Why the Hate On for Carbon Tax?

It’s hard to understand why carbon pricing has become the government policy that Canadians love to hate, the focus for countless editorials and op-eds, protests and three-syllable rhymes like “Axe the Tax”.

Particularly when most Canadians get more money back in quarterly rebates than we pay out for our carbon emissions.

Carbon pricing may be the most hyper-politicized concept in Canada today, but it wasn’t always so.

The whole idea of carbon pricing began with conservative economists who accepted the need to bring climate change under control, and thought the best way to get the job done was to mobilize the power of the private market system. It’s a form of taxation that is widely considered one of the cheapest, most effective ways to reduce the greenhouse gas emissions that cause climate change.  In fact, some of the first proponents of the system, in Canada, were some of our best-known conservative politicians.

When you hear politicians talk about “putting a price on carbon”, they’re referring to what economists call “externalities”—the societal costs that affect our lives, but that our pricing system can’t address on its own. Climate pollution is a particularly dangerous externality because it stays in the atmosphere for up to 300 to 1,000 years, but we don’t see its impacts right away when we turn on a gas furnace or buy a few litres of gasoline or diesel. Carbon pricing is meant to correct that balance by giving consumers a price signal that at least partly corresponds to the true cost of the items we buy.

Of course, not every cost can be measured in dollars. How do you put a price on seeing your neighbourhood or beloved landscape burn to the ground, losing loved ones in a devastating heat dome, or watching your community steadily overtaken by rising seas?

And how do we bring those devastating impacts back into the cost of the products that cause the problem, even with attribution science getting precise enough to name the often stupendously profitable companies responsible for the emissions?

In an economy motivated primarily by the bottom line, a carbon price is meant to make products more expensive if they have a higher carbon footprint, creating an incentive to pick cleaner alternatives. When we make those choices as consumers, we pay less for the products and services we buy.

But Canada’s carbon price is set up to be more expensive for polluters, not consumers: the revenue it generates comes back to households in a quarterly rebate, and most of us get more money back than we pay out. That’s particularly important for lower-income Canadians who can’t afford to worry about whether the cheapest products they can buy are also the lowest-carbon.

Carbon pricing gets more complicated in a global economy, where driving up the cost of Canadian products can open the door to imports from countries that aren’t as serious about tackling climate change. Canada, the United States, the European Union, and others have been looking at border carbon adjustment mechanisms to address that problem.

But every country has an interest in quickly driving down greenhouse gas emissions to prevent the more frequent, severe heat waves, wildfires, drought, crop failures, severe storms, sea level rise, and habitat loss that we can already see accelerating before our eyes.

So let’s take a step back, pause for a deep breath, and give carbon pricing a chance. It may seem risky to take real action to shift our economies and get the climate emergency under control.

But it’s so much riskier not to.