Why a tax on carbon won’t solve climate change

In Canada, the climate change debate has focused on Ottawa’s attempts to impose carbon taxes.

Proponents of these taxes, such as the federal Liberal government, say that only a price on carbon can adequately reduce the greenhouse gas emissions responsible for global warming.

Opponents counter that carbon taxes can never work.

But in a new book, Simon Fraser University economist Mark Jaccard says both sides are wrong. In theory, he says carbon pricing should work. In practice, however, it doesn’t — for the simple reason that in the real world of politics. it is too difficult to deliver.

“The carbon tax is, from an economic efficiency perspective, the perfect policy,” he writes, “which is why a lot of people, especially economists, keep saying we must price carbon emissions.

“But this statement is factually incorrect. In the real world of politics and policy, the selection of (emission-reducing) policies involves a trade-off between cost-effectiveness and the likelihood of implementation. Single-mindedly pursue carbon pricing and we could end up with nothing.”

The reason, Jaccard says, is that both sides of the climate debate are caught up in myths. The myths of those who deny climate change are well-known — that global warming is unrelated to human behaviour, that scientists who warn of the dangers posed by such warming are part of a vast conspiracy of radical environmentalists.

But those who believe, like Jaccard, that climate change does pose a global risk, often have their own myths as well.

One is that energy efficiency is profitable — that the cost of energy-efficient appliances and buildings will be more than compensated for by, say, reduced hydro bills.

Unfortunately, Jaccard says, the evidence shows this is rarely true.

Another myth, he writes, is that individuals can continue to indulge in energy intensive behaviour without harming the world, as long as they buy enough so-called offsets to reach a state of carbon neutrality. Once again, he says, the evidence shows that many of these offsets do nothing to reduce carbon emissions.

A third myth is the belief that renewable energy sources, such as solar and wind power, are already cheaper than fossil fuels. They are not, he writes, which is why developing countries remain so determined to use carbon-rich fuels like coal.

The problem with these kinds of myths, he writes, is that they foster the view that market forces alone can solve the climate change crisis. They thus let politicians off the hook.

But it is Jaccard’s account of the 2009 British Columbia election campaign that is most telling. That was the election fought just after Liberal Premier Gordon Campbell had brought in a revenue-neutral carbon tax.

To economist Jaccard, the tax was a no-brainer: it would discourage carbon-intensive behaviour without reducing economic growth. But to his surprise, Campbell’s political opponents — led by the provincial New Democrats — managed to convince many voters that this was nothing but a tax grab.

The anti-carbon tax campaign, Jaccard writes, was characterized by blatant lies and mistruths. But people bought it anyway.

In the end, he argues, Campbell was saved only by the global recession. Thinking that Campbell could handle the economic crisis better than his NDP opponents, British Columbians overcame their distaste for the carbon tax and voted him back into office.

For Jaccard, the 2009 B.C. election campaign served as a brutal reminder of the political difficulty in selling any kind of carbon tax, no matter how virtuous, to voters. He argues that regulation of emissions, while ultimately more costly than carbon pricing, would be politically more successful.

Given that some economists calculate that the federal carbon tax would have to rise from $20 a tonne now to $210 a tonne by 2030 in order for Canada to meet its emission reduction targets — a hike that would result in gasoline prices increasing by 40 cents a litre — Jaccard may be right.

Thomas Walkom is a columnist for Torstar Syndication Services.

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