Watch for carbon pricing to be a territorial election issue

In the service of Yukon News readers, I read the Vancouver Declaration published by our first ministers last week, even though it brought back traumatic memories of pointless diplomatic conferences I attended when I was in the foreign service.

In the service of Yukon News readers, I read the Vancouver Declaration published by our first ministers last week, even though it brought back traumatic memories of pointless diplomatic conferences I attended when I was in the foreign service.

Let’s hope the first ministers surprise us with more progress and less Model United Nations bafflegab when they meet again in six months.

I have written previously about the major menace climate change poses to the planet, and how lots of economists like revenue-neutral carbon taxes like B.C.‘s. But the disunity shown by the nation’s premiers in Vancouver brings up another concept economists like to talk about: tradable goods.

This means goods that are produced around the globe and traded internationally. A relatively large chunk of the output of northern economies falls into this category, such as Minto copper, Klondike gold, Nunavut fish and N.W.T. diamonds. This means carbon taxes inconsistently applied around the world can create unintended consequences.

If the Yukon implemented a high carbon tax, for example, this would drive up diesel prices and reduce gold mining activity around Dawson or copper mining in the central Yukon. However, global carbon emissions would not go down since someone in Saskatchewan, Nevada or Mongolia would burn some diesel and mine copper or gold there.

In this scenario, a Yukon carbon tax doesn’t help fight climate change; it just hurts Yukon miners and creates jobs in Nevada.

One good question is how big this effect really is. Is it merely a theoretical scenario that right-wing economists like to rant about? Or is it real?

Mining is an energy-intensive business, from mining to milling to shipping product to market. Depending on the type of mine, energy is typically from 15 to 30 per cent of total costs. In the Yukon, given our distance from market and lack of rail transport, it is probably often at the higher end of the range.

This means that a carbon tax with a significant effect on energy costs would boost total cost by several per cent at least. For example, a carbon tax that boosted energy costs by 20 per cent at a mine running with 30 per cent of its cost in energy would result in a total cost increase of six per cent. That may not sound like much, but remember that mining is incredibly competitive and that our mines are struggling now with zero carbon tax.

A smaller carbon tax would have less impact. B.C.‘s current carbon tax works out to around 7 cents per litre, which is less than 10 per cent of the current pump price. This has some impact on behaviour, but is hardly big enough to force the big changes that would be required to meet Canada’s 2030 target of reducing emissions 30 per cent below 2005 levels.

My take is that a carbon tax big enough to put Canada on track to meet its 2030 targets would have a significant negative impact on the Yukon mining industry, unless the rest of the world also had such a carbon tax (which doesn’t seem very likely at the moment). Some mines would still be economic, if they had high grades, were close to existing power and road infrastructure, and the ore was amenable to low-cost mining techniques.

With the next first ministers confab happening in the fall, this is going to be on the Yukon election agenda.

Our politicians have three options.

First is to stand with Saskatchewan and say “no” to carbon taxes, at least until the rest of North America is also implementing a carbon tax. In the meantime, we could spend a bunch of money on other carbon-reduction initiatives to show we are doing more than zero about climate change. If you need an image summarizing the downside of this approach, think of people filling up their V8 Suburbans with cheap gas and then commuting on a cloudy day past the new solar panels on the Yukon Energy building.

Second is to have a carbon tax on everyone except mining and the oil-and-gas industry. The so-called “cap and trade” provinces like Ontario often give exemptions or sweetheart deals to politically sensitive industries. Somehow this seems to work politically in Ontario, but I wouldn’t want to be taking this campaign promise door-to-door in the Yukon.

Third is to be climate change leaders and implement a meaningful carbon tax, including on the resource industry. You could position this several ways. You could set the tax so low that it didn’t really affect behaviour, although in that case one wonders if a “feel good” carbon tax is worth the bother. You could set it high enough to be effective and then be disingenuous and try to claim mining wouldn’t really be affected, and toss out some transition support funding. Or you could just come out and say it was part of your plan to transition the Yukon to a post-resource economy, and then spray voters with a lot of words like “digital economy,” “knowledge workers” and “high-end eco-tourists.”

Unlike many issues that come up in elections, this one is actually quite important to the future of the Yukon and its economic sustainability. It will be interesting to see how the political parties play it during this fall’s election campaign.

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 this year’s Ma Murray award for best columnist. 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

Maria Metzen off the start line of the Yukon Dog Mushers Association’s sled dog race on Jan. 9. (Gabrielle Plonka/Yukon News)
Mushers race in preparation for FirstMate Babe Southwick

The annual race is set for Feb. 12 and 13.

The Yukon government is making changes to the medical travel system, including doubling the per diem and making destinations for medical services more flexible. (Joel Krahn/Yukon News file)
Subsidy for medical travel doubled with more supports coming

The change was recommended in the Putting People First report endorsed by the government

Chloe Sergerie, who was fined $500 under the <em>Civil Emergency Measures Act</em> on Jan. 12, says she made the safest choice available to her when she entered the territory. (Mike Thomas/Yukon News file)
Woman fined $500 under CEMA says she made ‘safest decision’ available

Filling out a declaration at the airport was contrary to self-isolation, says accused

The Yukon Department of Education building in Whitehorse on Dec. 22, 2020. Advocates are calling on the Department of Education to reverse their redefinition of Individualized Education Plans (IEPs) that led to 138 students losing the program this year. (John Hopkins-Hill/Yukon News file)
Advocates call redefinition of IEPs “hugely concerning,” call for reversal

At least 138 students were moved off the learning plans this year

Yukonomist Keith Halliday
Yukonomist: Your Northern regulatory adventure awaits!

“Your Northern adventure awaits!” blared the headline on a recent YESAB assessment… Continue reading

Yukoner Shirley Chua-Tan is taking on the role of vice-chair of the social inclusion working group with the Canadian Academy of Health Sciences’ oversight panel and working groups for the autism assessment. (Submitted)
Canadian Academy of Health Sciences names Yukoner to panel

Shirley Chua-Tan is well-known for a number of roles she plays in… Continue reading

The Fish Lake area viewed from the top of Haeckel Hill on Sept. 11, 2018. The Yukon government and Kwanlin Dün First Nation (KDFN) announced they are in the beginning stages of a local area planning process for the area. (Crystal Schick/Yukon News file)
Local area planning for Fish Lake announced

The Government of Yukon and Kwanlin Dün First Nation (KDFN) announced in… Continue reading

Whitehorse City Hall. (Joel Krahn/Yukon News file)
City hall, briefly

A look at decisions made by Whitehorse city council this week

Fire damage, photographed on Jan. 11, to a downtown apartment building which occurred late in the evening on Jan. 8. Zander Firth, 20, from Inuvik, was charged with the arson and is facing several other charges following his Jan. 12 court appearance. (Gabrielle Plonka/Yukon News)
More charges for arson suspect

The Inuvik man charged in relation to the fire at Ryder Apartments… Continue reading

The grace period for the new Yukon lobbyist registry has come to an end and those who seek to influence politicians will now need to report their efforts to a public database. (Mike Thomas/Yukon News file)
Grace period for new lobbyist registry ends

So far nine lobbyists have registered their activities with politicians in the territory

The Government of Yukon Main Administration Building in Whitehorse on Aug. 21, 2020. Some Yukon tourism and culture non-profit organizations may be eligible to receive up to $20,000 to help recover from losses due to the COVID-19 pandemic. (Crystal Schick/Yukon News file)
Details released on relief funding for tourism and culture non-profits

Some Yukon tourism and culture non-profit organizations may be eligible to receive… Continue reading

Most Read