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Take that, global warming!


 

Tories will cut excise tax on diesel fuel in half: Harper:

So whereas the Liberals would discourage carbon-belching, the Tories would actively encourage it.

UPDATE: “I’m running out of synonyms for stupid,” says economist Stephen Gordon at Worthwhile Canadian Initiative (one of my favourite econoblogs). 

In one stroke, it takes two serious and pressing problems – the deteriorating fiscal situation and greenhouse gas emissions – and makes them both worse.

MEANWHILE: The League of Below Average Prime Ministers Endorses Green Shift (Calgary Grit)


 

Take that, global warming!

  1. I think the Conservative Party has come to the realization that the environmental file is a little too crowded right now. After all, the polls, unfortunately, show that Canadians are not willing to make major financial sacrifices to lessen their impact on global warming.

    So, by giving up that stance, they’ve created a major differentiator between them and the other parties. Now, if they can successfully convince the populous that the other parties will hit their pocketbook big time, they may have a winning strategy.

    Sad, but true.

  2. Andrew,

    The commodity price of diesel is already high enough to discourage excessive use. We do not have alternatives to the use of diesel for transportation. It is a distress purchase.

    There is no point in the Government taxing it to discourage its use – it will have no environmental benefit (since it will be used anyway) but it can seriously hurt the economy. Food prices are already going up because of production and transportation costs. Most Canadians are only one missed meal away from saying “screw the environment” anyway!

  3. As I stated elsewhere, I don’t doubt for a second that this promised cut will be supplanted by some other concoction that the CPC can call their “green platform”.

    And yes, Andrew C., there is no point in putting a further surcharge on fuel.

    That, afterall, what Dion has stated since the introduction of the Green Shift platform.

    Austin

  4. Well, it cannot be said that there is no difference between the platforms of the two leading parties. Have a go at it, Canada!

  5. “actively encourage it” sounds a over the top to me.

    As Harper said, the demand for diesel is very inelastic. Hence small price changes do little to affect the demand. So neither Dion’s price increases, or Harper’s price decreases will have much effect on demand, and hence GHGs.

    That aside, just from a strategic point of view, this is a great move. It puts Harper on the other side of Dion and all the other parties on the left.

    Thus exposing one of the big downsides of Dion releasing so many details of the central plank of his platform so early in the game. Stockwell Day and the CA made a similar mistake in the 2000 campaign.

  6. Austin: gasoline is already effectively taxed by a carbon tax, but not so for diesel. Though we wouldn’t see any change for diesel until year three or so.

  7. Why are they online cutting the taxes used by business? People don’t rate? Why not just eliminate the gas tax as well? Real people will feel that.

  8. If the Tories were concerned about transit and transportation they could commit to refunding excise paid by transit systems and CN/CP/VIA/GO etc.

    Instead we’ll see diesel Hummers any day now, just as US people bought pickups to evade CAFE standards.

  9. ““actively encourage it” sounds a over the top to me.”

    Nah, this is effectively a tax credit on diesel consumption.

    And diesel demand is only inelastic in the short term. There are many things companies can do to reduce diesel consumption, given some incentive. That old commie, Wal-Mart wants to reduce its fleet’s energy consumption by 30%.

  10. “Pay no attention to that man behind the curtain” time.

    While the trucking industry will love the rebate (there are an awful lot of owner-operators out there) a 2 cpl cut really is a drop in the bucket.

    Provincial taxes and the GST are the real revenue generators for diesel fuel and they will still be in place. Provincial excise taxes on diesel range from 9 cents per litre in Alta to 16.9 cpl in NB (Yukon has a lower rate, 7.2 cpl, but its not a province). Moreover, downeast the HST (13%) is applied to the total so that in NS before-tax diesel (wholesale) at 94.3 cpl rises to 128.5 cpl after taxes are included.

    They say that every little bit helps but, in this case, a 50% cut really won’t amount to that much. Still, it’s better than the 7 cpl hike the other guy is proposing.

  11. Any reduction in energy costs here will have a net benefit to the global environment, by keeping manufacturing here in a relatively efficient location, instead of in developing countries with little or no emissions controls, and even lower productivity than ours.

  12. Thoughts:

    1. Stephen Gordon’s blog is a must visit. The guy does great work.

    2. It’s alarming how much the mainstream view of economists differ from the mainstream views of the general public. And as much as I like to critize the profession, they’re spot on here.

    3. I can’t believe anyone is arguing that we shouldn’t tax a good (or tax it less) because the current price is on a highly inelastic portion of the demand curve.

    Taxing inelastic goods and using the money to offset distortionary taxes is simply good public policy, even if there were no environmental benefits whatsoever. There are no words for how truly stupid this is from a strictly economic point of view.

    Also Time To Get Serious on Climate Change sounds suspiciously a lot like this:

    http://www.newswire.ca/en/releases/archive/November2006/15/c4802.html

    If they’re going to borrow from me, they should at least let me in their club. I’m below average too!

  13. Let’s see now.

    Cut taxes $600,000,000.

    Money stays in business hands.

    Business cuts prices.

    Consumers buy more.

    More jobs created.

    More wealth created.

    People prosper.

    Oh now I see the problem.

    It appears capitalism has become a dirty word in the strangest of places.

  14. bud: The part where we differ is you think the business will cut prices, I think the CEO’s will just take larger bonuses. Remember the massive price reductions we saw when they eliminated the hidden manufacturer’s tax for the GST?

    Neither do I. I just remember my prices going up.

    Consumers generally do not see any gains from reductions in hidden taxes. What they generally get is a longer period of prices remaining stable.

  15. The bigger question is – where is the $600M going to come from? Given the last two years, we know it’s not going to come from spending cuts.

  16. Meanwhile – one thought Mr. Tax Federation guy talks about tax reduction….can’t figure out the vision, whole picture thing, the future…all he does for a living is discuss taxes.

    Get life guy – there’s more going on and more important things than a few bucks in taxes.

  17. Bud: “It appears capitalism has become a dirty word in the strangest of places.”

    Intersting – as a pro-capitalism champ, I would expect you to favour the green-shift.

    Under this plan your income tax – which you have to pay – is cut – and your carbon tax – you can avoid paying by demanding more efficient technology from suppliers and by being more energy efficient with your purhcases.

    Assuming the current level of taxation is correct (even the Cons aren’t reducing many more taxes), wouldn’t you rather have a tax that you can take action to avoid paying vs. income tax which you can’t?

    That sounds much more market-friendly to me.

  18. Logic be damned, Scott. The Conservative strategy is the only pro-market strategy because, well, it’s impossible for the Conservatives to be wrong.

  19. Scott:

    When a Liberal says his new tax will be revenue neutral,and you believe him, then I think one of 3 things:

    1. You’re new
    2. You’re a slightly slow Liberal partisan
    3.You,re dumber than dirt

  20. AC,

    Do any of you jounalists ever operate in the practical world? Come down out of the ivory tower for just a moment and consider your argument from street level. Anyone who uses diesel power that could use gasoline if they wished has already made the choice of higher capital cost up front, for fuel efficiency later. Encouraging carbon belching? Just exactly what activity does diesel power which is discretionary? I’ll wager that less than one tenth of one percent of diesel consumption is discretionary. Unless you consider the economy discretionary.
    The part you guys miss is that just taxing something like diesel does nothing for the environment, especially if the money raised is redistributed (after a shave for handling) to families so they can use it to cover higher bills for things that come on trucks. Only thing that benefits in that transaction is one particular local economy, but I don’t live in Ottawa.

  21. Andrew, is there a tax cut that you have ever supported.

  22. Curmudgeon: You obviously don’t know Coyne. You’re going to call him a tax-and-spend liberal?

    He-larry-us.

  23. Peter,

    Energy use doesn’t have to be discretionary for it to be an opportunity for increased efficiency. High prices have induced Wal-Mart to retrofit its American truck fleet to consume up to 30% less energy, ie, diesel. I don’t think you can call Wal-Mart a bunch of eco-hippies, either. They are doing it because it makes dollars, and sense.

  24. Andrew,

    That is interesting. And without a green shift, I assume, unless Dion has entered the US race. As fuel efficiency innovations are made they will be adopted by industry because it makes economic sense, what exactly does an extra tax levied and redistributed to various desirable client(voter) groups do to enhance this?

  25. It increases the incentive. And ‘various desirable client groups’? That’s like saying cutting the GST only benefited ‘Canadian consumer groups’.

    Why don’t we all try to be a little more intellectually honest around here…

  26. Ahhhh, it increases the incentive. You haven’t mentioned how giving individuals money to cover the higher costs increases their incentive…….when clearly it does the reverse. Oh that’s right, it’s those pesky voters.

  27. Pete, I raise the price of something by a hundred bucks and then give you a hundred dollars, will you by that thing without thinking or would you look for alternatives/do without it and pocket the money? If you don’t understand this, your alma mater just called, they would like to recall your microeconomics credit.

  28. Andrew,

    Don’t know about you, but I have a family, and my energy purchases are not discretionary. In a cold, huge, sparsely populated country like Canada, we already spend a disproportionate amount on energy, the reason demand is inelastic is because our energy use is not wasteful now, if it were, market prices would have reduced it over the last few years.

    If my alma mater called you it is to tell you you still can’t get in.

  29. You might be surprised by just how much of your energy purchases are discretionary.. or to be more specific, how much of your carbon emission intensive purchases are discretionary.

    Even heating energy. Geothermal and micro-hydro, for instance, are very good ways to generate non-emitting energy and heat. What’s more interesting is over the long term, they cost less. Unfortunately, because their capital costs are high, most people don’t consider them in comparison to standard carbon-emitting energy. Well, when the price of carbon-emitting energy starts to climb, these alternatives become more attractive.

    Our energy use IS wasteful now, because efficiency isn’t necessarily easy. But then again, things really worth having typically aren’t easy, are they? We need a prime minister who’s willing to challenge us to take the hard road, with the confidence of knowing where it leads is a better place, and the ability to convince us of that.

    From what I’ve seen, Dion may have the confidence, but I still don’t know about his ability.

  30. Well said, T. Thwim.

  31. Pete, it is pretty ridiculous to think that over the time frame of a few years that your family’s fossil fuel demand is perfectly inelastic. Suppose it is, though. There are many businesses that provide a variety of services to you. I work for one which serves about 40% of Canadians, so has a decent chance of serving you. There is plenty we can do to increase our energy efficiency, but it helps to have a business case (higher fossil fuel prices), the offset (lower corporate income taxes), and some assurance that our domestic competitors face the same challenges, so we can gain a competitive advantage by increasing our efficiency. There you go-you don’t have to do anything in your own family, and your consumption will still induce less carbon emissions.

  32. Uh Andrew,

    Don’t look now but the trucking and airline sectors aren’t making any money and so aren’t paying any income taxes, higher costs will make them lose more, and a tax break isn’t worth anything.

  33. I’m surprised a bunch of proto-economists aren’t thinking about signaling.

    The problem here isn’t that it’s going to raise GHG in the short term, or that there is some kind of hard-and-fast law saying that it’s going to raise it in the medium term.

    The problem is that if you see a boneheaded move like this, you think “well, now we know the score”, and act on that thought. People will assume that the Conservatives don’t care about carbon emissions, and will have no incentive, or perhaps even a negative incentive, to engage in any future discretionary spending to reduce their carbon output. Harper might talk about doing something about it, but they’ll think “when push came to shove, he showed where he stood”.

    (And, heck, considering how dirty diesel is, it’s a good bet to assume that Harper doesn’t care about particulate pollution, either.)

    Yes, there are any number of other signals telling people that Harper doesn’t care about carbon pollution, or any other kind of pollution. But this will help cement it.

  34. This is a brilliant move by Harper as it focuses a very clear decision for voters either vote for almost doubling the tax (LPC) or halving the tax (CPC)and have little or no impact on GHG and diesel nowadays with the newer engines is by far and away the cleanest of the fuels and since canada is only repsonsible for a few percent of total global GHG an impacyt on the environment is negligible. This is a master stroke and would mean nothing to you if you live in a city and are not employed in transportation industry however if you are a farmer, fisher,trucker et all then this is a big bonus and an important issue so it obviously helps with blue collar urban, rural and other widely distibuted demographics – this particular issue may become far more important than what a lot of people realize see NFLD outside of city voters.

  35. The side effect of bankrupting our government so that it can’t afford to provide proper protection for our sovereignty (coastal supply ships, anyone), and of making us increasingly dependant on a non-renewable source of energy instead of encouraging us to find other solutions before we have no control over whether the costs are unbearable is, of course, not worth mentioning, hm?

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