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Why is it so hard to do carbon taxes right?

01 May 2019 | OP ED Watch

In the National Post Peter Shawn Taylor reminds us that “11 out of every 10 economists” think a carbon tax is the best way to reduce CO2 emissions if you think you have to. But only provided they replace costly, inefficient regulations. Yet the Trudeau Liberals are piling on new regulations thick and fast, especially the new Clean Fuel Standard, that could push up the price of carbon to nearly $200 a tonne and you won’t be getting one of those vote-bait rebates for that hike in gas prices.

Taylor is right that there is substantial agreement on the desirability of substituting taxes for regulations if reducing GHGs is your priority. He quotes the “self-appointed Ecofiscal Commission” that “Regulations are more expensive than carbon pricing,” and adds “Earlier this year, 27 Nobel Prize- winning economists made the same argument in support of a similar U. S. carbon tax proposal. “A sufficiently robust and gradually rising carbon tax will replace the need for various carbon regulations that are less efficient,” the economic experts advised.” So why on Earth are the politicians determined to get the worst of both worlds?

Given the enormous unpopularity of carbon taxes in Canada and abroad, it might seem cunning, if not wise, to hide a regulatory increase in the price of gas in a sticky mass of red tape then blame the companies or some such. It’s fashionable to target “the fossil fuel industry that caused the climate crisis in the first place” as New York City’s new climate strategy puts it, as if the reason oil companies were selling oil wasn’t that we were buying it but that they were conspiring to give us all the climate equivalent of lung cancer. But there’s a huge problem with that approach, assuming politicians are clever enough to be rogues on this file instead of fools.

It’s that they’re being fools anyway, because voters react badly to economic pain. Citizens may not always understand the source of such pain or be able to articulate their concerns into a microphone or to a pollster. But they can vote the bums out if they feel that things aren’t going well. So the more determined a government is to take drastic action on the climate front, the more determined they ought to be to get maximum gain for minimum pain because a fair amount of pain is inevitable. Thus piling the Pelion of confusing inefficient regulation on the Ossa of vexing carbon taxes seems a politically as well as economically self-defeating strategy.

If only they read the economists they love to quote.

2 comments on “Why is it so hard to do carbon taxes right?”

  1. I think the twin giants of Greek myth piled Pelion onto Ossa, in an attempt to reach heaven.

  2. Rather than pile the Pelion of stubbornness atop the Ossa of error, we have corrected the post.

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