Atmospheric user fees

Frances Woolley thinks it’s time to rebrand the carbon tax.

It’s not clear why carbon taxes should be called taxes in any event. What distinguishes taxes  from user fees or social insurance premiums is the absence of a quid pro quo between the taxpayer and the government. Paying more taxes does not entitle a person to more government services. By way of contrast, paying Employment Insurance premiums is a necessary (though not sufficient) condition for accessing Employment Insurance benefits. By this definition, carbon taxes are more like a user fee than a tax. There is a quid pro quo: pay the tax, burn the carbon; burn the carbon, pay the tax. Go ahead and contribute to global warming, as long as you pay your dues.

Renaming carbon taxes “atmospheric user fees” would be a start, but people are smart enough to see through purely cosmetic name changes. If funds raised through the charges on fossil fuels go into general government revenue, it is hard to argue that they are anything other than taxes. If, on the other hand, the revenues are earmarked for tax refunds, low-emissions transportation, tree planting, and initiatives to combat climate change, it becomes much easier to argue that a $0.20 per litre charge on gasoline is, in fact, a user fee.

Calling your policy an atmospheric user fee wouldn’t, of course, prevent your opponent from describing it as a “permanent tax on everything” that would “screw everybody.” In that regard, it is up to the party and the political leader proposing the policy to make the case for it and defend it against such criticism.

That said, Frances is very right to think about language and presentation. I’m reminded of this polling from the 2008 election on Stephane Dion’s signature proposal. When respondents were presented with the statement that “the Liberal party’s carbon tax will really hurt the Canadian economy,” 53.5% either strongly or somewhat agreed. When respondents were presented with the statement that “the Liberal party’s Green Shift will really hurt the Canadian economy,” 39.7% either strongly or somewhat agreed.




Browse

Atmospheric user fees

  1. Mornings of 9/11, it’s like a new remembrance day has been created. It is melancholy morning for me.

    That’s some pretty wooly thinking from Prof Woolley. Why is it economists job to come up with ways to bamboozle the public into believing ‘atmospheric’ conditions justify a tax? World isn’t warming, we actually want the climate to change, it would be much more worrisome if the climate wasn’t changing, and people’s behaviour suggests we don’t believe the world is warming.

    People claim they believe the world is warming but who actually has taken measures to reduce their carbon use – I see many people getting rich off green movement but no one has gotten rid of their cars, moved into a yurt, started wearing hemp clothing and doing their dishes in the local creek. Global warming/climate change scare mongering is done by reactionaries who want to take us back to times before industrial revolution and then a bunch of other left wing types are using peoples fears to raise their taxes.

    Twenty cent tax hurts poor people the most, and they don’t have biggest carbon foot prints, it is the middle classes who have multiple cars and giant homes and fly off on two week vacations and they can afford to pay more for gasoline. Middle classes feel virtuous while continue to wreck the environment and beggar working class even more. Is there any evidence at all that a 20 cent tax will significantly change people’s driving habits, enough to alter the world’s atmosphere and save humanity?

    I think it is hysterical where Woolley claims “One strength of economists is that we see through framing … ” while that’s all she provides herself. Maybe Prof Woolley forgets that other people, not just economists, can ‘see through framing’ as well.

    • Global warming/climate change scare mongering is done by reactionaries who want to take us back to times before industrial revolution.

      I would be very surprised if any more than a handful of those scare mongers are actually interested in returning either themselves or the rest of us (or both) to some pre-industrial revolution lifestyle. The same goes for people who aren’t scare mongering, but are just reasonably or very certain that AGW is occurring and it is a problem.

      Of those people – the ones who believe in AGW – a handful believe the transition away from fossil fuels will be quick, easy and no-cost, most understand that a transition will take some time, will have some pain, will have some costs and are willing to pay those costs.

      And a question for you: If we had to abandon fossil fuels, do you think that we would be able to make the transition?

    • “Global warming/climate change scare mongering is done by reactionaries
      who want to take us back to times before industrial revolution…”

      • I’m guessing the hilarious irony was unintended.

  2. Change the name if you think it’ll work. Chances are though that Harper’ll claim it is the mark of the beast or some such nonsense next time round. The really important thing is for whoever attempts to sell such a tax, levy or whatever is to sell the fact that it is NOT going into general revenue – Dion did an atrocious job of that last time out. People will grudgingly support a tax, even a escalating tax if they can see it wont get wasted on boondoggles or pumped into programmes they didn’t ask for. You just have to start from the position that the public isn’t stupid, nor is it entirely venal or self interested. IOWs, trust the people.

    • The answer is probably not to try to convince people you are lowering other taxes for net zero revenue impact–many will be convinced you are lying (see BC carbon tax).

      A carbon tax where the revenues are delivered by delivered by direct deposit into your bank account or cheque in the mail, but with the costs hidden in the prices of goods we buy is probably more politically feasible. Also, the redistributive effects mean that a majority would probably be better off under such a scheme. Alas, we forego the benefit of reducing harmful taxes on income.

  3. Reminds me of that symbol of “The artist formerly known as Prince”. Once never went without the other. Kinda looks like the outdoor drink holder (push into the ground) we all made in grade nine high shop at Oakridge h.s.
    http://www.discogs.com/viewimages?artist=Artist+%28Formerly+Known+As+Prince%29%2C+The

    “Atmospheric user fees (formerly known as the permanent tax on everything)”… As a former AB observer, I doubt it would fly there. The idea would be quickly extinguished – after a while you’d never even remember it.

    • Alberta has a cap and trade scheme. True story.

      • Alberta has a carbon tax based upon intensity targets. 12% reduction over 2004 baseline. Here’s a specific calc I did for Suncor in 2009:

        http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/12/we-are-all-albertans-on-est-tous-des-albertains.html?cid=6a00d83451688169e201287672a13e970c#comment-6a00d83451688169e201287672a13e970c
        For 2011, based upon total AB production, and the total AB tax collected, I calculate it at an effective rate of 10 cents per barrel.

        It’s effectively a pr exercise, or rounding error. True story.

      • Andrew, for the record, here’s how I calculated the 10 cents per barrel effective rate:

        1) The total synthetic and bitumen prod for 2011 for AB (listed as Canada in CAPP spreadsheet) was 87.73 million cubic metres, or 552 million barrels (1.511 million barrels/d avg)

        http://membernet.capp.ca/SHB/Sheet.asp?SectionID=3&SheetID=85

        2) The Climate Change and Emissions Management Fund during 2011-12, collected $55.4 million. From Alberta Environment 2011 Annual report, page 30:

        http://environment.gov.ab.ca/info/library/8611.pdf

        Based upon the above, I calculate an average of roughly 10 cents per barrel carbon tax ($55.4 million/552 million barrels) recognizing that some projects /companies pay more, and some pay less.

        • It is greenwashing to a degree, but evaluating a carbon pricing scheme on the cost per unit of production is fundamentally flawed. The goal of carbon pricing is to reduce the carbon intensity of production. If production moved toward zero carbon emitted per unit of production, and thus no carbon fee collected, is the policy a failure?

          I will acknowledge that a $15 per tonne carbon tax is not enough to have meaningful impact on behaviour, but it is not nothing either.

          • Looking at it from an investment perspective. I think we both acknowledge the fine is too low. It is cheaper to pay the tax than invest. So, just another cost of doing business.

            Say I have an existing,or proposed new facility. If I invest in a piece of equipment to reduce the carbon intensity, I run the whole production through it, not a 12% slipstream. And my investment decision has to meet my cost of capital.

            You ask: “If production moved toward zero carbon emitted per unit of production, and thus no carbon fee collected, is the policy a failure?”

            This already happens, to a degree. There is an economic incentive to reduce operating costs – natural gas being one of the cost inputs. This is typically what engineers do on a daily basis. All a carbon tax does is increase the incentive to do so.

            So, I’m not sure what you’re getting at when you ask “is the policy a failure”? Can you elaborate a bit?

          • By that, I was questioning your approach of calculating the cost of the carbon tax per barrel of oil. 10 cents is quite low, but that doesn’t mean that the policy is ineffective. What matters is the shadow price of emitting carbon, not producing barrels of oil.

          • I thought about this a bit further after your earlier reply. Sure, if the carbon tax is high enough, no tax will be collected. All will be avoided through intensity reduction investment, or no development of the resource.

            If it’s too low, only carbon tax paid, no carbon tax induced investment.

            Somewhere in between, it’s a bit more complicated.

            Admittedly, I was implicitly assuming that the $15/tonne on 12% (equivalent to $1.80/tonne on 100%) would not affect investment. I could be wrong, but not convinced so.

  4. Here’s where we have it right:
    - Alcohol and tobacco cost society money so we tax them considerably.

    Here’s where we have it wrong:
    - We want people to earn money – yet we tax Income.
    - We want people to own property – yet we tax property.
    - We want people to participate in the economy – yet we tax the sale of products and services.
    - We don’t want people to produce waste or pollute the land, sea or air and we have a problem with carbon tax? I don’t get it.

    It shouldn’t be a user fee; it should be a tax. But carbon tax/waste tax should replace the existing tax scheme which penalizes people for being prosperous. (Yes, I am well aware of the 1% issue – let’s lay that one to rest for a couple of minutes.)

  5. A good letter to the editor in today’s G&M, related:

    Big oil is right

    Shell’s Lorraine Mitchelmore is reported as saying Canada “will need a carbon price” (President Of Royal Dutch Shell Canadian Division Urges Carbon Pricing – Report on Business, Sept. 11).
    http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/president-of-royal-dutch-shell-canadian-division-urges-carbon-price/article4534929/

    This is not the first time Shell has taken this position, nor is it the only oil giant to do so.

    Natural Resources Minister Joe Oliver immediately rejected the call for carbon pricing.It is often claimed that Prime Minister Stephen Harper and his cabinet are in the pocket of the oil industry. If only.

    Elizabeth May, Leader, Green Party of Canada

Sign in to comment.