Monday, June 16, 2008

Do we still need a Carbon Tax?

The idea of the Carbon Tax is to increase the cost of fossil fuels - or at least the burning of fossil fuels - in order to discourage their use. This is a good idea for a number reasons regardless of your stance on anthropogenic global warming. The contribution of fossil fuels to pollution, terrorism, the Bush Administration and all sorts of other evils is well established.

My question is in regards to how much of a carbon tax were we planning on imposing. This idea had its genesis when a barrel of oil was somewhere in the $20 range. Oil just bounced off $140 per barrel. Were we planning on establishing a tax that would make oil 600% more expensive? I find that very difficult to believe, but I never did see any hard numbers from the Carbon Tax people stating where they'd be placing the tax and how much it would have to be.

My impression is that even with a complete shift from corporate and personal income taxes all the way over to a carbon tax, the effective cost of oil would not be more than the current price.

And is the current price enough to change our use of fossil fuels? Just barely.

And does it make sense to still support a carbon tax, given the crushing effect the current price of oil is already having on the lives of lower income people and the economy in general? My suspicion is that introducing a carbon tax now, piling on top of the soaring cost of oil, would prove to be destructively shocking to our way of life.

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5 comments:

Anonymous said...

A carbon tax-shift could actually help the lower income folks out.

To avoid getting taxed on employment, you need to either work less, or make enough money to be able to put some aside into tax shelters.

To avoid getting taxed on behavior, you need to avoid the behavior.

Now, the difficulty is that sometimes avoiding certain behaviors costs money (such as purchasing new insulation or a better hot water tank). These kind of things will have to have low-income subsidies to ensure fairness.

I'm not saying it's easy, but it certainly can be done in a way which does not disadvantage the poor -- unless, of course, they refuse to change their behavior.

JimBobby said...

Whooee! I ain't sure what Dion's plan'll do to gas taxes. He sez it won't be directly applied to gasoline and I like to take people at their word until they prove to be liars.

I think too much emphasis is being placed on the gas tax aspect. Especially, if Dion is correctly stating that the tax-shift will not affect gas.

As far as other energy use, consider the big shopping malls where gazillions of cubic feet are over air conditioned to the point that store clerks and customers must wear sweaters indoors on the hottest days of the year. Consider the lights left on in high rise office towers 24/7/365. Consider my local high school where they run the AC day and night in the summer when no classes are in session.

The high price of gas has, up until quite recently, had little effect on behaviour. That is changing. Drivers are dumping gas guzzlers. More people are using mass transit where it is available. More are car pooling, vacationing closer to home, multitasking their errands to save trips, etc. And that's just wrt transportation.

Almost all of us can save energy through conservation and efficiency. We need to decide if new windows, doors, insulation, furnaces, etc. are cost-effective. As fuel prices increase, the cost of conservation and efficiency becomes more attractive. Incentive programs beyond the obvious incentive of paying less tax should and will continue to play an important role in reducing our fossil fuel use.

Some are saying that the concept of revenue neutrality will be aimed at the "average" Canadian. That is, an average person will have their income tax reduced by the same amount as they pay in carbon tax. If you are an average person, you can pay less tax by outputting less carbon.

Big industries and commercial operations are the biggest consumers of fossil fuels and also the biggest wasters. The biggest wasters will be the ones who will pay the most carbon tax with the least amount of neutrality. As businesses see the value in conservation and efficiency, they reduce their overhead and become more competitive within their market sector. Win-win stuff for energy efficient businesses.

JB

Skeptic said...

I think a carbon tax, unless the poor is subsidized, will only hurt them.

The rich in this country have a way out - to buy carbon credits to offset their environmentally-unfriendly ways without having to modify their lifestyles. The poor don't have this luxury. So for them to exist, I'm sure the government will come up with something to subsidize them. Of course, if this were a true crisis, you shouldn't be able to buy yourself out of using carbon. Everyone would have to sacrifice - the rich, the middle class and the poor - equally.

Greg said...

Yes, due to the rising price of oil and gas, poor people are already being encouraged by heating and driving costs to move closer to work.

I can't imagine the point of having a carbon tax that didn't affect the price of gasoline. Isn't that the whole point? Why would Dion promise that?

The only stupid part right now is that the high cost of oil is going in to the profit margin of private oil companies and disreputable governments rather than say, funding health care, education and the search for better energy production.

And Skeptic points out my real beef with the carbon tax. Extraordinarily rich people get away with burning all they want.

The idea of imposing mileage restrictions and gas guzzler taxes (on an annual rather than point-of-vehicle-purchase basis) rings true. I think we should all be pitching in and yes, I know that makes a socialist crazy man.

At least these discussions are starting, because these details have to fleshed out before we leave someone freezing in the dark somewhere.

JimBobby said...

Extraordinarily rich people get away with burning all they want.

Correct. But they'll be paying a carbon tax when they carry on with their wasteful lifestyles.

Extraordinarily rich people get many perks that the rest of us don't. You know, like running for president of the US, buying influence in major political parties all over the world, building up their own militias a la bin Laden, ruling a nation with an iron fist a la Mugabe.

The extraordinarily rich will consume energy regardless of who gets the money they spend on it. With a carbon tax, the energy expenditures by the extraordinarily rich will go into government coffers. These collected taxes will then help subsidize the poor who, as has been pointed out, are hit disproportionately by a carbon tax.

So far, all discussions about a carbon tax have included provisions to accommodate the poor. The Green Party plan certainly takes this into consideration. The as yet unreleased LPC plan will, no doubt, address this aspect.

The NDP proposal for cap-and-trade without any carbon tax makes no provision to help the poor. It makes the incorrect assumption that big industry will pay big bucks to government for new alternative energy development and will not pass along its costs to the consumer -- rich and poor.

Government -- particularly, the federal government -- has great experience and great ability when it comes to administering taxation. Government has far less experience and ability when it comes to creating brand new market mechanisms. The EU experience with cap-and-trade has been positive but the biggest complaint about it is that it has taken way too long to implement.

New tax policies can be brought in almost immediately. Creating a functioning, effective cap-and-trade system takes years. In the EU case, it's been 10 years and they are still working out the kinks.