Carbon Taxes Explained

By Aaron Wudrick

Canada’s Ecofiscal Commission released a report on carbon pricing last week along with survey results from polling firm Abacus Data gauging Canadians’ support for fighting climate change. The results were not earth shattering.

Most Canadians believe climate change is real and caused by human activity. Most think governments should take “action” to combat it. And, most of them don’t know much about carbon prices.

The last point might be the most surprising finding.

The survey notes that less than half of Canadians are familiar with the concept of carbon taxes and that this figure hasn’t really changed much in three years. This means the debate is, according to the Ecofiscal Commission, still largely an “elite-level discussion.”

Perhaps more worrying for supporters of carbon taxes is that more Canadians ranked many other issues, including health care, government spending, jobs, cost of living, and tax cuts as higher priorities.

Ironically, for a report and survey that shows many Canadians don’t seem to know about or understand carbon pricing, at no point in the 142-page survey do they ask Canadians about any specific prices.

If you want to know how people feel about prices, give them a price to consider. After all, if someone offers you a new car, your decision would be different if the price is free versus $40,000.

Asking Canadians something as simple as, “Would you be willing to pay $10 more for a tank of gas?” or, “Would you be willing to have the cost of groceries rise by 30 per cent?” would go a long way toward illuminating what kind of “action” Canadians want governments to take.

Of course, carbon-tax proponents deliberately avoid doing this for the same reason they prefer to use the term “carbon pricing” instead of calling it by a far more understandable term: a carbon tax. When you frame it this way, it’s actually very simple to explain.

Carbon taxes try to reduce carbon emissions by making things more expensive. They rely on the law of supply and demand. The more expensive something is, in theory, the less people will buy of it.

Higher gas prices mean people can afford to buy less gas, so they will want to drive less.

The effectiveness will vary since some people, especially in cities, can more easily switch to alternatives like public transit, biking, or walking, whereas people in rural areas don’t have those options. But, the point is that carbon taxes are a deliberate attempt to force lifestyle changes through cost increases.

This is a unique feature for a tax. Most taxes are primarily designed to raise revenue for government. But, carbon taxes are different.

Making things more expensive to change people’s behaviour is not a side effect. It is the main purpose.

From a political standpoint, telling people this is problematic. Indeed, the Abacus survey shows fully 75 per cent of people believe any plan to reduce emissions must not “drive up the cost of living too much.” So, people support “action,” so long as it doesn’t cost too much.

This is a major headache for carbon tax advocates since the smaller the tax, the lower the potential emissions reduction. This is why they want to talk about pricing, but not actual prices.

It’s also why leading carbon tax proponents, such as Environment Minister Catherine McKenna, have been stymied by the most basic questions about the impact of carbon taxes and, instead, fall back on meaningless bromides like, “the economy and the environment go hand in hand.”

Even when carbon-taxers do mention real prices, such as the Trudeau government’s incoming $10 per tonne tax, rising to $50 per tonne by 2022, they fail to mention that this is nowhere near the $300 per tonne that Environment Canada said would ultimately be needed for Canada to hit its own emissions targets.

This is not an honest way to sell people on climate change policy.

Abacus’ Bruce Anderson noted that most Canadians tend to “embrace the centre” and seek “consensus and compromise.” But, that’s precisely the problem with carbon taxes; smaller ones will satisfy no one because they are not big enough to change behaviour.

If anything, they will anger both supporters and opponents of carbon taxes. The former for failing to raise them high enough to actually reduce emissions and the latter for proving right fears that they’re just another tax hike.

Carbon-tax advocates need to go big or go home. They can either admit to Canadians that slashing carbon emissions will be expensive, difficult, and painful, and all the sacrifice could well be for nothing if other countries aren’t doing the same. Or, they should just admit this is nothing more than a plan for filling up government coffers.

Aaron Wudrick is the federal director of the Canadian Taxpayers Federation. The CTF is Canada’s leading non-partisan citizens’ advocacy group fighting for lower taxes, less waste, and accountable government. This column originally appeared in the Financial Post.