Jack M. Mintz: Canada has created a jungle of costly carbon policies

In the name of the environment, governments across Canada are effectively blocking pipeline infrastructure, coal production, fracking, LNG plants and more, through endless process requirements or outright bans. Much of these regulatory restrictions limit manufacture of natural resources with significant regional income losses specifically for British Columbia, Alberta, Saskatchewan and 2 Atlantic provinces.

But why stop at reining in upstream greenhouse gas emissions when there are plenty of downstream emitters we can control, too? Here are a few policies that all those politicians pushing for limits to GHG emissions might consider.

First, federal and provincial governments should no longer approve gas-guzzling car plants. Or at the very least, we must quit subsidizing them. Sorry Ontario, but all those GMC 4x4s, Lincolns and Dodge Chargers you produce are compromising Canada’s environmental objectives.

Second, we should stop all subsidies to existing fuel-powered aerospace companies. Quebec’s Bombardier isn’t much of a national champion whether it makes products that pump the climate full of emissions, right?

Third, farm and heavy-equipment machinery using diesel or gasoline should not be produced in Canada. It’s difficult to believe we not just continue to allow this, but we even encourage carbon-emitting manufacturers with the subsidy of accelerated depreciation underneath the corporate tax system. My goodness. Where are the demonstrations?

Finally, all petroleum refining should be stopped and all sorts of petrochemical industries turn off the same way we have been ordering coal power plants to close.

Bombardier – makes products that pump the climate full of emissions.

Now you may think that i am smoking something not-yet legalized. And it’s correct that these are irrational policies. Stopping manufacturing in Canada around the pretext of reducing downstream emissions is a nice bad idea that achieves nothing: Instead of manufacturing taking place in Canada, it’ll shift elsewhere, with the resulting products simply being imported into Canada rather than being produced here. This is exactly what happens when a country tries to act alone. 

So why have we not taken exactly the same view for that production of fossil fuels? When we don’t allow an oil pipeline because of upstream GHG emissions, we will simply import oil using their company countries instead. We’ll also provide fewer exports, as our customers import their oil from elsewhere. Worldwide GHG emissions will not be meaningfully different, but Canadians will be hurt with lower incomes and more expensive energy-intensive products.

That is why the important thing to our GHG policy ought to be ensuring we stay consistent with what other energy-producing countries do. The Trudeau government is on course in the try to harmonize our environmental policies with the ones from the United States.

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There’s no point in Canada investing in a high carbon tax if the major emitting countries responsible for three-quarters of worldwide GHG emissions – China, U.S., India, the EU countries, and Japan – tax lower at, say, $20 a tonne. Our stricter policies is a significant economic cost paid for through lost jobs and investment, while achieving no global environmental objectives.

This gets to the issue of carbon pricing, the topic of last week’s federal-provincial ministerial conference. The value of uniform carbon tax or cap-and-trade systems is that emissions could be priced generally. In principle, which includes both upstream and downstream emissions, with both production and imports taxed on emissions. Consumers therefore have a hit through higher prices on fuel, heating and electricity, in addition to transported goods.

The benefit of a uniform carbon price over other kinds of climate policies is that the marketplace is best suited to work through the best methods for curbing emissions. It’s also broad-based, applying to all emissions, instead of policies that use regulations and renewable subsidies that are selective and, invariably, far more costly. That’s the theory, anyway. But it only works if international co-operation creates a similar carbon price.

So far it hasn’t. What we should see are non-uniform carbon prices all over the world. The current EU cap-and-trade price is barely over five euros ($7.00). Carbon taxes, one of the few non-European countries that have adopted them, are generally below $30 per tonne. And even though carbon taxes are higher in Denmark, Norway, Sweden and Switzerland, those countries provide large exemptions for many industries, which wind up taxed hardly any.

But the greatest “implicit prices” of carbon control are found not in taxes, but in the price to consumers and also the economy that comes from regulations phasing out coal, subsidizing solar, and even banning Keystone XL. Actually, Canada is far from having a climate policy that is remotely as efficient like a basic carbon tax: Federal and provincial policy-makers are eagerly introducing carbon taxes and cap-and-trade systems, but aren’t willing to undo previous regulations and subsidies that impose much higher implicit carbon prices. They’re still adding more.

So when Brad Wall argues that the carbon tax is simply a revenue grab when it’s not returned to taxpayers the form of income and purchasers tax cuts, he has a point. Canada’s carbon tax minute rates are relatively low (B.C.’s $30 per tonne may be the highest) and do little compared to drastic regulations, like phasing out coal. Patrick Brown, the new kid on the market Ontario PC leader, is now also backing a carbon tax – however i suspect he too is happy to keep his province’s jungle of numerous regulatory and subsidy policies.

Economists who argue for uniform carbon taxes to curb both upstream and downstream emissions are neglecting to recognize that governments prefer the hodge-podge of implicit carbon prices, often for political reasons. Maybe, that should be expected. Central planners like to control an economy because they think fit.

Jack M. Mintz may be the President’s Fellow at the University of Calgary’s School of Public Policy and scholar-in-residence at Columbia School.