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A 50 cent carbon tax?

Looks like the federal carbon tax is going to stay around, at least for a little while.

It was interesting to watch the carbon tax debate (debacle) play out during the election campaign given that, regardless of who won, British Columbians were going to continue paying the tax.

There has been plenty of discussion whether carbon taxes actually work … those who don’t like the tax say it doesn’t work, those who do, say the opposite and are backed by, egads, economists.

Here in B.C., where we’ve had a carbon tax for 10 years, the waters are as murky as bitumen spill.

Many of the anti-carbon tax folks have jumped on the fact that B.C.’s carbon emissions have increased since the tax was implemented as undeniable proof carbon taxes don’t work. The flip side of the coin, however, is that emissions in relation to gross domestic product, haven’t increased. In other words, once growth is factored into the equation, emissions have, well, not exactly dropped but not increased as much or as quickly. A win, right?

Will a carbon tax actually work? Absolutely, but we shouldn’t pussyfoot around, which is what we’re doing.

I wrote the following about the B.C. carbon tax in July, 2009, and it still holds true today.

The idea behind the carbon tax is simple make the price of gas prohibitive and the result will be that British Columbians don’t drive as much.

We would suggest that, at the current price of gas, it isn’t working. Ask yourself have you curtailed your driving habits in the past year because of the carbon tax? We would suggest that the vast majority of British Columbians would answer “no.”

For a carbon tax to be truly effective it has to be truly punitive, something no government is willing to do because it is tantamount to price controls.

For a carbon tax to be truly effective, we need to know the level at which the price of gas actually results in people changing their driving habits. Is it $1.50 per litre? Is it $2 per litre? $2.50 per litre?

When the price of gas drops, which it has since last summer, the carbon tax becomes ineffective. It’s just a tax and, despite what government says about it being revenue neutral, there is always a cost.

For the carbon tax to achieve its goal of changing our driving habits, it has to keep the price of gas at a level that accomplishes that. If it is determined that $1.50 per litre will actually change our driving habits then a carbon tax, to actually work, should be on a sliding scale to maintain that price.

In other words, if the actual price of fuel is $1 per litre, then the carbon tax should be at 50 cents per litre to achieve the desired effect.

Just for the record we are not advocating such a move. And, no government would do so because it is political suicide. The NDP made hay with their “axe the tax.” Imagine the debate over a 50 per cent carbon tax.

Our point is our carbon tax will steadily increase over the next few years without any idea of whether it is actually working. In fact, we suspect it is not changing our driving habits.

If the goal of the carbon tax is to alter our driving habits, then we have to either make it work or shelve it. Since government is unlikely to actually put the carbon tax at a level that changes our habits, opting instead to keep it at a level where the political damage is manageable, then it should simply get rid of it.

I do support a carbon tax, but only if it is actually effective in reducing emissions. In addition, governments should commit to pouring every penny raised into actually reducing emissions, not lining companies’ pockets, which is what B.C.’s Pacific Carbon Trust did.

What do you think about this story?