BC's carbon tax and the alternatives - Macleans.ca
 

BC’s carbon tax and the alternatives

Mark Jaccard on the need to do something


 

Mark Jaccard considers the impacts of BC’s carbon tax and explains his willingness to support possible alternatives.

But does this new study make me a devotee of the carbon tax? No. While my position on many things has changed over the last 20 years, the repeated evidence – including from the BC experience – has only reinforced my opinion on the strengths and weakness of the carbon tax. Yes, it is the most economically efficient way of reducing emissions. Yes, I will desperately support any elected politician who implements one – or who wants my help to design one.

But I have never, and never will, tell politicians that they must implement a carbon tax to reduce greenhouse gas emissions. If they ask me to assess their climate policy options, I always say that other compulsory policies, like cap-and-trade or regulations on technologies and fuels, can reduce emissions as effectively as a carbon tax, not as cost-effectively as a carbon tax, but just as effectively. If a committed politician prefers one of these, because he or she fears the political difficulty of succeeding with the carbon tax, I tell them I can design these with enough market flexibility to almost (!) approximate the economic efficiency of the carbon tax.

We humans have amply demonstrated over the last 20 years that we are incapable of acting effectively on global warming. Why on earth would we worsen bad odds by insisting that politicians do a carbon tax when there are less-politically-difficult ways of achieving the same, already-incredibly-difficult objective?

Brad Plumer compared the options last month, at least in the American context. Laura D’Andrea Tyson argues for a carbon tax. William L. Holahan and Charles O. Kroncke argue for cap-and-trade.


 

BC’s carbon tax and the alternatives

  1. I wonder if BCers proclivity to go across the border to get gas has been factored into the ‘reduced emissions’ credited to the Carbon Tax?

    • Good point.

  2. It is worthwhile to note that Jaccard would fit the description of an “academic economist” with some significant regulatory and outside consulting experience in the energy industries.

    So, this section above caught my attention:

    But I have never, and never will, tell politicians that they must implement a carbon tax to reduce greenhouse gas emissions. If they ask me to assess their climate policy options, I always say that other compulsory policies, like cap-and-trade or regulations on technologies and fuels, can reduce emissions as effectively as a carbon tax, not as cost-effectively as a carbon tax, but just as effectively.

    This is generally the point I was making on a blog here on Macleans EconoWatch some 9 months ago that was focused on the supremacy of a carbon tax:

    OK, I think I get, generally, the point you are making.

    But, so what?

    Is there any way of quantifying the difference in approaches? Because if regulation is inefficient, and not the preferred approach, how much does it cost the economy/individual relative to other approaches?

    1% GDP per year? Yikes.

    0.1% GDP per year? Ahhh, not so much yikes.

    0.01% GDP? zzzzzzz

    http://www2.macleans.ca/2012/10/23/memo-to-the-conservatives-on-climate-policy-take-the-money-dammit/

  3. BC’s carbon tax is a joke. The Chinese and the Malaysians are not going to build those expensive LNG facilities if they have to pay any form of a carbon tax (direct, cap-n-trade, or regulatory). An uncertain level or a carbon tax, or a tradeable carbon permit, makes it nearly impossible to evaluate a rate of return on an expensive LNG terminal investments.

    Does BC want to sell its natural gas at $3 on the North American market, or over $10 on the World Market, where it would net $3 in royalties, rather than 50 cents? One can pay for a lot of adaptation (and social programs and pensions and health care) if one is collecting $3 in royalties on natural gas, instead of that being the actual price received for product.

    And as soon as you start exempting foreigners from paying taxes you are forcing Canadians to pay….

    • What if BC collects more carbon tax and less royalties, leaving the net tax burden for the LNG industry unchanged? Their behaviour would not reasonably be any different. Other than that they may invest in reducing emissions.

      • Only a portion of BC natural gas will be exported via LNG. The rest will continue flowing through pipelines to down through California or tthrough Alberta and points east and south.

        BC would be obligated to charge those producers the same reduced royalty. Those companies don’t have to liquify their natural gas to ship it through pipelines.

        You can’t charge one company one royalty and another a different royalty for the same product. That would clearly violate all guys of domestic and international trade and common law rules.

        I’m sure even the current promised exemption for the LNG industry from the carbon tax will be challenged in court by other companies in other industries, if not by individual ciitzens on the basis of basic tax fairness.