What better way to start this blogging experiment than on the topic of Alberta’s new carbon tax. Here’s the link to the current government web-site that set’s out some of the key points on this tax: https://www.alberta.ca/climate-carbon-pricing.aspx I’ll be quoting from and referring to this website extensively in this blog.
My approach to this topic is to think of some key questions: What is the problem we are trying to resolve? What is the proposed solution? What is the cost of the solution? What evidence is there that the solution will work as proposed or better? What alternatives could produce the same or better results?
The answer to the first question is Climate Change. This topic alone will likely need a few separate posts to really explore it well. Because I’d like to look at the proposed solution in more detail in this post I’ll quickly make some points on the problem.
The particular climate change we are talking about, as the problem to be resolved by the carbon tax, is anthropomorphic or man made climate change which has as its main characteristic the release of carbon dioxide into our atmosphere primarily through the combustion of fossil based fuels (natural gas, gas, diesel). Again, leaving aside the various facets and arguments of this problem for another day, the stated purpose of the carbon tax is:
“Alberta’s carbon levy provides a financial incentive for families, businesses and communities to lower their emissions. Economists agree that a price on carbon is the most cost-effective way to reduce emissions. It drives innovation and changes behavior by encouraging individuals and businesses to become more energy efficient and shift away from higher emission fuels.”
So the rationale is straight forward, based on the view of economists (none cited) the best way to reduce carbon emissions is to incentivise a change in consumer behaviour by way of a tax. Again I see another post examining the evidence for this contention and looking for examples in other jurisdictions. (Wow I see how this blogging thing can spiral out of control).
At first Alberta’s carbon tax looks like a consumption tax. Consume this product and you will be subject to a tax, the more you consume the more you pay as such you are incentivised to consider using alternative cheaper products. This seems to be born out on the website which states:
“All Albertans who take steps to reduce their emissions – by turning down the heat when no one is home, installing smart thermostats, choosing more fuel efficient cars, using public transit, walking, biking, or taking advantage of coming energy efficiency programs – can reduce the cost of the carbon levy.”
On further examination it becomes clear that this is not a pure consumption tax and it does not, in fact require all Albertans to take steps to reduce their emissions.
Again from the government website. “Carbon rebates will offset costs associated with the levy to help low-and middle-income households adjust. To help businesses, the small business tax rate is being cut by one third.” The rebates are income based, so what starts of as a consumption tax becomes some sort of a hybrid – the full impact of which is determined by a consideration of one’s income. Of course middle to high income households under this type of scheme always end up paying more (because they fail qualify for any rebates).
The rebates are so far reaching that the government confidently proclaims “Six of 10 Alberta households will receive a rebate that covers the average cost of the carbon levy.”
Let’s remember that the stated rationale of the carbon tax is to incentivise changes in behaviour so that all Albertans reduce their carbon emissions. And yet in application the government are exempting 60% of households based on their income from this incentive, leaving the pain and the change to the remaining 40%.
Surely if we are really concerned with the problem of man made climate change and want to show leadership in this area we would introduce a flat consumption tax with no exceptions – if you use you pay, so reduce your use type of approach. In failing to do this the government has simply introduced another tax on middle to high income households.
Low to middle income households will not feel enough incentive to change and likely middle to high income households will off set the cost by less consumer spending (bad for the economy), less savings (bad for the economy) and fewer investments (oh, also bad for the economy).
For me this is a serious flaw. I don’t agree that we need a carbon tax to fight climate change. But if we are going to have a tax on carbon it should be a pure consumption tax applied at a flat rate to all consumers so that all consumers are incentivised to change.
The Reasonable Conservative 