Federal Carbon-Tax System: Robust or Bust?

By Patrick O’Brien (AIMS On Campus Student Fellow)

The Federal Carbon-Tax has been the primary subject of debate in politics within the last couple months. The system is designed to tax consumers and businesses currently at the $35 per carbon tone, as an incentive to consume less and therefore produce less carbon emissions. Premier of Ontario Doug Ford has claimed that he will be dismantling the current “Cap and Trade System” that the Province abides by, and the next step will be the Federal Carbon-Tax system. The Cap and Trade system allows a certain carbon limit per firm to produce, and to continue production of goods, the firms either purchases credits from another company, or stop production. The main problem here is that the credit now “trade” like financial products in the carbon market, which independent companies then profit on by acting as a broker between firms that need the credits.

The new Federal Carbon-Tax is receiving a lot of criticism lately by politicians and consumers, as they feel the policy will not be as effective as initially stated. At the Summer Premier meeting in this past June, Premier Dough Ford along with Premier of Saskatchewan Scott Moe publicly announced that they oppose to the program, and that Saskatchewan will be going to court (with aid of Ontario) to challenge to proposed plan, and Federal jurisdiction to impose the tax on residents of Saskatchewan. PEI has also joined the list of growing Provinces who declare they will not implement the Federal Carbon-Tax program. PEI’s Environment Minister Richard Brown stated that the province will be able to reduce their carbon footprint by 30 percent below 2005 levels without introducing a tax. This will be included in the climate action plan to be submitted to the Ottawa on September 1st, but the Federal Carbon-Tax will not.

Why all the opposition against the carbon-tax program? The Provinces feel that the effects of this taxation on consumers would be unjust and would not promote the reduction of carbon emissions. Consumers would be affected by higher prices in gasoline, electrical heating, natural gas for homes, therefore effectively increasing the household costs and reducing the relative wealth of consumers. The other argument is that where a large amount of carbon emission comes from transportation, many driving would be hit with higher gasoline prices of roughly 11.6 cents per litre. Marginal but painful increase in necessity goods such as this would not have a profound effect on carbon reduction. It would just reduce wealth across consumers and consumption in other goods.

While some Provincial Governments are neglecting the Federal Carbon-Tax altogether, there has not been a definitive solution provided by these same Governments to replace the program. If they are to reject the Carbon-tax plan, then we need to see actual alternatives besides statements that just suggest action will be taken to reduce emissions. Besides the fact the countless hours and millions of dollars has been invested into the development of the Federal Carbon-Tax plan, it is also a major distraction to other large political problems Canada faces such as international trade negotiations, and primarily NAFTA. There needs to be a joint-meeting between Provinces, like that of this summers Premier meeting in New Brunswick, so that we can conclude with the next steps of carbon reduction across Canada.

 

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