Silver Donald Cameron

The Return of the Carbon Tax

November 22, 2009

Lemme tell you about a carbon tax you’re gonna love. Two such taxes, actually. I tell you, kid, Stephane Dion had the right idea, but the wrong sales pitch.

The fun starts with the government giving you maybe $2000 as a carbon dividend. You like it so far? Thought so. And the government gets the money by imposing a tax on everything that emits carbon dioxide into the air. The total amount raised by the carbon tax is the same amount that’s being distributed as a dividend. So it’s a wash. The government is no better off at the end of the day.

But you’re better off, if you’ve been frugal with energy, living in a snug house with solar hot water and wood heat, travelling on public transport, eating local food. You lose a bit of your dividend in taxes on gasoline and electricity and what-not, but you get to keep a good chunk of your carbon dividend. Let’s say you pay $400 more in taxes. That money just reduces your windfall dividend. The carbon tax still leaves you $1600 ahead. You like it so far, sonny?

Fred Foulwater doesn’t.

Fred’s a carbon glutton, so he’s definitely worse off. Sure, he also gets his $2000 dividend — but he lives in a huge house in the outer suburbs, he doesn’t turn down his thermostat, and he commutes 60 km. to work in a monstrous SUV. He has a penchant for exotic tropical fruit in midwinter, and he flies a lot, so in the end he pays a lot of tax — which doesn’t exactly feel like a tax, but feels like higher prices. Let’s say Fred’s profligacy adds $3600 to his overall tax bill. So the new taxes have eaten up all of his $2000 dividend and another $1600 besides. That’s the $1600 that ended up in your pocket, buddy.

Pollute if you want. Buy junk if you like. Emit as you choose. But it’s going to cost you — and the money captured from you goes directly to your clever neighbours. As time goes by and the whole society becomes more serious about slashing emissions, the taxes and the dividend go up. Stupidity becomes more and more expensive.

Now this is simple stuff. Basic economics, kid. Raise the cost of bad behaviour. Lower the price on good behaviour. Watch things change. Why do you think cigarettes — which once cost $3 a carton — now cost $100?

That’s the first tax — easily administered, totally fair, a boon to the poor and the smart. The second one is equally simple. (It comes from the celebrated economist Jeff Rubin, who recently spoke in Halifax.) Put a hefty tax on factory emissions in the US and Canada, which will run up the price of, say, steel — but tax imported steel, too, by imposing a tariff based on the carbon emitted during its manufacture overseas.

Since North America tends to have cleaner plants, the carbon tax gives an immediate advantage to our steelmakers. And once we add the true costs of the emissions into the price of the steel, it turns out to be cheaper to make the steel where it’s going to be used. Even if the final price were identical, we still have the advantage — because we don’t have to pay, in cash and in carbon credits, to ship our steel halfway across the world.

So the jobs that used to migrate away to low-wage havens overseas start coming back. Apply the same principle to food, and food imports slow to a trickle, while local farms start making money. Our whole economy turns green and wakes up.

Environmentalists and trade unionists discover that they’re allies. They start working together. They form organizations like the Blue Green Alliance in the US — the Steelworkers, the Communications Workers, the Utility Workers and the Laborers Union on the one hand, and the Sierra Club and the National Resources Defence Fund on the other. Their slogan is Good Jobs, Clean Environment, Green Economy.

More jobs, a green economy, better air, better food. All brought to you not by magic, but by the astute application of taxes. Taxes, kid! Gotta love ‘em!

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