Why a carbon tax?

This article was first published in the Skaha Matters Newsletter.

No one likes the word “tax”, and governments at the provincial and federal level find it much easier to pass legislation that looks like a give-away or reward (such as the electric vehicle rebate program) or targets activities no one likes (like burning tires).

But recently a statement was released by a think-tank from McGill University. This think-tank has made the strongest (and most succinct) statement of support for the carbon tax: “This is the smartest way to get serious results”. The think-tank, called Ecofiscal, isn’t related to the Green Party and isn’t made up of biologists, weather experts, or people who love animals. It’s made up of economists -- people who worry about job losses and the prime lending rate. Ecofiscal’s twelve commissioners include Richard Lipsey and Nancy Olewiler (Department of Economics, Simon Fraser, School of Public Policy, Simon Fraser University) as well as professors from McGill University, University of Ottawa, University of Calgary, and Queens University. A similar appeal was made in the New York Times, signed by more than 3000 US economists.

There are other suggestions for addressing climate change: These fall under the headings of: credits/subsidies, command/penalty or tradable pollution permits. Why is a carbon tax better than other options? Here are the reasons:

Climate change is the result of “market failure”. At each and every turn our choices result in more and more pollution. At the grocery store, you can choose between a local apple, and a mango from Ecuador, at similar prices. People prefer Ford F-Series pickups over electric cars or Smartcars (and the effect is still there after you exclude people who actually have a farm, or require a pickup for work). A carbon tax puts the burden from that long trip from Ecuador back where it belongs, on the mango at the grocery store.

Command-penalty carbon control, where legislature determines how much carbon each industry should emit and fines companies for exceeding it, should really be called “whack-a-mole”. Companies, pressured by short term gains, come up with creative ways to move carbon emission from illegal places to legal places. Legislation is a slow moving process and cannot possibly keep up with nimble capitalist companies.

In any democracy, lobbying is going to introduce holes in government efforts to fight global warming. While you can write holes into a carbon tax (farmers are often exempt), it is harder to hide them. When a carbon tax is passed, economists (or anyone who does math) can say “This legislation is weakened by 23% due to exemptions for the concrete industry”.


Articles on Teaspoon Energy by Kristy Dyer is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License You can reprint it for free, as-is.