The Three I’s of a Yukon carbon tax: inevitability, impact and inequality

The carbon tax has become perhaps the defining issue of the territorial election. It is clear the Yukon Party is against it, while the NDP, Liberals and Green Party are on the other side.

The carbon tax has become perhaps the defining issue of the territorial election.

It is clear the Yukon Party is against it, while the NDP, Liberals and Green Party are on the other side.

After that, it gets a lot murkier.

Yukon voters have been barraged by confusing salvos of opinions and facts from every direction, mostly around three big themes: inevitability, impact and inequality.

Is a carbon tax inevitable? The pro-carbon tax side says the federal Liberals have announced a national carbon policy, so the Yukon has no choice. The Yukon Party wants to fight for the Yukon’s right to decide. The pro-carbon tax side replies that this is unproductive posturing.

Reality is somewhere in the middle. The feds can indeed impose a national scheme, and have said they will. But they haven’t tabled legislation in Parliament yet. We have lots of past examples where smart campaigning by Yukon politicians has convinced or embarrassed the feds into giving special treatment to the North. Think of the creation of our transfer payment, which is much more generous than what the provinces get. Or all the federal programs over the years that have special funds for the North instead of equal per capita funding for each province or territory. Or even last year’s imbroglio over cuts to our transfer payment, which resulted in a partial reversal of the cuts after lobbying by the Yukon government.

The three territorial premiers came up with a united front on carbon pricing before the last Council of Federation. Several provincial premiers responded supportively. Earlier this month, the News reported that there are negotiations going on among the ministers of the environment for special treatment for the North. The Prime Minister knows he only has a 14-seat majority, and that three of his MPs are from the North.

A special deal for the North is hardly a sure thing. But given how federal-provincial negotiations work in this country, we can be sure premiers from Victoria to St. John’s are battling for special deals for their jurisdictions. Alberta’s Premier Notley said her support for the federal scheme was dependent on the feds delivering on new pipelines for Alberta’s oil industry. We should expect the same from our premier, whomever that may be.

It is strange I haven’t heard any of the pro-carbon tax leaders say that even though they support a carbon tax, the feds need to give special transitional provisions (read: extra cash) to the Yukon.

So what about about the second issue, a carbon tax’s impact?

Let’s assume we have a carbon tax of $50 per tonne by 2022, which is the current federal proposal. That works out to 10 cents per litre of gasoline, with roughly similar levels for diesel, propane and other fossil fuels.

At one level, this is not huge. The price you pay at the pump has fluctuated up and down by more than this in recent years without causing socio-economic catastrophe. Indeed, some critics say carbon taxes at such levels are just baby steps towards really dealing with climate change. Some economists think carbon taxes will eventually have to be up to four times higher to really affect our behaviour.

On the other hand, it will be noticed to some extent across nearly everything you buy.

Air North spends over $20 million a year on fuel. According to the ICAO air travel carbon calculator, a trip from Whitehorse to Vancouver generates 132 kilos of carbon emissions. At $50 per tonne, that works out to $53 for a family of four’s return trip to Vancouver.

As for heating, a City of Whitehorse study estimated that older Whitehorse homes with oil heat and forced air could burn 3,966 litres of fuel oil per year, with more modern and better insulated versions burning 1,670 litres. That works out to roughly $150 to $400 in extra heating costs.

Many businesses will be able to pass on their carbon tax costs to their customers. But some will not, such as miners who sell into a global commodity market. One placer miner told the News last week that he used 150,000 litres of fuel per year. His bottom line will take a $15,000 hit, unless he mines fewer hours or figures out how to use less fuel.

The impact on food prices is harder to predict, since it is hard to know exactly how much fossil fuel goes into fertilizer, tractors, processing and transportation from the farm to your plate. A study in the Canadian Tax Journal from a few years ago suggests a $50 per tonne tax could boost food prices by around 2 per cent.

A Yukon Party campaign ad on Facebook claimed a carbon tax would increase the price of a house by around $11,000. This is hard to verify. Construction of a new house would indeed be increased by a carbon tax, since everything from diesel for clearing the lot to mining the copper wires to transporting the drywall would get more expensive. A new house in the $400,000 range might indeed have its cost boosted by a per cent or two, which would work out to thousands of dollars.

This is what we would pay. But the pro-carbon tax parties are also promising to return some or all of the tax revenue to Yukoners. Which brings up the last of our “I” issues: inequality.

Lower-income Yukoners spend a greater share of their incomes on heating and transportation, which will be hardest hit by carbon taxes. This is why places like B.C. have programs similar to the GST credit that give rebates to lower-income citizens. The NDP has promised to dedicate some of the tax revenue to compensating low-income Yukoners (while half of the revenue will not be rebated but used instead for green energy projects). The Liberals have promised it will return all of the tax revenue to Yukoners, but has not said how it would be divided up. So we still don’t know how much businesses, non-profits, high-income or low-income Yukoners will get back, or indeed if any or all of these groups will get rebates at all.

Those are my best answers to the three “I” questions. Now the big outstanding question is how Yukoners will vote on Nov. 7.

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 last year’s Ma Murray award for best columnist. You can watch his election interviews with all four party leaders on the Northwestel Community Channel website. Full disclosure: Keith is a member of the Yukon Liberal Party. He is not involved in their campaign.

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