Options exist to take sting out of carbon pricing

With the announcement that carbon pricing will be coming to Canada whether provincial and territorial leaders like it or not, we finally have some details about how much each tonne of carbon will cost consumers and business.

With the announcement that carbon pricing will be coming to Canada whether provincial and territorial leaders like it or not, we finally have some details about how much each tonne of carbon will cost consumers and business.

As a result, the issue has come to the forefront of the Canadian political discussion in recent weeks.

The Trudeau government’s decision to leave the details of carbon pricing to the provinces has created an unfortunate gap in the minds of many voters as to what the expression “revenue neutral” means. All Canadians hear is that carbon will be taxed at a rate of at least $10 per tonne starting in 2018, rising to $50 per tonne by 2022. They aren’t hearing how their government proposes to ensure that carbon pricing doesn’t become a hardship for Canadian families.

But that is kind of the point. The idea is that each provincial and territorial government can tailor how carbon pricing works in its own jurisdiction, each with its own unique set of circumstances and challenges.

Conservative politicians, eager to appeal to voters weary about the government taking more of their hard earned money, are quickly rushing in to fill that gap with some scary sounding numbers. The Canadian Taxpayers Federation is claiming that carbon pricing will cost Canadian families $2500 a year.

Voters, cynical about the idea that government ever gives back what it takes, are receptive to these messages and, without any details beyond a bare assurance that the tax will be revenue neutral, assume the worst.

“My groceries are going to be more expensive and my house costlier to heat,” they think. “I don’t like this idea.”

Fair enough.

But that’s why now is a crucial time for creativity on the part of politicians who are concerned about climate change and who appreciate the role of carbon pricing in reducing our reliance on fossil fuels. They need to step forward with some details about how exactly we can make carbon pricing revenue neutral.

Here at home the Yukon Party continues to baldly insist that carbon pricing “doesn’t work” in the Yukon. This is more a failure of imagination than a failure of the policy itself.

With an election coming, it is incumbent on the other parties to explain how revenue neutral carbon pricing can work.

We can start by lowering the threat level a tad. This can be done by being honest with ourselves as a territory and avoiding the temptation to wrap ourselves in the territorial flag.

The truth is the Yukon isn’t as “different” as our territorial leaders would have us believe.

With the exception of the B.C. coast, Canada is a cold place regardless of where you live. Residents in all provinces have to cope with the cost of heating their homes. Our prolonged darkness up north is not nearly as big of a deal in the era of LED lightbulbs which require a tiny fraction of the power older incandescent bulbs used.

Electrical generation is a major contributor to greenhouse gases but, as the Yukon Party is fond of pointing out, most of our electricity comes from hydro power. This puts us far ahead of not only the other territories (which are still heavily reliant on inefficient diesel generators), but provinces like Saskatchewan and Alberta as well.

Unlike the other territories there is road access to almost every Yukon community, so the increased cost of flying food to distant communities is not as big a challenge here.

The most common concern I hear from Yukoners about a carbon tax is how it will affect the cost of heating their homes.

But there is a very simple and obvious solution to this problem: implement a rebate to each Yukoner that is equal to the average additional cost that the carbon tax will impose on household heating costs.

The same goes with groceries. The Yukon Party made a point of announcing the Nov. 7 territorial election in a grocery store to put the fear of even more expensive food into voters. But the additional cost of groceries and other essential goods as a result of a carbon tax is easily calculable.

So with a relatively simple regular cheque to Yukon households we can easily negate the pain imposed by carbon pricing with respect to certain essential and unavoidable expenses we incur.

Some ask, what is the point of taking the money to begin with if you are just going to give it back? Because it creates incentives for each and every one of us to do better. If we receive a flat rebate for home heating and food, but pay carbon tax incrementally, we can actually save money and pay less tax by finding ways to make our homes more efficient.

It finally puts carbon intensive options on a more equal footing with lower carbon alternatives and prices the social cost of carbon dioxide emissions into our economy. Right now, fossil fuel intensive options appear cheaper because pumping carbon dioxide into the atmosphere is free for the person doing it, while the burden of climate change is spread across society — what economists call an “externality.”

Rebating the carbon tax collected on home heating and groceries is but one simple way of making carbon pricing revenue neutral. There will surely need to be more. Ensuring that key industries like placer mining are not unduly burdened will require a different set of more complex policies and tools.

But it is certainly possible to ease the fears of Yukoners by showing them how the government intends to make carbon pricing revenue neutral. Rather than simply repeating the mantra that a carbon tax “won’t work,” it’s time to start explaining how it can work.

Kyle Carruthers is a born-and-raised Yukoner who lives and practises law in Whitehorse.

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