Monday, May 26, 2008

Carbon Tax: Good, Necessary, Politically Dangerous

The enduring problem with democracy is that the voter has an inherent conflict of interest between the good of the whole and their personal well-being. So even though voters are crying for environmentalism from their government, they are also stridently opposed to any increase in gas prices - even though an increase in gas prices is the only way to improve the environment. Governments of Canada have not tried to raise the gas tax significantly since Joe Clark was tossed out of power in 1980 for making such an attempt. Consequently, the fuel efficiency of Canadian vehicles has plummeted and our contribution to greenhouse gas emissions has skyrocketed. Canadians cry that they want something done - but they won't stomach higher gas taxes. And as long as gas prices stay low, Canadians pollute like there's no tomorrow.

Finally the market stepped in and prices have started to rise. It's a pity that the excess revenue is going to the oil companies instead of the government. The government could be offsetting the pain of higher gas prices by improving urban transit, inter-city passenger and freight rail, home insulation programs, and on and on. That's the whole point of gas taxes.

Now Stephane Dion has suggested a carbon tax and he risks losing the next election over it - even though it is an idea that is not only good but necessary to effect a transition that will prevent disaster for Canadians. I disagree with one major part of Dion's proposal: the carbon tax should not be revenue neutral. Revenue from the carbon tax should be earmarked for programs that will help offset the pain of higher carbon prices, as outlined in the previous paragraph.

I have an 11-year old Corolla that I drive sparingly - a couple thousand kilometers per year. I have put off replacing it, in part, because I'm waiting for more fuel-efficient car options to come on the market. The SmartCar is a little too small; it's more suitable for a two-car household. Hybrids offer lower gas prices but a higher purchase price and higher maintenance costs; plus, their battery presents environmental problems for disposal. The diesel VW Beetle is an excellent car with better mileage than even a hybrid, but it's way too pricey. The Toyota Echo (3-door model) was just about perfect but it disappeared almost as soon as it was introduced. Surely, now that gas prices have risen car manufacturers will start to offer more fuel-efficient options.

Better fuel efficiency in vehicles is only part of the solution. Disposable diaper prices are rising 8% this summer, according to the Globe's Report on Business. The RoB laments that low-income consumers are being disproportionately hurt by higher prices, and "their influence on demand is so weak that even a concerted effort to cut consumption might be ineffective in cooling the hot market and pushing prices back down." The RoB misses the point. The goal is not to push prices back down, but to change consumption patterns. And in that regard lower income consumers could lead the way. For example, there is a convenient alternative to disposable diapers: the disposable diaper insert. You buy a washable diaper that has a pad that can be flushed. This product is thousands of times better for the environment; it is even more convenient; and it is far cheaper. Once widely known, I have no doubt it will be adopted. We continue to rely on disposable diapers because there's big profit in them for certain companies who advertise like crazy.

Toiletries, cosmetics, home cleaning products and the like tend to face non-price competition: consumers react less to price and more to advertising, packaging, and brand loyalty. That's why people buy toilet paper and paper towels that cost more than twice the lowest price brand. That's why they fall for heavily-advertised but ridiculous products like disposable brooms. It will take a massive force to get the market to stop succeeding with ever-more ridiculous disposable products. Sharply higher prices and resulting exposure to cheaper alternatives might just wake us up.

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3 comments:

Anonymous said...

Yappa: The NDP cap and trade solution would provide a hard cap for industries. Industry makes up 50% of Canadian carbon emissions. For corporations that surpass the cap they pay a penalty to government which can then be used to offset increased public transit, rebate programs for retrofitting homes and business, improving rail infrastructure to increase commuter and commodities transport.

Do Canadians have to take more responsibility for their carbon footprint. Of course. But the LPC proposal is not the only way to encourage emission reduction.

First, if rumours are true, the LPC will shy away from a carbon tax on gas and heating. I would argue that these two things make up the largest percentage of an individual's carbon footprint. The very logic of implementing a carbon tax would therefore be comprised should this be the LPC plan.

I personally don't support a carbon tax because I think that it will disproportionately hurt fixed income, and working class families who will see higher costs on a day to day basis but will not see the tax shift benefit except on a yearly or at best quarterly basis. Upper middle class and well off Canadians will be able to mitigate the costs of a carbon tax by buying hybrid cars, or buying homes closer to their work, or paying the premium for organic locally grown food or putting in geothermal or solar equipment to heat and light their homes. These options are not available to most Canadians.

Cap and trade is an equally viable option from an environmental perspective. It has been supported by the David Suzuki foundation. The NDP is arguing that the first step for both environmental AND social justice should be cap and trade.

Once we have more transit, more green affordable housing, more locally produced food, more green collar jobs - essentially more green options, that would be a time when we could ask for greater personal sacrifice because then the transition would be less painful for those that can least afford it.

Partisan alert - I would remind progressives who happen to vote Liberal that we are in this crisis in part because of 13 years of inaction by successive Liberal governments. Throughout that time, the NDP called for more federal money and policy to meet Kyoto targets, for increased funding to municipalities for transit and green affordable housing. Folks should get a full picture of the NDP's Green policies - visit (www.ndp.ca/greenagenda)

The Grumpy Voter said...

As an old fart grumpy voter who actually remembers Joe Clark's government falling and who has lived through now his third *high gas prices, low supply, high inflation crisis* the fuel efficiency of vehicles has actually incrementally improved since the 1970's, so I'm not sure where you're getting the notion they haven't. That said, what Detroit produces and what people buy is directly linked to said price of oil. In the early to mid-70's, Detroit produced HUGE cars that got 10 Feet/gallon. When the energy crisis hit, those boat mobiles suddenly created a situation where nobody could afford to drive them (similar to what is happening now with the high prices and SUV's) and it very nearly bankrupted Chrysler Corporation. (Chrysler's salvation was a loan from the US government and the creation of a small, efficient and affordable family car for the masses - the K-Car). The energy crisis also forced government to open the border to small econo-boxes from Japan that were mechanically well designed and fuel efficient - but poorly designed for the Canadian winter - they were rust buckets - that's why you don't exactly see a helluva lot of 1977 Datsun B210's driving around anymore. When the recession hit in the 80's, the price of oil plummeted and cars started getting bigger again. In the 90's, when oil was $10/barrel and there was a huge oil surplus, Detroit started producing SUV's like it was going out of style (along with their Japanese counterparts) and soon, our highways and biways were filled with gas pig vehicles again.

They key factor you are failing to recognize is the economic circumstances that led to Clark getting punted out of office.

He wanted to introduce a tax on gasoline at a time when inflation was rampant, fuel was in short supply and the price at the pumps was abhorrent. (Basically what we have now - funny how history repeats itself.)

I admire your concern for the environment, but the reality is there are a jillion other things we could do that won't penalize the working poor, seniors or those on fixed incomes. A carbon tax is political suicide for Stephane Dion because the fact is, the economy will ALWAYS trump concern for the environment when push comes to shove.

ted said...

The NDP have supported the Liberal Cap and Trade proposal. In particular the NDP supported the plan contained in "Balancing Our Carbon Budget", the Liberal Party white paper put out last spring and available at
http://www.liberal.ca/pdf/docs/whitepaper_EN.pdf

The planet doesn't need the NDP and the Liberals fighting on this issue.