Raving Canuck’s Guide to the Trudeau Government’s Carbon Tax Smoke and Mirrors

Reprinted without Permission. But this is juicy!

may 21, 2018 by graeme c. gordon, posted in canadian politics, ontario politics

By Josh Lieblein

For what seems like forever, the Trudeau government and their provincial allies have been pushing for some sort of pan-Canadian price on carbon.

Recall that the current Prime Minister was once of the opinion that the provinces should be left to decide how to make consumers pay. However, Environment Minister Catherine McKenna has made it perfectly clear that a carbon tax will be imposed on provinces that don’t implement their own system of carbon pricing, and she isn’t backing down in the face of threats from provinces that are, or might soon be, governed by Conservative or Conservative-adjacent parties.

The provinces have until the end of 2018 to draw up their own carbon tax or cap-and-trade plans, but at this time barely half the provinces (Ontario, Alberta, Quebec, and B.C.) will meet the government’s standard, setting the stage for a legal showdown led by Saskatchewan. McKenna seems pretty confident that the Supreme Court of Canada will find — as they usually do — in favour of the Liberal position, citing a legal opinion sought out by the province of Manitoba. She’s also pretty sure that the federal Conservatives, who have promised to scrap the tax if they win the 2019 election, won’t get that opportunity — or that they won’t follow through if they do win.

Unfortunately, the Liberals seem to have spent more time obfuscating the details of their vaunted carbon tax implementation than they have with the actual implementation. It’s one thing to posture for the cameras while trying to show how much smarter than the Conservative rubes you are, but it’s another thing entirely to not be able to answer basic questions about something that could fundamentally alter revenue streams in this country. It’s especially problematic when you’re promoting this tax as a method of changing behaviour, because how are people supposed to change their behaviour when they don’t understand what’s going on?

Well, I’ve taken it upon myself to categorize exactly how this government continues to make it difficult for Canadians to get a handle on how this new tax will affect their lives.

What’s The Point Of A Carbon Tax? (Besides the Obvious)

Naturally the Liberals won’t admit that this thing is meant to pump money into their coffers, so they’ve employed other methods of convincing the public that it’s a good thing.

The government did promise to reduce carbon emissions by 30 per cent by 2030, and it can be argued that this carbon tax is one way of getting there. But the reality is that people don’t stop driving because gas is more expensive, and that while a tax does affect people’s choices with respect to the types of cars they buy and the number of days that they drive to work per week, it requires a rather large jump in the price of gas and takes quite a bit of time for the effect to be noticed. Data from B.C. shows that the reduction in emissions caused by the carbon tax there was offset by the emissions generated from the province’s overall economic growth.

An ATIP filed by the team at Ottawa-based news outlet Blacklock’s Reporter shows that the feds don’t really understand the full impact of the tax themselves, which is troubling to say the least. For this tax to actually reduce emissions and change behavior, the right combination of incentives for business to cut down on how much carbon they produce has to be offered in exchange. But there’s lots of concern that the tax would “cascade through the economy” and lead to increases in the costs we all pay from day to day. Even articles that are pro-carbon tax have to concede (repeatedly) that it’s impossible to calculate all the economic effects of a pan-Canadian levy.

There’s also a worry, originally floated by Brad Wall when he was Premier of Saskatchewan, that the federal government will withhold money to the provinces that do not comply with the Liberals’ demands to initiate some form of carbon pricing. To her credit, McKenna has ruled this out for equalization payments, but not for infrastructure transfers and the like.

How Much Is This Thing Going To Cost?

The Liberals have been all over the map on this question. The provinces will have a $10 per tonne tax imposed on them by the federal government this September, and pricing will rise to $50 per tonne by 2022. But in order to make the 219 million tonne reduction figure that was talked about before, the tax would need to be $200-$300 per tonne per year.

Indeed, the folks over at Blacklock’s Reporter have found proof that the Department of Finance considers the $50/tonne tax to be only the beginning. They have admitted that it won’t be enough to curb emissions enough to meet those aforementioned targets, but the only written proof of an increase is another secret “sensitivity analysis” found by Blacklock’s Reporter which shows that it’ll rise to $75/tonne by 2030.

The Conference Board of Canada estimates that the tax will cost $3 billion and negatively affect the Canadian dollar, but that’s in the aggregate. How much will it cost per person? Nobody from the government is saying.

We also know that the tax won’t apply across the board. It won’t apply to farmers, or companies who emit less than 50,000 tonnes of carbon per year. It is, however, estimated to cost about 12 cents extra per litre of gas when it is fully implemented in 2022.

Is The Carbon Tax Unconstitutional?

There’s no question that the idea of a carbon tax — for those who have heard of it and understand what it means — is deeply unpopular, a fact that presumptive Premiers like Doug Ford and Jason Kenney are seizing on in their campaigns. Poll-pushing, however, will only get you so far. The big question is, is there a legal peg for the opponents of a carbon tax to hang their hats on?

Brad Wall argued that federal governments cannot tax other governments as per S.125 of the Constitution Act. To wiggle out of that bind, the government will actually have to claim that the carbon tax isn’t actually a tax, or claim that it’s not intended to raise revenue.

The “Revenue Neutral” Fallacy

The favoured talking point of carbon tax proponents is that the money doesn’t leave the province, and that whatever the feds collect will be reimbursed. Well, B.C.’s carbon tax started off “revenue neutral,” all right, but things went sideways pretty quickly, with tax relief measures dropping off year by year until the NDP-Green coalition did away with the idea of revenue neutrality entirely. The Alberta NDP used a similar trick of counting pre-existing tax credits in the tax relief that would make their carbon tax “revenue neutral.”

Then you have Manitoba, who will be implementing a flat $25/tonne tax this year (that the NDP opposition is trying to delay, go figure), which does meet the government’s threshold to avoid being dinged with the $10/per tonne imposition I mentioned before, but Manitobans have received no assurances from the feds that the national rate won’t be raised on them in 2020. So, if the Liberals are so intent on pushing the line that “the money stays in the province,” why wouldn’t they let friendly Manitoba off the hook?

Call me cynical, but the same government who turned a “modest deficit” into the monster deficit we have now just might be tempted, desperate to balance its own books, to make this tax less and less neutral as time goes on in a similar fashion, or engage in some “Ottawa accounting” to make sure Manitobans pay up.

Is Cap-And-Trade A “Carbox Tax By Another Name”?

While we’re on the subject, and while an election is being fought (in part) on this issue, it seems like a good time to uncover the shell game that is cap-and-trade.

First, let’s explain what cap-and-trade actually is. The government introduces a nebulous “cap” on the amount of carbon a consumer can produce. In order to exceed this “cap”, the consumer has to buy “credits” from another company or invest in government programs which will magically transform them into companies that produce less carbon. If you happen to be a chain of gas stations, you’re likely going to incur lots of costs as a result of exceeding your “cap”, which means that you have to pass on some costs to your purchasers, which means — you guessed it — higher gas prices, which means in turn that Doug Ford is going to promise to scrap the whole thing.

So what cap-and-trade amounts to is another indirect cost imposed by the government, which creates the potential for even more opportunities along the way for middlemen to take their cut as the money goes from you to government coffers (the credits literally get auctioned off by the government) to wherever else. Cap-and-trade is certainly not revenue neutral, the money may very well not stay in the province or even the country as Ontario is part of a “carbon market” with other ticking-debt-bomb locales such as Quebec and California, provides no guarantee of exemption from the federal carbon tax in the years to come, and, most of all, does even less to meet emissions targets than the carbon tax.

But, strictly speaking, no, it isn’t a tax!