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Carbon tariff: bad. Carbon tax: good.


 

There’s something to the Conservative news release this week slamming Stéphane Dion for proposing a “carbon tariff”—an import penalty on imports from countries that aren’t doing enough to fight climate change.

The Tories point to a recent OECD report warning that such tariffs, which are being mused about in many capitals, might start a damaging trade war. Why would Canada, a big trading nation, want to contribute to a wave of enviro-protectionism?

As far as I can tell, Dion hasn’t talked up the notion of Canada imposing a carbon tariff on the hustings, although he often mentions the risk that Canadian exports might soon face such barriers, imposed by other countries, if we fail to create a credible climate-change regime.

The Liberal green shift policy book, however, does indeed briefly state that “goods from countries that are not pricing carbon will face a tariff reflective of carbon content” when they enter Canada. So fair enough to take a shot at Dion over this dubious proposal.

But since we’re citing the OECD, what does the Paris-based club of modern trading nations have to say more broadly about global warming and carbon taxes?

Well, the 2008 OECD Environmental Outlook report urges “green taxes, efficient water pricing, emissions trading, polluter-pay systems, waste charges, and eliminating environmentally harmful subsidies (e.g. for fossil fuels and agriculture).”

And in case there’s any doubt about what “green taxes” means, the outlook report looks closely at the possibility of a global carbon tax. The OECD’s forecasters did a simulation study to see what it would take to stabilize greenhouse gas emissions—an extraordinarily ambitious aim—and found it could be achieved by a carbon tax equal pegged at half a U.S. per litre of gasoline in 2010, rising to 12 cents in 2030, and about 37 cents in 2050.

This is not an endorsement of the Liberal plan, of course. It’s just another sign among many of how the carbon tax mechanism is widely seen, by all sorts of experts, as a sensible, perhaps indispensable, part of the policy mix if climate change is ever to be seriously addressed. And not “insane.”


 
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Carbon tariff: bad. Carbon tax: good.

  1. Any kind of carbon tax is insane if you don’t believe global warming is happening. Lets take billions of dollars out of peoples wallets to fix a problem that doesn’t exist!

    And I would definitely be interested to hear Dion’s thoughts on why imposing tariffs on our three largest trading partners during a global recession is a good idea because none of them have a carbon tax.

  2. This is VERY VERY DANGEROUS, particularly for Canada (being, as we are, about the most carbon-intensive economy there is).

    Canada is already looking very closely at (and contemplating a trade action in response to) a policy by the DOD in the US to not purchase oil sands products because of their carbon intensity.

    Any Canadian government with half a clue would would any such move tooth and bloody nail at the trade agreement level.

  3. *would FIGHT any such move, that is.

  4. “none of them have a carbon tax”……. yet.

  5. Jwl: All scientific evidence points to global warming existing and happening right now… or would you care to blame the Arctic being completely ice-free and losing ice shelfs due to sunspots?

    You and your like are equivalent to the Flat Earth Society – denying all the scientific evidence in front of your face.. and all because you don’t want corporate Big Oil to lose some of their billions in profits in order to find a worldwide problem.

  6. But what does emissions trading mean? Not that that would be an endorsement of anything, of course.

  7. “fight a worldwide problem” that should say.

    Anyhow.. the point is; Harper and his supporters are climate dinosaurs in this regard.. and they’re fighting a rearguard battle that does nothing but damage the planet more.

  8. The important question isn’t whether global warming is happening. Lots of terrible things are happening and will continue to happen in the world: doesn’t mean we will or even should do anything about it.

    The real question is one of costs and benefits: is the benefit of mitigating global warming worth the price in terms of growth. That is, we’re not choosing between global warming and no global warming, we’re choosing between reduced global warming and a lower living standard.

  9. Regarding global warming, there are two questions — (1) is global warming real and (2) what is causing it.

    The answer to the first seems self-evident — it is happening. However the answer to the second is less clear. Especially since similar global warming is taking place on Mars and it is remarkable hubris to assume that we are causing that.

    However, that does not mean that improving the environment through reduction of carbon emissions is a bad thing. Even if it is NOT causing global warming, is there really any argument whether reduction of pollution is a good thing?

    Alternatively, is there really an economic argument against increasing the cost of items that pollute so that their cost reflects the true cost of the goods including the inherent externalities involved.

  10. Scott Tribe

    Except all scientific evidence doesn’t point to man made global warming, far from it.

    The quote below is an extract from a letter written in 1817 by President of UK Royal Society and sent to the Admiralty proposing an arctic expedition to check out the situation.

    I am thinking vehicle emissions did not cause the problem. What do you think it was?

    “A considerable change of climate inexplicable at present to us must have taken place in the Circumpolar Regions, by which the severity of the cold that has for centuries past enclosed the seas in the high northern latitudes in an impenetrable barrier of ice has been, during the last two years, greatly abated.”

    “2000 square leagues of ice with which the Greenland Seas between the latitudes of 74° and 80°N have been hitherto covered, has in the last two years entirely disappeared.”

    “The floods which have the whole summer inundated all those parts of Germany where rivers have their sources in snowy mountains, afford ample proof that new sources of warmth have been opened …”

  11. Without tariffs what would our future economy look like?

    Are Canadian manufactured goods going to cost more to produce? Yes, in some regions of the country. Not in all, perhaps. It all depends, for instance, on what the energy cost will be. Quebec power might be cheaper than power provided in other regions because of the incoming Green Shift tax regime.

    But then, it depends on other imput costs as well AND added cost to transportation. This Green Shift plan is not as straightforward as Dion makes us believe. That is why the Liberal party doesn’t seem to want to talk about it all that much.

    But this is the kicker: IF Chinese imports will indeed become cheaper because in relative terms our nationally procuduction will become more expensive, and more people will buy Chines imported goods, well then:

    Canadians will ACTUALLY CONTRIBUTE to an increase of global environmental pollution.

    Think about that one for just a moment….. How more ironic can ‘green’ plan become??

    Why would we sacrifice our economy, let the Chinese economy (and others) grow on our backs AND increase global environmental pollution simultaneously???

    Look, I am not against trying to do something about environmental pollution, but any plan has to place responsibility onto the individual. Squarly. Worldwide. Period.

  12. My view is that whether doing something about Co2 emissions is desirable or not, political/economic reality dictates we can’t do anything about it. Unless you get EVERYONE in the world making the same sacrifices, those that do will put themselves at a relative disadvantage to those that don’t. Since you will never get everyone doing anything it just won’t happen.

    We’re stuck with the normal price mechanism to do the work for us. If you worry about global warming then hope the price of fossil fuels goes up and stays high, because that’s the only way to curtail their use.

  13. The point is Carbon Tax isn’t additional taxes. It’s incentive to shift our economy to less polluting sources of energy. We Win-Win with this tax. You increase investment in windmills and photovoltaics and hydrogen and high efficiency batteries and electric cars . . .

    Who has a problem with that? Fewer coal hydro plants spewing mercury giving our kids autism, and other poisons contributing to asthma. Fewer diesel trucks on the road. How many smog days is enough before we say enough?

    Like Stephane says, we should’ve been at this twenty years ago. And we may already be too late.

  14. Coal is very cheap. Windmills are extremely expensive. That’s the problem.

  15. Stwcide sed: “The real question is one of costs and benefits: is the benefit of mitigating global warming worth the price in terms of growth. That is, we’re not choosing between global warming and no global warming, we’re choosing between reduced global warming and a lower living standard.”

    How long ago was it that the horse and buggy industry warned that changing to combustion engines would bring the decline of society as they know it? For them it did, but it also opened a whole new reality for those willing to grasp at it. There’s no indication that wide-spread societal shifts in our actions to combat climate change would end up as a lowering of our standard of living. Unless you happen to have all your investments tied up in oil stocks. And even then, the window of opportunity is enormous for wiser choices and potential profits.

  16. “goods from countries that are not pricing carbon will face a tariff reflective of carbon content”

    I must have missed Harper’s solution to this problem the last time he was selling his own plan. What was that again?

  17. Substitution something that’s generally cheap (fossil fuel energy) for something that’s generally expensive (alternative energy) will lower our living standard by definition!

    If we could simply substitute dirty fossil fuels for clean energy at about the same cost THERE WOULD BE NO DEBATE!!! WE WOULD SIMPLY DO IT!!!

  18. What about the costs of not doing anything? The Stern Report came to the comclusion that the greatest threat to our western standard of living was NOT doing something. Doing nothing will cost us more in the end.

  19. How long ago was it that the horse and buggy industry warned that changing to combustion engines would bring the decline of society as they know it?

    The H&B industry was trying to stop improvements that were underway thanks to market forces and technology’s ability to supply a demand. And the marketplace, thank god, won out. There is zero, nada, zilch, to compare with the hold-on-a-sec-can-we-realistically-look-at-the-costs-of-this-scheme crowd in dealing with the massive state intervention in the economy being proposed here.

  20. The Stern Review is junk economics.

    Notice that actual ECONOMISTS are in consensus that it’s junk. Read “Cool It” by Bjørn Lomborg, which teams it to shreds. Or just see the Wiki article.

    The environmental movement both vastly inflates the effects ACTUAL SCIENTISTS predict to global warming, and similar vastly under estimate the costs ACTUAL ECONOMISTS see in doing something about it.

  21. The Stern Report was probably the worst piece of garbage economics I’ve ever seen. (And there’s a lot of it out there.) If there is one thing economists CANNOT do, it’s forecast. The only thing they can do is use econometrics to churn out complex regression models that in turn spit out garbage.

    Read The Black Swan by Nicolas Nassim Taleb for a brilliant critique of what is wrong with modern day statistics, as well as economics and any other pseudosciences that use common statistical methodology. He’s a statistician and mathematician himself, and he singles out economics in particular as a field that never should have been “mathematized” the way it has been. The mathematization of economics has lent it a veneer of scientific rigour that it simply does not have.

    Personally, I think climatologists are making the same mistake economists are. That is, they assume that their complex models have actual forecasting value. They don’t.

  22. Whether you believe in global warming or not, a carbon tax is a useful thing because there is no denying an upcoming energy crunch. The only question about that is when.

    So we can do nothing, and then hope when it hits other countries take pity on our unprepared ass and sell their tech and knowhow to us at a price that doesn’t break the bank, or we can start preparing now, by giving the market the incentives it needs to seriously look at reducing our energy usage and moving to a non-fossil fuel energy base.

  23. “Whether you believe in global warming or not, a carbon tax is a useful thing because there is no denying an upcoming energy crunch. ”

    If the market knows there’s an upcoming energy crunch, it will include this information in current prices. Making a carbon tax superfluous. I think it was Hotelling who demonstrated this.

  24. Raging Ranter, good observation:

    “That is, they assume that their complex models have actual forecasting value. They don’t.”

    They don’t because they, like you said,’single out’.

    I am reading a very interesting book Beyond Growth by Herman E.Daly (economist and served on the World Bank). Actually I heard Ms.May refer to Daly.
    I haven’t finished the book yet, but I have always known that when we single out, or in other words, when we try and take anything out of a contextual whole, conclusions can never lead to anything overarching.

    What is missing in the problems concerning the clean-up of the environment (the clean-up of crime, the clean-up of drug use, the clean-up of obesity etc.) is to come back to basics:

    Those basics are: responsibility belongs to the individual and rights belong to the collective.

    The trend in human behaviour has been to try and turn this absolute truth into something it is not: wishfull thinking.

    Ranging Ranter, when we as humans can live with the fact the responsibility belongs to the individual and rights belong to the collective, and when economist include that sort of thinking into their evaluations, we might be able to forecast a lot! Most of all value, I would argue.

  25. Perhaps I left things dangling a bit:

    I should have completed the explanation of the turn-over by saying that the turn consist in believing that rights can belong to the individual and that responsibility can belong to the collective.

    But a collective can never carry the burden of responsibility unless this sort of responsibility is shoved onto the shoulders of a so-called ‘system’. What then makes up the system? Individuals, of course. Anyone who believes that a system can exist independently of individual involvement, is not living in the real world, but is involved in wishfull thinking (think of the economic downturn in the housing market!)

    And so,too, individual rights mean nothing if the collective does not back this ‘given’ right to the individual.

    Purely individual rights can not exist because they belong to isolation, and an isolated individual is nothing but a being onto its own, and placed within wishfull thinking also.

    But if that’s where we want to be, than we’ve come a long way.

  26. Francien, what if individuals who pollute choose not to pay (carbon “interac” cards are being contemplated in UK, but must be backed by law to work)?
    jwl, DOE stats show coal increases cancel out renewable energy increases when oil rising. It is why NB isn’t part of the employment intensive wind-turbine supply chain and is coal.
    stewacide, Bjorn’s only argument is we shouldn’t use foreign aid to fund AGW solutions. Whatta dork.
    For those who want to be the first to model AGW costs, main concerns are melted Himalayas cessation of drinking and industrial water supplies to 1/2 the world (2040?). Refugees (2040?). Agri-yield declines (2025?). Cities that will house 75% of people and 55%(?) industry; many will flood (2075?).
    I hope the tarriff is part of the last ditch Kyoto II Dec/09 Copenhagen talks. Make a ladder of prefered new generation electricity sources and make it a revenue neutral “shift” if recession threatens. Those that build new coal get tarriffed. Those that build wind turbines, subsidized exports. Provisions for poor nations with access to developed technologies (analogous to AIDS vaccines) and exemptions for poor nations who don’t get shared technologies.

  27. “what if individuals who pollute choose not to pay”

    I think that is an excellent question because I think it would include most of us, world wide. But let us stay within Canada.

    What then is the Liberal Green Shift asking of us? Besides the fact that I think the Green Shift is a much more complex policy proposal than portrayed up untill this point, I find the Green Shift’s approach a bit hypocritical. The approach is trying to say to us: gain without pain. The plan is trying to fool us with our own hypocricies. Gain without pain under the circumstances is not remotely possible but we can argue over what this pain consists of.

    But look at it this way, for instance. When I hear all these voices supposedly rising up in anger (!) because our climate is in crisis and we need to do something about it (!) Those protesting voices belong to the same people who after the rallys go back to their normal way of doing things. (The other day I heard on interesting comment coming from a person talking to Ms.May about the environmental need for driving a 4 cylinder car instead of a 6 or 8 cylinder car, and how the government should do something about that. Well, how about that! I hope I do not have to explain this any further, the obvious is clear to me, and I had hoped it would have been clear to Ms.May and her passenger companion as well.

    To come back to the individual choosing not to pay, I’d say again, that would include most of us. We humans cling to this nasty habit of believing we can separate things. And good luck with that.

    But let’s throw the Conservative notion of a cap and trade system into the fray. I don’t hold such proposal to be any more productive than the tax scheme suggested by the Liberals.

    I believe the difference between the Conservatives and the Liberals, at this point in time at least, to crop up in another aspect altogether, that being the aspect of not being too hasty with any of this.

    Wow, I can hear them scream: “We have waited so long, the tipping point is nearing.” But quess what? If we implement the wrong policy, and by the wrong policy I mean not coming to the fundamental problems underlying this environmental dilemna, then we could do more harm than good.

    For instance, if in fact certain imports originating in countries that do NOT have environmental costs levied become cheaper as a result of our national implementations, and if we as Canadians choose to buy into those procucts (choose not to pay!), not only will we undermine our own collective well being, and thereby the individual well being, but we will in fact CONTRIBUTE to an increase of man made global warming.

    It is my opinion that Harper is not completely convinced of what the right plan for action might be. He may not even be completely on side in believing that all global warming is caused by mankind, and good for him for not taking up advice blindly.

    That to me shows more leadership than not being prepared to look at all incoming stats. Any plan can be implemented in a hurry, and so what is a year or so of further debate going to do? Burn us up in the meantime. I doubt it very much.

    Perhaps the time has come to look at the underlying and therefore fundamental issues, and they would have to include the relationship between responsibility and rights. Not copying something we know we have done wrong so far, and trying to build upon it. That could turn out to be real disastrous.

  28. Some very cool ideas floating about here!

    As mentioned earlier, regardless of one’s stand on the credibility of the scientific argument about global warming – or even the predicted time lines, we can (I hope) all agree that we’re going to run out of oil sooner or later. Rather than view a carbon tax as a punitive program that will disadvantage us economically compared to some other nations, we ought to be viewing it as getting a jump on the technologies of the future.

    But as much as I generally support the Green Shift, I’ve had a nagging question: if enacted, the entire point of the program is to reduce carbon output. If it works, won’t the revenues from a carbon tax decline? (Presumably, the ideal situation would be to have it decline quickly – in a matter of a few decades or less.) How will we offset the loss of carbon taxes in future years – though increasing income taxes incrementally? If I’m being stupid here, please tell me so…

  29. I think the idea is that when carbon taxes go down, so too will the tax credits go down – sort of like a reward system in reverse :)

    Of course, there is no reward system to begin with; on the surface of things it only seems that way. Or perhaps that’s intentionally. One way of feeling good about the whole thing.

    Some people might think they will actuall receive a cheque in the mail to begin with, but I don’t think that’s gonna happen for most of us.

    But I could be wrong. I understand fishermen, farmers and truckers are promised something of the kind. Who knows?

    Does anybody know?

  30. I honestly cannot believe people are still debating whether Global Warming is real or not. If we are not past this subject yet, then this world is truly in trouble. I will not argue that some of the ideas out there are maybe not the best ways in which we should tackle the issue. I haven’t read through all of the proposals out there. But it’s disheartening to think that there are people that still turn a blind eye to it. For me, it’s like turning a blind eye to a family member abusing drugs just because you do not want to accept that the person you love may have a problem. I morally just cannot do it.

    To me it’s just the politics of fear and fear of change. Personally, I’m not afraid of it in the slightest. I’m quite willing to fork over extra amounts of my own cash to try and preserve the planet for the future generations. Be it tax or whatever, bring it on. (btw: I make less than most middle income people make, so I don’t understand what everyone’s problem is). Will people not want to pay? Yeah, sure, who does? But we’re going to be paying anyways. What’s the difference between now or later, except that later it will be even more expensive to change.

    However, that being said, I usually tackle this issue more from a security stand point than an environmental/economic one. It’s about foreign oil and the Geo-political consequences of us importing Oil from less than stable and non-democratic countries. That is why I feel we should move to be more green, both for the enviroment but also for the internal security of Canada as well. The less we rely on this oil, the more flexibility we have in persuing just politics. Like condemning countries that inhibit their peoples human rights (ie: Saudi Arabia) or countries that may act belligerently towards it’s neighbours based on their own Oil agenda (ie: Russia). The demand for Oil will be doing nothing but increasing in the future and the Oil reserves will inevitably be doing nothing but decreasing. Not to mention a favourite tactics of terrorist recruiters is to blame Western interference in Middle Eastern countries, their politics and policies, in keeping muslim people from reaching a higher standard of living. And what is one of the big reasons we are involved or concerned with Middle Eastern countries policies? OIL!

    I’m not going to endorse any political party or position here, but there are more issues connected with going green than whether or not we may have a buck or two less in our pay cheques every week. Gas in my area has gone up and dropped about 30 cents roughly in the past week and a half. For me this is just wrong! Canadians shouldn’t have to put up with this type of fluctuation because somewhere around the world a hurricane is threatening a refinary (Ike anyone?) or terrorits blow up a pipeline (Iraq) or some oil platform is taken over by rebels (Nigeria) or somebody just doesn’t like us (Venezuela).

    I don’t have the answers. But as Canadians we need to be thinking more progressively than this. Canada should be a global leader, not a follower.

  31. Travis,

    a few questions which need to be answered:

    Is it purely a matter of global warming generally or is it also an important matter to find out how much of it is caused by mankind?

    If some of global warming is caused by mankind, but not all, then would it not be prudent to finds ways for adapting to a changing environment, rather than putting all eggs in one basket?

    If the Green Shift carries the potential within for possibly making global warming worse (involvement of mankind through distorted markets)should we not look at all aspects of such plan before implementing it?

    If terrorists can so easily blame (excuse) their behaviour on half truths, does that not say more about the gullibility of their fellow citizens, and shouldn’t that gullibility be seen as the root cause of world wide turmoil, rather than oil?

    If oil is the scarce commodity now, and we manage to wean ourselves off oil, could you confirm that there will be no other scarcety of commodities in the future?

  32. Francien, are you J.Baird?

  33. Style: Given the subprime mortgage debacle, and the bailouts going on like crazy, this might a particulary bad time to be claiming that the markets “know” much of anything beyond short-term profits. If anything, the evidence has shown us that the market doesn’t care a whit about the long term future.

    Sean S.: If people start using less carbon, revenues will certainly go down. This will be compensated for by increasing the level of the carbon tax that is charged on the remainder that is used thus furthering the incentive.

    A number of economists also suggest that the efficiency gains made, and the industries that spring up supporting a green economy, will further add to the tax base in that fashion. While I believe that, I don’t like to factor it in, as it sounds too much like laffer curve economics for me to be comfortable with it before I actually see it.

  34. Carbon taxes on imported goods is where this scheme really comes unstuck and where there is no basis except national self-flagellation for proceeding …

    …and anyway, whatever the cause, current ice coverage in the arctic is actually up over last year, so here’s to something or another.

    Fortunately, Dion is doomed to failure, so we only have Harper’s cynical pandering to worry about in this respect and he has no intention of doing anything concrete.

  35. Prediction:

    future’s scarcety of commodity will be: common sense.

    Phillip, who is J.Baird??

  36. I certainly hope so, Francien. After all, common sense is most often an appeal to the old ways of doing things. Common sense told us that heavier things fall faster than lighter things. That women should be kept in the kitchen and away from politics, that eliminating slavery would lead to an economic downfall.

    The record of common sense really isn’t all that great, when you start to investigate it.

  37. John Baird is a comedian and one of the greatest environmentalists to ever live.

  38. T.Thwin,

    common sense is not time related. Common sense has nothing to do with history or future for that matter. It’s an attitude.

    That thingy about keeping women in the kitchen and out of politics in relation to common sense makes no sense at all. Common sense tells us that only after men learned how to cook could women come out of the kitchen. Or else we all would have starved to death.

    But now that we’re into cooking up new complicated recipes, tell me if you think Canadian manufactured goods will become cheaper, or more expensive under the proposed Liberal Green Shift?

    We have a recipe selected, now let’s see your cooking skills.

  39. This is another proposed tax on consumers which would mean higher prices, less consumption spending and less jobs. It would all add up to a huge global slowdown.

    Having said that, it is a positive idea for the planet which badly needs some help and it's good to see a lot of Canadians realizing this, despite the fact Canada would lose out a lot on its exports. Very difficult issue, but the fact it is getting discussed properly means we are making some progress.

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