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The carbon tax is supposed to incentivize low carbon alternatives

Almost everything government does involves the choosing of so-called “winners” and “losers”
Joel Krahn/Yukon News People take in the sunset on the clay cliffs in Whitehorse the evening of Aug. 29.

As the feds were in town last week sorting out some of the details of the upcoming carbon tax with the Yukon Government, we have further indications that no “exemption” for the North is in the cards.

Seemingly resigned (finally) to the notion that this is coming one way or another, the opposition has embraced a new line of attack. A refusal by the government to promise that the tax it collected once in place would be “revenue neutral”, not for government, but for individual Yukoners paying it led to criticism that it would be picking winners and losers

If I might move slightly off track for a moment, let us add the expression “pick winners and losers” to our list of meaningless political talking points that ought to be excised from the political discourse. Almost everything government does, whether overtly or more subtly, involves the choosing of so-called “winners” and “losers.”

Yes, since they need to win elections politicians will often go out of their ways to only highlight who stands to gain from a particular move while downplaying the hit suffered by those who lose. But the losers are still there even if they don’t recognize themselves as such. Every dollar spent on a program or policy that doesn’t benefit you in some direct or indirect way makes you a “loser” in some sense. It means less money to spend on those that do benefit you or to return to you in the form of tax cuts.

Ultimately picking winners and losers is what government does. It is not that anyone wants there to be “losers” in the world, but zero sum situations exist and governments have to contend with them.

Returning specifically to carbon pricing, I certainly always understood the expression “revenue neutral” to mean revenue neutral for government (as in it didn’t result in a net increase in revenue), and not revenue neutral among individual payers.

The latter would defeat the purpose of the tax. If you literally returned every dollar and cent to the exact person who paid that tax to begin with it would accomplish nothing. A carbon tax creates winners and losers by design. The point is to create a structure so that the losers want to and can become winners by reducing their emissions.

The tax is supposed to be about incentivizing low carbon alternatives wherever they are available. So yes if you are one who purposely chooses a high carbon lifestyle which provides little in the way of broader economic benefit in the face of reasonably cost effective alternatives you have to “lose” in order for the policy to be effective.

So what principles ought to govern the rebating of carbon tax revenue to Yukoners? This was the subject of one of those online consultations the Yukon Government has been doing recently.

As I’ve argued before, I don’t think carbon pricing should be a “tax grab” or a means to accomplishing some other social policy change. This is why I supported the Liberal promise of revenue neutrality over the NDP promise of splitting the money between rebates for low income households and a green energy fund.

If we are modelling for other jurisdictions around the world that might be considering carbon pricing as an economically efficient mechanism to reduce emission, it behooves us not to prove the critics right by using it to increase the size of government or redistribute wealth from rich to poor.

My view, as it has always been, is that the manner in which the money collected through carbon pricing is rebated should be structured in a way that recognizes that a certain quantity of carbon emissions are unavoidable or cost prohibitive to eliminate. Carbon taxes collected on those emissions ought to be refunded to the payer.

But that doesn’t mean returning every dollar to the person who paid it.

For example, as the former premier constantly felt the need to remind us, home heating is unavoidable in the Yukon. That is absolutely true and it isn’t just low income households that must cope with the increased cost of home heating. It is middle and high income ones as well.

But how much you spend on heating your home is the result of certain choices regarding size, temperature and efficiency. I think there needs to be some sort of flat rebate structured around the number of people living in a household. But that rebate ought to create winners and losers.

Transportation is another one. Most of us have to get to work. Some of us need vehicles – often bigger vehicles – to do our jobs and that ought to be recognized. But if you drive your one ton to your desk job then you may be one of those “losers” under whatever carbon rebate scheme is devised. Drive a fuel efficient car? Maybe you can break even and receive back what you paid. Ride a bike, catch public transit, or carpool? Perhaps the net result of the rebating will make you a “winner.”

There are also certain industries – the placer industry being one commonly cited by my colleague Keith Halliday as a cause for concern – which has to pay big fuel bills that ought to be specifically targeted. But there are going to be differences in level of efficiency between operations as well and we ought to be creative in how we return the money. Perhaps rebates could be a function of the amount of minerals produced rather than the quantity of fuel consumed.

Yes, implementing carbon pricing is going to create some winners and losers. And some of the details are going to be complicated. Let us get those uncomfortable truths out of the way and recognize that not all carbon emissions were created equal. Some are the practically unavoidable consequence of living and working in 2017. Others are the result of our own excess. The key to devising an effective policy will be recognizing he difference.

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