Silver Donald Cameron

Posts Tagged ‘carbon tax’

The Return of the Carbon Tax

Monday, November 23rd, 2009

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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Jeff Rubin: Prophet of Petroleum

Wednesday, June 3rd, 2009

May 24, 2009

When Jeff Rubin said that oil was going to $50 a barrel, other economists thought he was on drugs. But it did. They scoffed again when he said it would go beyond $100. It went to $147 before dropping to $50. Don’t be suckered, says Rubin. As the recession ends, oil will go far higher — $200, $400, who knows?

For 20 years, Rubin was Chief Economist at CIBC World Markets. His newly-published book Why Your World Is About To Get a Whole Lot Smaller (Random House,$29.95) rests on a simple argument. Our entire globalized economy depends on cheap oil, but we have already burned most of the easily-obtained free-flowing oil. That’s why we’re now spending vast amounts to wring the difficult oil from the deep sea and the tar sands, because that’s all that’s left.

So the world’s steadily-rising demand for oil ultimately can’t be satisfied. According to conventional economics, when a thing is scarce, its price goes up. Higher prices stimulate more production, which drives the price down again. But not this time. With the easy oil already used, we’ll be hard-pressed even to maintain today’s production for very long. More and more dollars will chase less and less oil, and the price will soar.

When the oil price jumps, the economy slumps. One of Rubin’s startling assertions is that four of the last five world recessions were caused by upward spikes in oil prices — two after the OPEC oil shocks of the 1970s, one after Iraq invaded Kuwait and torched its oil wells, and another one right now. This recession, Rubin contends, is a result not of malodorous mortgages in Middle America, but of $147 oil.

There’s a pattern, says Rubin. The oil price rises, and the economy stalls. The demand for oil then drops sharply, and the oil price falls. Consumers and producers alike heave a sigh of relief and get back to work until the next spike. But notice this: the prices always ratchet upward. In 2000, when Rubin predicted $50 oil, a $30 price was considered high. Just eight years later, we regard $50 oil as cheap.

Without cheap oil, the globalized economy withers. As fuel costs become prohibitive, companies stop importing raw materials and shipping products halfway around the world. High transport costs, says Rubin, work exactly the same as a tariff, penalizing imports. Firms realize that they can compete more effectively if their factory is close to the consumer.

The bad news is, no more Chinese-made bargains at Wal-Mart, no more cheap food from California and Chile. The good news is, a lot more jobs in factories close to home, and a bright new dawn for local agriculture.

Coping with climate change will also erode globalization. Rubin predicts that the US will soon impose mandatory carbon controls on its own industries — and will insist that its trading partners cut their own emissions too, or face a carbon tariff for their products at the border.

Indeed, a carbon-control bill now in Congress includes a provision to impose tariffs on imports from countries with lax climate-change rules. The main target is China, but Stephen Harper’s Canada is not exempt. Expect hard questions about the tar sands, for instance. Bob Page, an Alberta energy executive, chairs the national roundtable on environment and the economy, a true fox in the henhouse. He condemns the Congressional initiative as “protectionism.” I’d call it “leadership.”

The inevitable adjustments will be painful for a small province that generates power from coal and heats its homes with oil, but we may like the eventual results. Think of walkable neighbourhoods, efficient public transit, revitalized small towns and villages, close relationships between local businesses and customers. Cleaner air, safer food, healthier forests. How bad is that? Europeans, Rubin notes, already live like that. In 1950 we lived that way too, and we thought our lives were pretty good.

Is Rubin correct? Well, this summer, Marjorie and I are going to insulate and tighten the house, build a woodshed and install a solar hot water heater. Last winter’s oil prices were an unexpected gift. They gave us a chance to prepare for the next spike — and we’re not going to waste it.

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