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The Yukon’s new carbon tax started this week

‘The art of statesmanship is to foresee the inevitable and to expedite its occurrence,” said Talleyrand.

‘The art of statesmanship is to foresee the inevitable and to expedite its occurrence,” said Talleyrand.

It is not easy to predict which wonkish and impractical schemes will become conventional wisdom in 10 years.

In 1993, who would have guessed that budget deficits would go so decisively out of style?

During the 1988 election campaign, few would have predicted that the US-Canada free trade agreement would be expanded to NAFTA within five years and that, by 2008, no politician seriously proposes canceling it.

Carbon taxes appear to be the next inevitability. In fact, you’re already paying a carbon tax, since BC’s version took effect on July 1st.

Everything from apples to whisky and wood — if it’s shipped through BC — will cost just a bit more thanks to an additional 2.4 cents per gas litre carbon tax.

Why carbon taxes?

Because 10 years of publicity campaigns and voluntary action have been ineffective in getting Canadians to reduce their CO2 emissions.

Despite Rick Mercer and the One Tonne Challenge, Canada’s CO2 emissions in 2004 were 27 per cent above 1990 levels.

Even George Bush and the Americans have done better.

In the Kyoto Accord, we promised to have them six per cent below 1990 by 2012.

Premier Gordon Campbell also confirmed that the new fuel tax will rise steadily over the next five years. It will reach 7.4 cents per litre by 2012.

British Prime Minister Gordon Brown did the same thing, sending a clear price signal to individuals and businesses making long-term purchase decisions on vehicles and gas-guzzling equipment.

What does this mean for the Yukon?

According to Whitehorse’s own Vector Research, Yukoners use about 130 million litres of refined petroleum products per year. Add about 10 million to that number to account for propane use.

That’s about 4,500 litres per person per year, or 13 litres per day.

If Ottawa applied a carbon tax equivalent to BC’s, that would increase our cost of living by $9 million or about a dollar per Yukoner per day.

And that doesn’t count the fuel used shipping our kiwi fruit from California and our wine from Chile.

Even more worrying, many economists believe that carbon taxes of this magnitude will not be high enough to change people’s behaviour.

BC’s 2012 rate of 7.24 cents per litre works out to $30 per ton of CO2. Some think this must be doubled, or more, to significantly reduce Canada’s CO2 emissions.

We may be in a no-win situation: either global markets keep oil prices high or, if oil prices fall, governments pick up the slack with higher carbon taxes.

As for the Yukon, the implications are complicated.

Most carbon tax proposals include a promise to use the revenue to reduce income taxes.

What this means is that if you are a high-income professional who walks to a steady government job from a well-insulated home downtown, you could be ahead.

If you don’t pay much income tax and use a lot of fuel for heat or your truck, then you could find yourself much poorer.

And some organizations that don’t pay income tax, like marginal businesses or First Nations or municipal governments, will have to pay the carbon tax without getting any income tax relief at all.

Consider just one example of many costly impacts: commuting 20 kilometres daily in a Chevrolet Blazer from a country residential home will cost you $4,000 per year in gas, assuming gas costs $1.50 per litre, a few trips to Skagway and Dawson per year and that you actually achieve Chevrolet’s claimed gas mileage.

A BC-style carbon tax would cost you an extra $200 per year.

For affluent Yukoners, this is just annoying. For others, it is a significant burden on an already stretched family budget.

And for the most vulnerable Yukoners, it is simply unaffordable.

So what is the Yukon government doing to help?

Earlier this week, Premier Dennis Fentie denounced federal Liberal Leader Stéphane Dion’s proposed national carbon tax.

This will undoubtedly make Fentie popular on the summer barbeque circuit, where he can make jokes about the Liberal plan to tax propane.

But if this is all he does, he will have failed Talleyrand’s test of statesmanship.

Think about the inevitable and cast your mind forward to 2013. This columnist predicts a national carbon tax will be in place, whether the prime minister’s name is Dion, or Stephen Harper is in year seven of his minority government.

In the US, President Chelsea Clinton will be expanding the carbon tax implemented by President Obama/McCain.

The Kyoto Accord version 2.0, renovated and rebranded, will be in place.

What would a forward-looking Yukon government do?

Here are a few things a student of Talleyrand would look for.

Electricity prices: The Yukon government is cutting the Rate Stabilization Fund and Yukon Electrical has applied for an 11 per cent rate increase.

On the other hand, Yukon Energy plans to reduce rates due to new revenues from mining companies.

Even if Yukon Energy saves the day and prices stay roughly where they are, this doesn’t look like a bold Yukon government policy to use our abundant hydro-electric power to replace fossil fuels.

New technologies: Even though some already claim that heat pumps are cheaper than home heating fuel, it is not easy to buy and install such a heating system for your house.

If some entrepreneur isn’t driving around Whitehorse in a green heat-pump van by this winter, Yukon Energy should think about getting into the business as Nova Scotia Power already has.

Constructive engagement:

The federal government and both major political parties are thinking about carbon taxes, even if they publicly claim to be against them.

Now is the time to engage them to ensure that the North is recognized.

An exemption isn’t likely, but northerners need something like the GST-refundable tax credit built in from the beginning.

If the Yukon government drifts along with the status quo, we may very well find ourselves sleepwalking into a future where we are still using 140 million litres of fossil fuel a year and paying $9 million a year in extra taxes.

Plus we’d still be emitting more CO2 per person than almost any other jurisdiction on the planet.

Some people might say that kind of outcome would be an environmental crime.

But the economic consequences of complacent Yukon policy bring another Talleyrand quote to mind: “It was worse than a crime, it was a mistake.”

 Keith Halliday is a Yukon economist and author of Aurore of the Yukon and Yukon Secret Agents. His most recent book Yukon River Ghost appeared in June.