Thursday, June 19, 2008

Better Than Expected

That's my conclusion after reading the Liberal Party of Canada's "Green Shift." Here's the quick run down of why:

What I Like:
  • Excluding and then minimizing taxation on transportation emissions will go a long way in preventing the new carbon taxes from causing a massive spike in prices at the grocery store. It will also minimize the sticker shock that may have otherwise ensued.
  • It is head and shoulders more practical and reasonable than the Green Party's ridiculous proposal from yesterday. There are no ridiculous cuts to CPP or EI, for one thing. It also will not send the economy into immediate shock.
  • It is gradual and predictable. I have long believed that the only way to be successful is to give the private sector time to adjust before we beat them over the head with a hammer. This plan does do that by increasing the carbon tax year over year.
  • The tax cuts are progressive. They are weighted heavily towards helping Canadians who need it most and will be most negatively affected by the shift.
  • We've given up on Kyoto. One of my largest concerns was that this tax was being proposed in order to somehow miraculously meet our Kyoto targets. Stephane Dion has moved away from that today and I applaud him for that. Kyoto is simply not possible anymore. It will be much easier to make the argument against the Conservatives without the red herring of the Kyoto Protocol in the way.
What I'm Still Worried About:
  • The green tariff plan is vague and dependent upon the US Congress approving a carbon tax. Furthermore, what kind of tariffs are we prepared to place on imports and how do we ensure that these tariffs are consistent with our committments in our various FTA's and the WTO? If we don't ensure that Canadian industry is promoted and not hurt by this plan, it will fail the country if it doesn't fail us Grits at the polls.
  • It isn't clear how consumers will see the impact of these taxes. As I've said before, sin taxes should discourage negative behaviour. However, with the tax being assessed at the "wholesale level" how much consumers are going to pay or understand that they are paying is an issue. If consumers don't understand how they can make carbon-friendly purchases they won't. Similarly, if cleaner producers simply raise their prices to match the taxes imposed on their diritier competitors, consumers will not be able to discern what is green and what isn't.
  • Provincial autonomy. Loyal readers of this blog will know that I am fierce a federalist. However, I am concerned that this plan, as it relates to electricity generation may infringe upon a provincial jurisdiction. Two major concerns:
  • First, it is up to each province to determine how they produce energy. Different options make more sense for different provinces. For instance, the carbon cost of electricity in Quebec is negligible because of the availability of hydroelectric power. That is not available to Albertans who rely on a far dirtier grid. Energy is tightly regulated if not government controlled industry in this country and the green shift runs the risk of interfering with those regulations. It is today, the responsibility of the provincial government to determine how much individuals pay for a kilowatt/hour of electricity. The Green Shift fundamentally shifts that power to the federal government.
  • Second, Stephane Dion is not the first leader to come out with a climate change strategy. A discussion with the premiers of BC, Ontario and Quebec will be necessary in order to ensure that federal and provincial efforts are working in concert and not at cross-purposes. I don't believe that it is within the power of the federal jurisdiction to simply override provincial initiatives.
  • The world needs our oil. Even with the Saudis boosting production and new reseves off the coast of Brazil, the world is thirsty for Canadian oil. That thirst is not just to fuel American SUV's. It's to make fertilizers for African farmers. I am not an economist. I don't know how much this is going to cost the oil patch. However, I am concerned that this would push the soaring cost of a barrel of oil even higher.
  • I would have liked to see a more explicit discussion of what this going to cost Canadian industry. In particular an assessment of the impact on extraction industries, agriculture, forestry and auto manufacturing.

1 comment:

Anonymous said...

My only concern with the plan is... what happens if it works? If the carbon tax successfully reduces carbon consumption, then revenue will slowly decline. How will we make up the revenue?

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