Preston Manning on putting a price on carbon

In September, Preston Manning was linked vaguely to a new call for a carbon tax—he was said to support the idea of full-cost pricing “in principle.”

For the sake of clarification, I passed along a question to him through his office: “Do you support establishing a price on carbon, either through a carbon tax or a cap-and-trade system?”

Here is the response I received via email yesterday.

“I support the concept of moving towards full cost accounting with respect to energy production – which means determining the negative environmental impacts associated with any energy project, adopting measures to avoid or mitigate those effects, and ultimately integrating the costs of those measures into the price of the product.

As you know, the two principal approaches to accomplishing this, with respect to the production of energy from hydrocarbons, are through a carbon tax or a cap-and-trade system. I believe that the carbon tax involves less interference by governments in the marketplace than the cap-and-trade approach.

However I also believe that the carbon tax is misnamed, as the public’s idea of a tax is a levy on income or the sale of a good or asset, the proceeds of which go to the government to pay for public services – which is fundamentally different from the economist’s idea of using a tax to internalize an externality. It is the communication of the carbon tax concept to the public which I feel was hopelessly bungled.

I also believe that if you are going to apply full cost accounting to the production of energy from petroleum sources, then the same concept should be applied to every other energy source, since none is environmentally neutral. For example when the oil sands producers tear up several hundred square kilometers of forests in northern Alberta, the cost of mitigating that activity are incorporated into the cost of the operations through reclamation bonds. But where then is the reservoir tax on the hydro producers of this country who have flooded forest areas in Canada the size of lake Ontario? And similarly, where is the radiation tax on nuclear power producers, and where are the environmental levies on wind and solar producers?

In my view the application of full cost accounting and pricing to hydrocarbon producers should be conditional upon the simultaneous application of this concept to all other energy producers.”