesses to predict and manage.
    Stephane Dion was defeated not just on this this issue alone. BC premier Gordon Campbell was re-elected after introducing a carbon tax. Yes, any new “tax” will frighten people who are afraid of any change from the status quo, but the status quo is slowly driving toward a cliff, and change is needed. Keep promoting this, Tyler.

  5. A provincially-zoned carbon tax is a great idea – I hadn’t thought of distributing it that way. Much more politically palatable, though the feds would have to have some mechanism of setting the rate across all provinces (which could still get messy).

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