Carbon taxes: They just don’t work

Earlier this week, we learned that the Pembina Institute joined forces with Mark Jaccard at Simon Fraser University to present yet another faulty carbon tax advocacy piece, promoting it as “research.” The deficiencies in the study’s research method are too numerous to document in a 1,000-word article, so I will focus on just a few.

The authors say a primary objective of their study was to “document evidence of any positive and negative environmental and economic impacts of the carbon tax to date.” Interestingly, 67 per cent of their survey respondents reported they are not aware that the tax has had any impact on energy demand or emissions, but they like the tax anyway. The authors elected not to inform the survey participants that in the just under four years since B.C.’s carbon tax was introduced, per capita demand for the taxed commodities increased at the fastest three-year rolling average rate in the 25-year history for which we have data, and the Minister of Finance is forecasting that our demand for those commodities will grow even faster over the next three years, in spite of the tax. If we divide B.C.’s actual and budgeted provincial carbon tax revenues by the scheduled carbon tax rate, the finance department is banking on taxable GHG emissions jumping from 37.4 MM TCO2e in 2009/10 to 42.0 MM TCO2e in 2013/14. I wonder: How might the survey participants have responded had the study’s authors shared these facts?

The authors slough off the failure of B.C.’s carbon tax to curb emissions by suggesting that it takes more time for the tax to take hold, and positing that a higher tax rate is likely required to make a difference. Then they talk about how successful carbon taxes “worked” as emission reduction measures throughout Europe.

Nowhere do the authors acknowledge that there is no direct correlation between the published European carbon tax rates and either the taxes large emitters pay, or where those nations have realized GHG reductions. In Finland, Sweden, Denmark and Norway — the only nations with basic carbon tax rates higher than B.C.’s — fossil fuel producers, petroleum refineries, chemical plants, airlines, commercial marine vessels and other “energy-intensive” businesses are, and have always been, 100-per-cent exempt from the carbon tax. But, since 1990, almost all of the GHG reductions reported by these nations have occurred in the tax-exempt sectors. These nations also have cap-and-trade programs, but the listed energy intensive industries have been given surplus free CO2 quota. The combined effect of European carbon tax and cap and trade policies is that 100 per cent of the carbon tax burden in those nations is born by households, the public sector and not-for-profit organizations. That is why Norwegian and Swedish families paid, on average, $0.24/kWh (Canadian) for electricity in 2011, while large industry in those nations paid under $0.09/kWh for the same power.

In Europe’s carbon-taxing nations, GHG reductions reflect high-wage job losses in sectors that governments have exempted from energy taxes in the unrealized hope of curbing those job losses. Total employment (both public and private sector) in Sweden crashed to almost 12 per cent below 1990 levels in the seven years after Sweden’s carbon tax was first introduced. Sweden’s job count only squeaked back up to 1990 levels in late 2007, before falling off again. This is a jobs plan B.C. should embrace?

In Europe, governments have applied high energy taxes only to energy demand they feel is certain to grow in spite of the new taxes. This is about scoring new government revenues, not emission reductions.

Vancouver Sun