Carbon pricing: Beyond the talking point

It’s all fun and games until China institutes a carbon tax

by Aaron Wherry

Michael Den Tandt wonders if the Conservatives will have to stop freaking out about the NDP’s cap-and-trade proposal if they hope to see the Keystone XL pipeline approved by the United States. If the Conservatives think likewise, we’ll presumably see a different tone on Monday when the House returns to business (the Conservatives certainly weren’t shying away from their preferred talking point when the House was sitting a week ago).

Meanwhile, China is talking about a carbon tax and Ontario is thought to be moving forward with cap-and-trade and here is what the woman thought to be President Barack Obama’s choice to lead the EPA told an audience of regulators yesterday.

Addressing a room full of familiar faces at a workshop of state and federal regulators, McCarthy applauded local efforts, such as the nine-state carbon cap-and-trade program in the Northeast United States, for showing Washington a path forward on combating climate change.

“At the EPA we will do our part to build on your success,” she said at the Georgetown University Law Center. “We can find a way instead of having national solutions…to open up opportunities for states to use all the flexibility, the ingenuity, the innovation that you have shown could be done, and just simply get it done.”

Stephen Gordon talks to Global about what international developments might mean for Canada.

As the rest of the world starts to put a price on carbon, any Canadian exporter is going to have start paying that price regardless of where it is located,” said Laval University economics professor Stephen Gordon. Carbon taxes are usually applied to imports as well, so local producers are not disadvantaged, according to Gordon.

The U.S. is Canada’s largest trading partner and accepted $330.1 billion worth of exports from Canada in 2011. China ranks number three when it comes to Canada’s largest export destinations, accepting $16.8 billion in exports in 2011. “If Canadian exporters are already paying for it why not send that tax revenue to Ottawa instead of Washington or Beijing,” Gordon said.

And PJ Partington compares coal regulations in Canada and the United States.

The U.S. ambassador has made it crystal clear that as America steps up its climate action it expects us to do better too. The new line from the Harper government is that we’re already there, particularly on curbing emissions from coal power. Foreign minister John Baird recently suggested “maybe the United States could join Canada” on “taking concrete direct action with respect to dirty, coal fired electricity generation,” adding that “we’re the only country in the world that’s committed to getting out of the dirty coal electricity generation business.”

Sadly, Canada isn’t the shining example of coal-curbing excellence that Harper’s ministers are claiming. When it comes to regulating greenhouse gases (GHGs) from coal power, we’re doing about the same as our neighbours to the South — and may well be eclipsed before too long. While coal power is America’s biggest source of GHGs, accounting for over a quarter of national emissions in 2010, it accounted for about 11 per cent of Canada’s in the same year. As for “getting out of the dirty coal electricity generation business,” Canada won’t be fulfilling that commitment until 2062.




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Carbon pricing: Beyond the talking point

  1. Entitling this article “Beyond the Talking Point”, graphically illustrates what is going wrong in Canada’s carbon talks. Author Aaron Wherry starts a paragraph with “As the rest of the world starts to put a price on carbon…” and then says very little about how and why the rest of the world is putting a price on carbon.

    In fact, “put a price on carbon” is, in reality, nothing more than a “talking point”. Put a price on carbon. How? And then who does what? Most carboni tax advocates love this slogan because as long as we don’t get past it, they don’t have to answer those questions.

    The reality is that since they introduced carbon taxes, per capita transportation fuel demand and GHG emissions have grown faster in all of Denmark, Norway, Sweden, and the Netherlands than has been the case in largely carbon-tax free Canada. Since the beginning, all major oil refineries, power producers, smelters, food processors, cement plants, etc. have been not only 100% exempt from European carbon taxes–they are exempt from all energy taxes. 100% of European carbon pricing policy cost burdens have been allocated to families and used to deliver new subdidies to large, energy-intensive industry. That is why, today, the average Danish, Norwegian, German, or Swedish household pays more than CAD$0.40/kWh for electricity (out of after-tax income), while energy-intensive industries in all of those nations currently pay LESS for the same electricity than BC industry pays.

    Most of the “reductions” in European GHGs reflect contiued manufacturing job flight from Europe to Asia, which flight started before carbon taxes started to show up in Europe. Every EU state that has a carbon tax–much like BC–committed to and does use C-tax revenues to finance corporate income tax rate cuts. So EU corporations have been protected by policies that ensure that 100% of carbon tax costs are entirely born by families, have been granted new exemptions from all other energy duties and excise taxes, AND the carbon tax revenues that have been collected from families out of after-tax income have been 100% used to cut corporate income tax rates.

    In spite of this massive tax shift from corporations to families, manufacturing jobs continued to flee Europe at pre-CTax rates.

    Sweden and example we should follow? Between 1990 and 1996, TOTAL jobs in Sweden–public and private sector–fell, absolutely, to as much as 15% below 1990 levels. It took until the end of 2007 before total jobs (counting every job, part-time or full-time, as 1) to climb back up to 1990 levels, but then they fell again. The carbon taxes in Denmark, Norway and Sweden were supposed to save manufacturing jobs. They failed in that regard. But they put huge holes in government’s budgets, which the governments could only fill by passing more and more tax burden on to families.
    Today, total employment in Sweden is back below 1990 levels. Swedish mandatory health care premiums have more than doubled in the last 10 years, while most health care service delivery has been privatized and most Swedes now privately pay suplemental invoices for their services. In education, ther Swedes introduced a voucher system. Most families now pay a private premium, over the voucher value, for K-12 education services.

    Most Canadian “put a price on carbon” advicates tell us we should do what Denmark, Norway and Sweden have done. But they NEVER tell us what this is. Is this where we really want to go—large industrial electricity cost under 4 cents/kWH, subsidized by families who pay over 40 cent/kWh for the same electricity? Let’s at least talk about this reality before we impose it on Canadians.

  2. Wherry quotes from a speech by EPA Administrator-candidate McCarthy, in
    which that candidate very strangely refers to the northeast US states’ RGGI carbon market
    rules as a golden example of carbon pricing strategies. Of course, as we all know, the RGGI carbon market has been a total disaster due
    to the states’ creation of a massive over-supply of carbon quota. The
    initiative has had no effect on emissions, state revenues from carbon quota
    sales have fallen very, very short of state budget forecasts (as demand for this useless quota leaves most of the state-auctioned quota unsold, these days) and–most
    importantly–now that the states have released billions of
    bankable GHG emission quota certificates into the market place at prices less
    than US$2/TCO2e (constant US2011 $s), they have massively restricted their options for putting real GHG reducing policies in effect.
    To achieve GHG reductions beyond those which would have occurred completely in the absence of regulations/carbon prices, the states must now rule to
    directly or indirectly expropriate the market value of this huge reserve of
    cheap, banked GHG quota, where “indirect” expropriation is achieved
    by discounting the compliance value of each quota unit (i.e. government rulings that the regulated
    entities have to surrender, say, 2 units of banked quota to cover 1TCo2e of
    emissions). Alternatively, they can cut off future auctions until the GHG quota surplus is depleted, but this means no more state revenues from quota sales. Worse, it positions high-emitting market incumbents who hold massive cheap quota surpluses to hoard quota to block new market entrants and innovators (all of whom would have to buy any quota they need to operate from the incumbant large emitters if governments stop selling quota).

    In most (but not all of the RGGI states), the state governments are required to
    compensate the corporations if they take any action that expropriates quota market value, under state property
    laws which deem government takings of the market value of these quota units as comparable to government expropriating your front
    yard to build a highway. There might many good reasons for government to take private assets in
    both cases, but the private persons who lose asset value when government acts get compensated no matter how valid the reasons for the expropriations.
    The mounting future taxpayer liability associated with a growing reserve of cheap, banked carbon quota is one of the primary reasons that the state
    of New Jersey (the single largest state source of demand in the RGGI quota market) pulled out of the RGGI market more than a year ago.
    But if we just say “put a price on carbon”, we don’t need to talk about this disasterous carbon pricing experiment, running the risk that we might simply repeat it in Canada.

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