Monday, June 02, 2008

Do McGuinty and Charest Reject Carbon Tax?

Whooee! I was just over to Steve V's fine blog, Far and Wide, where he's talkin' about the new cap-and-trade deal between McGuinty and Charest. Steve's post is mostly about how PitBullBoy Baird is all hot under the collar and don't like the idea of the provinces workin' independently for the sake of the planet. I hear Dubya says the same things about Schwartzenegger.

An anonymous commenter characterized the deal as a rejection of carbon taxes. Here's what the nameless one said.
Anonymous said...

Interesting that you do not note that the two Liberal premiers of the two largest provinces where the Liberals need to maintain and acquire new seats have REJECTED Mr. Dion's carbon tax and favour the NDP cap and trade approach.

I agree that a realignment in QC may be in the works but I wouldn't be gleeful about it if I were a Liberal activist.

The Charest/Dion enviro message will reinforce the NDP narrative come election time.

8:06 AM, June 02, 2008

I think we can safely assume the anonymous commenter is an NDP backer.

REJECTED? I ain't so sure about that.

I don't see this as a rejection of a carbon tax. In many European and Scandinavian jurisdictions, carbon taxes and cap-and-trade work side-by-side to reduce GHG's.

McGuinty has said he prefers the cap-and-trade tactic but I can't recall any quotes where he's rejected or even REJECTED a carbon tax. Dion did reject a carbon tax not long ago. I'm sure we'll all be reminded by anonymous NDP commenters soon enough. Dion changed his mind and the carbon tax idea is getting quite good acceptance. McGuinty and Charest won't be afraid of embracing a winning idea; especially, one that they haven't actually rejected.

If I purchase a new sofa, that does not mean I REJECT chairs. It simply means that I am adding one component to my living room seating capacity.

The Green Party is calling for a multi-pronged approach with two of those prongs being a carbon tax and sector by sector cap-and-trade implementation. Most observers and experts seem to think each system has merit. Proponents of each argue as to which is faster to implement.

In an interview last week, Iggy broadly hinted that the Grits will include cap and trade in their tax shift proposal.

The only ones who are REJECTING actions known to be positive are the NDP and the Con's. The NDP's rejection of a carbon tax flies in the face of EU experience and Kyoto target-meeting results.

Only the Con's are rejecting cap-and-trade and rejecting a carbon tax. Their plan: wait until after the US election to see what their masters dictate. Stall, obfuscate, nit-pick, demonise, scare and promote the status quo.

It is a well known fact that the federal government is the most effective arm of government when it comes to applying and collecting taxes. Outside of Quebec, we use the federal government to collect provincial income tax as well as most taxes. Also, wrt the revenue neutral tax shift idea, the provinces don't collect enough income tax to make a revenue neutral carbon tax a well-funded environmental solution.

Besides, somebody has to do something. The provinces, like some US states, are realizing that the federal level i sluggish and ill-inclined to act to save ol' Mother Earth. BC has introduced a carbon tax. The Western provinces are working on an international carbon market with some western states. Ontario and Quebec are collaborating on a cap-and-trade system.

The Fed's are doing just about nothing and the NDP is insisting it has the one and only solution.

(Note: This post is an edited version of a comment I posted at Far and Wide.)


Anonymous said...

Hey Jimbobby: yup the post was from an NDP'er I confess. You may reject the word reject but I would suggest that would be splitting hairs from a realpolitik perspective.

As Layton said he is happy to debate the merits of any proposal to reduce ghg emissions. The NDP favour cap and trade because it will have a hard cap (unlike the carbon tax proposal as we have heard thus far) and it will require that the big polluters pay. It would also have money available to govt to offset green initiatives with consumers and industry.

I know that Greens favour having both cap and trade and carbon tax - in an ideal world that might be possible but it would cause TOO much economic hardship at the national, provincial and individual levels.

As grumpy voter over at liblogs has pointed out there are consumer/voter revolts in countries that have implemented a carbon tax. If a parent is having a hard time getting to work and feeding their kids TODAY they will not support a policy that promises to give a cleaner environment 50 yrs or 100 yrs from now.

The cap and trade approach will enable government through the revenue generated (unlike a revenue neutral carbon tax) to actually improve rail infrastructure, public transit, help local farmers, help homeowners and landlords green their homes and rental properties.

Until we can help poor, working class and even middle class families afford the transition to greener economy and lifestyle, they will vote their immediate interests over their grandchildren's interests.

JimBobby said...

Well, Anon, when you tax carbon, the ones that use the most of it are taxed most heavily. With that in mind, I don't see how the NDP contends that a carbon tax does not require that the big polluters pay. Of course they pay. Everyone pays according to their output. Big polluters pay big taxes. What's so complicated about that?

On revenue neutrality: I cannot say what the Liberals plan. I am familiar with the Green policy. The idea of revenue neutrality is with regard to the overall revenue generated. The individual will not likely find complete neutrality. If you waste energy, you will pay. Maybe the cut in income tax will offset that. Maybe the cut will more than offset it. After all, the big polluters are going to be paying the most.

Without some offsets created by tax shifting, we will face the problems we're seeing in Europe. We can learn from their experience and tweak our plans accordingly. Or, we can dig our heels in and insist that we have the one-and-only correct solution while we stand in the way of everyone else.

The cap-and-trade approach, as you say, is not revenue neutral and generates revenue for the government. The dirty old corporations who remit that tax to the government are going to recoup it the same way they always do: by squeezing it out of the end user.

So, we have an idea that's revenue neutral versus one that raises revenue. Ultimately, the consumer pays. Which plan is more consumer friendly?

Remember, we can and should shift spending just as we are shifting taxes. We are subsidizing the oil and gas industry to the tune of $1.4 billion a year. That needs to be shifted. We are involved in a pointless and non-productive fiasco in Afghanistan. Retooling towards a less militaristic approach will save billions. WE throw billions at a healthcare system that is all about cure and ignores prevention. We can save money there, too.

When we save money by shifting away from those and other non-productive spending, we free up money for environmental priorities. In other words, we don't need to raise more money. We need to use the money we are raising sensibly -- and, we need to raise that money in a way that encourages earning while it discourages pollution.

As far as the "hard cap" goes, the only reason cap-and-trade can function is when some exceed the "cap" and are forced to pay money to those who do not. The success of the system depends upon some participants exceeding the "hard" cap. It does work and I'm not ruling it out. I'm only pointing out that the sales rhetoric of a "hard cap" is no guarantee that pollution will be capped -- only that exceeding caps will incur financial penalties.

Producing excess GHG in a carbon tax system also incurs financial penalties.

The appeal of system that uses cap-and-trade exclusively is that it appears to take the onus off of the little guys. In reality, the little guys still pay but it is indirect and they pay the big bad oil companies and not government. The majority of little guys are smart enough to know they will pay in the end.

By attempting to paint cap-and-trade as completely painless for the end user and something that forces only the big polluters to pay, the NDP is pandering a la Clinton and McCain and their gas-tax holiday idea.


Anonymous said...

Let McGunity and Charest speak for themselves in the debate Layton is happy to have. I haven't heard either of them "rejecting" a carbon tax.

On the cap and trade, the NDP proposes to put all the money into green solutions. So how will low-income Canadians cope with the rising oil and gas prices?

If one doesn't want to increase the number of Canadians living in (or near) poverty, doesn't any carbon pricing strategy have to be combined with tax credits, changes to income taxes or other means of sending government money to low-income Canadians? The Liberals have hinted that they might propose such things, the Greens have proposed such things, but the NDP seems to think such things are not needed in a cap and trade system. How does that actually work? Or what am I missing about the NDP plan?

Kyle said...

On Politics with Newman both McGuinty and Charest made remarks to the effect of the two systems would work well in tandem...

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