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Climate change and the Provincial Budget

It is difficult to square Doug Ford’s recent statement that Ontario would lead Canada, even North America, in reducing greenhouse gases (GHG), with the measures announced by his government in the recent budget: let alone with their opposition to the carbon tax.

Funds have been cut from tree planting programs, and anti-red-tape measures may weaken environmental assessments and species protections amongst other things. The overall Environment Ministry budget is to be cut by 17%, not including the programs that were to be funded by the former government’s Cap and Trade program (arguably a more bureaucratically burdensome form of carbon tax than that the federal government has imposed). Shades of Walkerton, perhaps.

Nevertheless, the Premier is insistent that “A carbon tax is not the only way to fight Climate Change.” The new budget does include pricing on industrial emitters. However, its target for GHG reduction is only one third that of the previous government.

Let’s compare cutting greenhouse gases to trying to reduce smoking, which has been quite effective, with smokers reduced to 17% of the adult population from over 50%. To do that, we used every tool available:

  • Regulation: controls on advertising and display, controls on packaging, controls on where it is legal to consume tobacco

  • Education: government-paid advertising programs to inform people of health risks to themselves and of their smoke to others and offered cessation programs

  • Tax (price on smoking): the price of cigarettes as a percentage of income is way up so there is a financial incentive not to smoke—the savings are such that non-smokers have meaningfully more disposable income

  • Moral suasion: the effect of the education was to make smokers into social pariahs. It might be still OK to smoke a cigar on a golf course, but being addicted to cigarettes is now socially stigmatized.

To reduce smoking, non-smokers also paid for regulation enforcement and the education through their taxes. Smokers paid for the health costs associated with smoking through higher and higher tobacco taxes and were rewarded financially for quitting. If we had not increased the taxes on cigarettes, non-smokers and smokers alike would have borne the costs of the cessation programs, regulation enforcement, and educational measures.

The same applies to reducing greenhouse gases. We will again need all the tools available to achieve this challenging goal. We will all pay for the increased regulation and education, that will lead to moral suasion. If the Premier has his way, we won’t pay in a carbon tax, but instead in our income tax and sales taxes (or the deficit we will pass on to future generations). There is no free lunch. Even the anti-carbon tax advertising is funded with our taxes. One way or another we will pay whatever part of the new $400 million emissions reduction fund is not paid by the pricing on industrial emitters. And in the absence of a carbon tax, the tax burden of these changes will not be different if you switch to geothermal and drive an electric car: you will pay as much income tax and sales tax as the person who does nothing to change their behaviour. This is socialism for polluters.

In my MBA economics course, I was taught that pricing was a conservation tool. If a resource was scarce, the price would go up, which would reduce the consumption and increase the supply, as higher prices would motivate more production of the resource. Of course, this is a bit too simple. Elasticity of demand (how much it is possible to change how much we use) also plays in. You can give up Russian caviar a lot more easily than you can give up heating fuel in the short term: but in the long term, you can always find an alternative to anything, so in the long term, demand for everything is elastic.

The resource that is in danger of running out is “liveable planet”. It is currently free to consume. If it had a high price on it, we would do our best to use less of it, and we would try to produce more of it. We would switch to lower or zero carbon energy sources, and we would plant trees and find ways to extract GHGs from the atmosphere, and research better and better ways to source food, we would over time choose our homes and jobs taking into account commuting costs and energy usage, and the market would respond with technology research to cut GHGs. Those who acted would be financially rewarded for doing so, those who did not would have less disposable income for other things like holidays or entertainment. (All of this would be done with less bureaucratic overhead than regulation will require. I am not the first to remark that for a conservative government to choose burdensome regulation over a pricing mechanism is paradoxical.)

If the local swimming pool does not charge for admission, all the non-swimmers in the community are paying for it. If we don’t charge for pollution, all those who are making changes to cut their GHG emissions are paying for those who are carrying on as if it doesn’t matter. They are paying in taxes, but if the regulation and other measures don’t work on their own, they are also paying in lost quality of life for their children and grandchildren.

Faced with recent once in a century floods recurring much more frequently, some previously inhabited parts of Canada are now being viewed as not suitable for habitation. Science tells us that with ocean acidification, ice cap melting, and species extinction, more and more of the planet will become uninhabitable if we do not act. We are past the denial phase of our grief about this and moving through the anger phase to the bargaining phase…how much do we have to do, how much do we have to give up, should we tax carbon or regulate it?

The time has come to move to acceptance. We can’t afford not to use every tool at our disposal. A rapidly increasing carbon tax that is revenue neutral is too good a tool (Sweden, British Columbia) not to use. The Provincial government needs both to restore funding to the Ministry of the Environment and end its battle with the Federal government on the carbon tax.

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