Design principles for a Yukon carbon tax

Although they didn't mention it in their budget-response speeches, when pressed by doughty newshounds from this newspaper, NDP leader Liz Hanson and Liberal leader Sandy Silver confirmed they are considering a carbon tax.

Although they didn’t mention it in their budget-response speeches, when pressed by doughty newshounds from this newspaper, NDP leader Liz Hanson and Liberal leader Sandy Silver confirmed they are considering a carbon tax.

So let’s look at the design questions for a Yukon carbon tax. The big ones are how high the tax should the be, who it should apply to, where the money should go and under what conditions should we implement it.

How high should a carbon tax be? The B.C. carbon tax is $30 per tonne of CO2, which works out to about 7 cents per litre of gasoline. However, 7 cents is not likely to significantly change business and consumer behaviour. This of course is the point of a carbon tax, since we need to reduce how much fossil fuel we burn. A recent report by the parliamentary budget officer in Ottawa refers to a variety of studies that suggest a tax in the $100 per tonne range would be needed to really get people’s attention. This would be about 23 cents per litre.

So one option is to set a tax at the $30 per tonne rate, then raise it by $3.50 per year until 2035. This would provide a small immediate incentive, plus tell people to start planning for a world where fossil fuels will be much more expensive.

Consider a Yukon family with an older oil-heated house, which needs about 2,000 litres of heating oil per year, and who fill up their car’s 50 litre gas tank every week. They would pay $325 per year at first and $1,025 when the tax was fully implemented.

According to Myclimate’s air travel carbon emission calculator, a return trip to Vancouver by air for this family would cost an extra $72 in the near term and $240 in the long run (assuming four people in the family).

A Klondike placer mine that used 100,000 litres of diesel per year would pay $7,000 per year at first, and $22,300 in 2035. If you think 100,000 litres is a lot, remember that D9s have an 800-litre diesel tank for a reason.

Or take a big mine. The 2013 feasibility study for Casino talked about a 125-megawatt natural gas power plant. The business case’s line item for power is almost $100 million in year two of the mine. Depending on various technical assumptions, that might generate $5-10 million in tax revenue at first, or perhaps almost $30 million at the higher $100 per tonne rate.

The next question is who should pay. Liz Hanson mused about a carbon tax that targeted industry instead of individuals. That might be politically popular, although environmentalists would point out it gives regular Yukoners no incentive to reduce their driving and home heating oil use. Others would argue for mines to be exempt, fearing that investors would choose projects in non-carbon-tax jurisdictions if Yukon mines had to pay a tax that mines in Alaska or Saskatchewan did not have to.

What is definite is that any plan that is selective in its application will address only part of our carbon footprint and be especially unpopular with those lucky few who get to pay it.

Then there’s the question of where the money should go. In 2012, Yukoners burned 139 million litres of fossil fuels according to Statistics Canada. Assuming the rate for gasoline is close to the average for other fuels, the carbon tax described above on that volume would net almost $10 million in the near term and $32 million by 2035.

Option 1 would be for the Yukon government to just add the cash to the territorial kitty. Option 2 is also for the government to keep it, but promise to spend it on renewable energy projects. Both of these represent a sizeable new tax on Yukoners and a growth in government, which some will like and others will loathe.

Option 3 is a revenue-neutral approach, which is what Sandy Silver mentioned in his post-budget comments. However, he didn’t give any more details. These are important, since a tax can be revenue neutral on average, but still have major winners and losers.

Option 3A is to take the revenue, say that $32 million I mentioned above, and give an equal share of around $850 to each Yukoner. That family of four would get a cheque for $3,400. You can guess how happy the placer miner above would be to pay $22,300 and know that her money paid for cheques to 26 bike-riding, downtown-living environmental activists in Whitehorse.

Option 3B is to do something similar to what B.C. did, and spread the money around. They paid some to lower-income citizens, and used the rest to reduce a variety of other business and personal taxes.

In any of these scenarios, a big mine will make a major new transfer to the territory. Accountants and land-claim negotiators will have to figure out later how this affects royalty formulas and payments to First Nations. In a way, a carbon tax on big mines is a backdoor way to create an Alaska dividend. The more big mines we have, and the more carbon they spew, the bigger the cheques to citizens under option 3A above.

Finally, we have to decide on the conditions for implementation. Would the Yukon go ahead regardless of what the rest of North America did? Or would we say we were on board with the idea, but would only implement it when a pan-Canadian deal was signed? Or would we wait until our mining competitors in Alaska and the other U.S. states were part of a comprehensive North American deal (which might be a very long time coming)?

These are important questions, but also tricky ones. It will be interesting to see what the NDP and Liberals have to say about them in the run up to the election, especially as the Yukon Party stakes out its position firmly against such a tax.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He won the Ma Murray award for best columnist in 2015. You can follow him on Channel 9’s Yukonomist show.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Connie Peggy Thorn, 52, pleaded guilty Jan. 27 to manslaughter in the 2017 death of Greg Dawson. (Crystal Schick/Yukon News file)
Whitehorse woman pleads guilty to manslaughter in death of Greg Dawson

Connie Thorn, 52, was arrested in October 2019 and pleaded guilty in Supreme Court on Jan. 27.

Abigail Jirousek, left, is tailed by Brian Horton while climbing a hill during the Cross Country Yukon January Classic in Whitehorse on Jan. 23. Jirousek finished second in the U16 girls category. (Crystal Schick/Yukon News)
Cross Country Yukon hosts classic race

Cross Country Yukon hosted a classic technique cross-country ski race on Jan.… Continue reading

Yukon Premier Sandy Silver talks to media on March 5, 2020. The Yukon government said Jan. 25 that it is disappointed in a decision by the federal government to send the Kudz Ze Kayah mining project back to the drawing board. (Crystal Schick/Yukon News file)
Territorial and federal governments at odds over Kudz Ze Kayah mine project

The federal government, backed by Liard First Nation, sent the proposal back to the screening stage

asdf
WYATT’S WORLD

Wyatt’s World for Jan. 27, 2021

Yukon RCMP said in a press release that they are seeing an increase in tinted front passenger windows and are reminding people that it is illegal and potentially dangerous. (RCMP handout)
RCMP warn against upward trend of tinted windows

Yukon RCMP are seeing more vehicles with tinted front passenger windows, prompting… Continue reading

An arrest warrant has been issued for a 22-year-old man facing two tickets violating the <em>Civil Emergency Measures Act</em>. (Joel Krahn/Yukon News file)
Arrest warrant issued for CEMA violation

An arrest warrant has been issued for Ansh Dhawan over two tickets for violating CEMA

The office space at 151 Industrial Road in Marwell. At Whitehorse city council’s Jan. 25 meeting, members voted to sign off on the conditional use approval so Unit 6 at 151 Industrial Rd. can be used for office space. (John Hopkins-Hill/Yukon News file)
Marwell move set for land and building services staff

Conditional use, lease approved for office space

The bus stop at the corner of Industrial and Jasper Road in Whitehorse on Jan. 25. The stop will be moved approximately 80 metres closer to Quartz Road. (Crystal Schick/Yukon News)
UPDATED: Industrial Road bus stop to be relocated

The city has postponed the move indefinitely

The Royal Canadian Mounted Police detachment in Faro photgraphed in 2016. Faro will receive a new RCMP detachment in 2022, replacing the decades-old building currently accommodating officers. (Joel Krahn/Yukon News file)
Faro RCMP tagged for new detachment

Faro will receive a new RCMP detachment in 2022, replacing the decades-old… Continue reading

In a Jan. 18 announcement, the Yukon government said the shingles vaccine is now being publicly funded for Yukoners between age 65 and 70, while the HPV vaccine program has been expanded to all Yukoners up to and including age 26. (1213rf.com)
Changes made to shingles, HPV vaccine programs

Pharmacists in the Yukon can now provide the shingles vaccine and the… Continue reading

Parking attendant Const. Ouellet puts a parking ticket on the windshield of a vehicle in downtown Whitehorse on Dec. 6, 2018. The City of Whitehorse is hoping to write of nearly $300,000 in outstanding fees, bylaw fines and court fees, $20,225 of which is attributed to parking fines issued to non-Yukon license plates. (Crystal Schick/Yukon News file)
City of Whitehorse could write off nearly $300,000

The City of Whitehorse could write off $294,345 in outstanding fees, bylaw… Continue reading

Grants available to address gender-based violence

Organizations could receive up to $200,000

Most Read