Sunday, June 1, 2008

Carbon trading or carbon taxes?

The debate rages on. Here's how Cameron Smith at the Toronto Star describes the carbon tax (Dion plan) versus carbon trading (Layton plan) debate in yesterday's news:

Imagine a large fire in a downtown building. Two fire trucks arrive, each from a different station, and they pull up in front of the only fire hydrant near the building. Firefighters from each truck roll out their hoses – and then for the next half-hour, while the building burns out of control, they argue over who has the best hose for the job.
This National Post story - Mr. Dion prepares to peddle a difficult tax - is interesting in that it identifies all the contradictory positions and strange bedfellows.
So there you have it: those forces most dedicated to defending the environment by battling emissions can’t even begin to agree which remedy is most suitable. Not only can they not agree with one another, Dion can’t even agree with himself, since he now fervently supports a carbon tax, which he fervently opposed when he was running for the party leadership.
The NDP opposes Dion's carbon tax plan and supports a cap and trade system to protect low income earners:
“The cap and trade system ensures that big polluters pay their fair share, and it makes it possible for more people to afford green solutions,” explained Layton.
However, to temper criticism from environmental groups over the NDP position, Layton offered an olive branch.
NDP Leader Jack Layton launched his party's latest climate-change plan yesterday with an olive branch to the Liberals and Greens, saying he welcomes debate with his political rivals over carbon taxes.
The CLC position: (page 7)
In line with the polluter pay principle, the CLC will support a national Cap and Auction Carbon-Pricing System. In such a system as proposed by the CLC, the government would fix a maximum emission level, in line with the overall national targets, literally setting a cap for different industries based on the industrial sector’s ability to reduce their carbon emissions in a realistic time frame.
Suzuki Foundation report: They support a well-designed tax or trading system. Last week, Suzuki was critical of Layton's position opposing Dion's plan.
At the end of the day there is marginal difference between a well-designed carbon trading system or a carbon tax policy. Both can be made to meet very similar ends. A trading system sets an absolute limit on greenhouse gas emissions. Similarly, a carbon tax will also inevitably “cap” emissions, as the price is adjusted until the desired outcome is achieved.

Both policy options involve passing the cost of carbon on down through the supply chain and on to industry and eventually consumers. This is the raison d’etre of a carbon price – to let consumers know, through a price signal, that carbon emissions are costing the Earth.
Meanwhile, last week the BC NDP voted against Gordon Campbell's carbon tax plan. Carol James is accused by the Sierra Club of pandering.
VICTORIA -- New Democratic Party MLAs voted against B.C.'s new carbon tax last night, taking a calculated risk that the support they can reap in rural British Columbia will outweigh the enmity of influential environmentalists.

The ground-breaking tax, which takes effect on July 1, has won the support of a coalition of 16 environmental organizations. It has also angered northern communities, suburban commuters and businesses, small and large.
While it is clear that Harper wants to stall and the when the Liberals were in power that they stalled, one can't but help but wonder if the NDP is playing politics, pandering and praying that some day they may have the leverage to force the implementation of their cap and trade system. The only thing we know for sure is that absolute reductions in carbon emissions remain as elusive today as they were yesterday.

Edited to add - Carbon cap and share. Also a good read here - The Architecture of Carbon Trading - Who Owns the Sky?


Anonymous said...

Dion said the cap and trade system is good, but takes longer to implement. He said the Liberal plan will contain both, although the carbon tax would be implemented right away. A number of European and Scandinavian countries have both.

Layton seems to be trying to sell his cap and trade as a system which will not cost consumers anything, although this isn't really possible. That is why politicians prefer the cap and trade -- the cost to voters is less obvious -- and all the US politicians seem to be pushing cap and trade for that reason. Perhaps this is Layton's reason too. In BC, the NDP is hoping to lure rural voters to their side by opposing a carbon tax.

Unless Canadians are willing to pay to help the environment, Dion might be comitting suicide politically by being upfront about the costs to regular Canadians associated with cutting emissions significantly. He said his plan will contain protection for lower-income, as well as help more generally to reduce our use of fossil fuels, but this may not be enough for voters, particularly as it seems it will be attacked by both Harper and Layton.

Gary Shaul (editor) said...

Dear Anonymous,
How will Dion's plan protect the poor and low income earners? They often pay very little or no income tax at all. Landlords cannot be relied on to pass along savings.


Anonymous said...

As far as I know, Dion's plan hasn't been released and there are just some statements he has made. So I don't know what he thinks he has for low income Canadians.

BC is giving $100 upfront plus tax credits which are more than the average low-income person would pay in carbon taxes. So you don't need to pay any income tax to get that, but you do need to file a return to get the money. I think the inequity for rural voters (which argue they need to drive larger vehicles longer distances) is what the NDP was upset about.

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