Comments on: A Tale of Two Elections

By: James Handley

James Handley — Thu, 13 Nov 2008 23:22:48 +0000

       Yes, William, lack of "additionality" and limited incentives for more rapid reductions are potential flaws of a cap that a tax would avoid. Some economists suggest that efficiency improvements below a cap would mostly reduce permit prices instead of leading to emissions reductions. Under a straight carbon tax, the incentives (and rewards for reductions) are continuous.
       David C., I agree, a direct "dividend" has great political appeal. On the other hand, using carbon tax revenue to reduce (or raise the threshold for) payroll taxes that discourage employment would be a badly-needed employment stimulus.
       David O., We don’t expect carbon dividends would "gyrate." As the tax rate went up as we propose, they’d go up, too.
       Aukje, Thanks for confirming that the Green Shift has support in Canada even if Dion didn’t gain seats. British Columbia’s carbon tax looks like a good model for the rest of the world, and we hope Canada will take up the proposal again. And yes, Dion and the Liberals deserve credit for holding down the Conservatives’ seat totals.
       Shahid, After we take what economists agree is the absolutely necessary step of pricing carbon emissions, then yes, there are many ways up the mountain. It’s very long and steep and will require all the best "gear" we can get — including, as you note, a shift to efficient public transportation. But carrying something as cumbersome and unstable as a cap-and-trade program might mean we don’t make it. A revenue-neutral carbon tax is just a lot lighter and smoother.
       Thanks to everyone for thoughtful comments. Keep ‘em coming!

By: Shahid BUttar

Shahid BUttar — Thu, 13 Nov 2008 18:37:23 +0000

It’s interesting to see the lack of political will for engaging climate change via concrete policies, despite the consensus (even stronger in Canada than here in the US) about the need to address climate change in the abstract. Could it be that discussing any policy pre-election runs the risk of alienating voters vulnerable to spin? The fate of Proposition 8 here in California — and the particular role of church-going people of color in rescinding marriage equality — seems to indicate just how easy it is to pull the wool over voters’ eyes.Another way to meaningfully address carbon emissions would be to upgrade the nation’s infrastructure. For instance, building a high-speed inter-city passenger rail network around the country could both (a) dramatically reduce our greenhouse gas emissions footprint, while also (b) helping pull the economy out of the current depression. There are many paths up the proverbial mountain, so maybe the best electoral strategy is for candidates to highlight climate change in the abstract and then test which among the various strategies are best received by the electorate.

By: Aukje Byker

Aukje Byker — Wed, 12 Nov 2008 23:20:58 +0000

I am a Canadian and just wanted to comment on the effect that the Carbon Tax issue seemed to have on our election. I know that the Carbon tax was often given as the reason why the Liberals didn’t win, but during the election I didn’t hear a lot of people that were that much against it. I don’t think that the Liberals did a good job of selling the idea and explaining it though. Stephane Dion did not seem to have the ability to capture the imagination of the people although I think he had the intelligence (and certainly a lot more than Harper) to lead the country. And although the Liberals didn’t do well, they were able to keep the Conservatives from having a majority which is what it looked like would happen when we went into the election.

By: David Ocampo G

David Ocampo G — Sun, 09 Nov 2008 22:05:12 +0000

If I understand the point my "tocayo" Collins is making, it is that returning all Carbon Tax monies collected to "the people" will make people readier to accept the tax. I doubt it. Let us assume a realistic Carbon Tax is implemented; as fuel prices rise, fuel consumption will fall, regardless of what people think (Durning’s #2). Again, thanks to elasticity, the price of fuel will fall. The gyrations in price and consumption will result in gyrations in "carbon dividend" checks, which will fuel more conspiracy theories than even the Internet will be able to keep up with. On the other hand, reduced payroll taxes will be perceived and appreciated immediately and will not need governmental spokespersons of limited credibility to explain them.

I agree with you completely on one point, Tocayo. What matters is getting the Carbon Tax implemented. Pronto. I feel that this can best be done by selling it as what it is. I suggest everybody keep plugging the Carbon Tax in every conversation, every blog comment, every Letter to the Editor, etc. Just like Cato the Elder ended every speech, regardless of subject, with the now-famous words "Cartago delendum est" (Carthage must be destroyed; it worked; Rome utterly destroyed that city), we should all keep plugging the Carbon Tax.

By: David Collins

David Collins — Sat, 08 Nov 2008 17:37:59 +0000

I come to bury the Carbon Tax Shift, not to praise it. I do praise the dividend return (on an essentially count-the-noses basis). Both approaches provide the essential service of reducing regressiveness in taxation. But although the tax shift reduces the cost of hiring employees, it provides little if any relief to the unemployed, the retired and the truly hard-up. (Disclosure: my wife and I are retired, and the stock market do-funnies have impacted us severely.)
That said, I believe what matters most is getting the Carbon Tax implemented. The Canadian experience is valuable, if we can learn from it. Having lived in Mexico for a number of years, I understand the political paranoia and distrust of government that is seemingly genetically programmed into Latins; but Anglos are not entirely devoid of it. Mr Durning’s first point indicates that getting the public to accept that 100% Carbon Tax revenues will be returned is of crucial importance. Not that Mr Durning’s second and third points are also important, but I feel the first is the critical one. And again I return to my conviction that getting the Carbon Tax implemented is more important than its details, which can always be modified subsequently.

By: William Fraser

William Fraser — Sat, 08 Nov 2008 14:44:34 +0000

Making the case for a carbon tax:
The latest economic downturn has unearthed three new reasons that a carbon tax is preferable to cap-and-trade: Additionality, instability, and the undercutting of success.
1. Much of the focus on carbon offsets is on "additionality", the concept that some reduction is made "in addition" to the baseline that would have been made in the absence of caps. However, we have seen a massive decrease incarbon emissions in the past month or so (and expect to see more in the near future). Clearly, these are not additional (as they have been made in the absence of caps), but there is no easy way to define a carbon offset so as not to include such market cycles.
2. I have read articles recently that current credit situation might make it impossible for businesses to have the money to spend on carbon cutting. However, I feel that a larger problem is that the current decrease in the price of fossil fuels makes it hard to justify spending on carbon cutting. Furthermore, even when/if fuel prices rise again, it is risky to make business decisions which depend on it staying high. In particular, it could be hard to obtain a loan based on such a business plan.
3. The final nail in the coffin, from my point of view, is that it discourages dramatic reductions. Suppose that I developed a high mileage car, capable of reducing total GHG emissions by 20% (roughly half of all transportation emissions). If I were to produce this vehicle, the value of carbon permits would fall to zero for several years — undercutting any market signal that should favor me. Even if I altruistically priced my car so that it sold anyway, other sectors would have no incentive to decrease their carbon emissions and would soon grow to make up the difference. In other words, the cap, advertised as an upper bound on emissions, is also a lower bound, below which it will not be economically feasible to go.
A carbon tax has none of these disadvantages.