Imagine you’re NDP Leader Thomas Mulcair and you’ve just been elected prime minister. Now, you’re about to impose a massive, new cap-and-trade market on Canada as your solution to “Dutch Disease.”
In other words, you’re going to hit Canadian energy producers with a new cost, buying pollution permits from the government for emitting carbon dioxide, t hat they will pass on to consumers.
This will raise the cost of almost everything to the public. But if you’re Mulcair, you’re ecstatic.
After all, by auctioning off these pollution permits to industry, your government is securing a massive new revenue stream for itself from Canadians, worth billions of dollars annually, to pay for your new government programs.
Of course, there will be problems.
For example, since, like Mulcair, you’re going to impose a cap-and-trade regime on Canada without there being one in the U.S., you’re about to damage the Canadian economy by making it more expensive to produce goods and services here, relative to our largest trading partner.
Plus, if cap-and-trade works as you advertised it, that is, if it actually lowers greenhouse gas emissions over time, the revenues it generates for your government will also diminish over time.
Sure, you can keep raising the price of the pollution permits by imposing stricter limits on emissions, but inevitably your government will face the law of diminishing returns.
Imagine being an NDP government stuck with a signature new tax that generates LESS money for your government over time. The horror! Fortunately, the “solution” is easy.
It’s to detach cap-and-trade from the requirement to lower emissions, turning it instead into a modern-day form of papal indulgence that doesn’t help the environment, but simply makes “polluters” (translation, people) pay perpetually for the “sin” of using energy.