Saturday, September 13, 2008
Column: Bruce Johnstone
The Liberal carbon tax will a) plunge the country into recession, b) undermine national unity, c) make everything more expensive, or d) probably not be any more economically damaging than the Tory or NDP green plan.
If you answered either a), b) or c), then you've probably been listening to Conservative Party Leader Stephen Harper recently.
Just the other day, Harper charged that the Liberal carbon tax would "wreak havoc on the Canada's economy, destroy jobs, weaken business at a time of global uncertainty.''
Moreover, Harper said the carbon tax would centralize power in Ottawa and weaken the federation by dividing Canadians into carbon haves and have-nots.
"By undermining the economy and by recentralizing money and power in Ottawa, it can only undermine the progress we have been making on national unity,'' Harper told a Montreal business audience.
Not to be outdone, Harper supporter and Saskatchewan premier Brad Wall said the carbon tax would increase electricity bills by more than 40 per cent and cause $500 million to leave the province annually.
These are strong charges and, if true, a damning indictment of carbon tax concept as proposed by the Liberals and their leader Stephane Dion.
But what evidence is there to support these apocalyptic predictions?
In Harper's case, we have to take him at his word as a politician and economist. There seems to be no explanation of where Harper's visceral hatred of carbon taxes comes from, other than sheer political partisanship.
For his part, Wall cited "very preliminary analysis'' by the provincial environment department for his projections of the dire consequences of carbon taxes on Saskatchewan.
So what do the real experts say?
Jack Mintz, the Palmer professor of public policy at the University of Calgary, recently compared the two competing systems for reducing carbon emissions -- the Conservatives' regulatory approach and the Liberals' carbon tax.
His conclusion? Both systems have their advantages and disadvantages.
The advantage of the Liberal plan, Mintz says, is that it will price carbon more generally rather than target specific sectors, like the Tory scheme.
The carbon tax will also tax consumption rather than production, and domestic consumption, rather than exports. The tax will apply to all regions of the country, but particularly those with large resource and manufacturing sectors, which are large energy users.
The advantages of the Tory plan is that it is "more directed at reducing carbon'' than the Liberal carbon tax. Mintz says. And the Tory plan is "quite tough on companies to find carbon-reducing technologies," he says.
But, as Mintz points out, the Tory plan is not without its costs. It's just difficult to estimate those costs with precision. "Each plan could substantially affect prices paid by Canadians. Each approach has it merits and demerits," Mintz said
The Canadian Taxpayers Federation has estimated the cost of the Tory plan at 0.5 per cent of GDP or $7 billion to $8 billion a year in economic output in order to meet the government's targets of reducing carbon emissions' "intensity'' by 18 per cent by 2010.
While no fans of carbon taxes, the CTF says the Conservatives' regulatory approach will penalize energy intensive industries twice by forcing them to invest in carbon-reducing technology and then by paying higher energy prices.
"These cost increases could hurt the international competitiveness of some of the biggest companies in Canada,'' the CTF says.
The point here is that neither scheme is perfect nor without its costs. Both put a price on carbon and both will require changes in the way we do business and consume energy.
Other countries, like Sweden, have introduced carbon taxes, at much more onerous levels, and their economies haven't collapsed
For Harper to claim that the carbon tax will destroy the economy, or break up the country, for crying out loud, is taking political rhetoric to a new low, even one noted for defecating puffins.
It smacks of demagoguery and, worse yet, desperation.
- Bruce Johnstone is the Leader-Post's financial editor.
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