an effective climate plan
needs a carbon tax
A carbon tax and rebate is widely seen as the best climate policy because…
it’s low-cost
A price on carbon lets people choose how to respond—those with the easiest/lowest cost ways to reduce their emissions are the ones that will take action. The flexibility is what makes a carbon tax the lowest cost way to reduce emissions. Other policies would require the government to regulate or subsidize economic activity resulting in inefficiency and higher costs. If regulations and subsidies are pushed far enough to reduce emissions significantly, they would cost Canadians too much, or hurt the economy in unacceptable ways.
it provides rebates
A carbon tax has another benefit over regulations and subsidies: it generates government revenue which can be rebated back to Canadians. The federal carbon tax is required by law to return all money collected in a province back to that province.
Based on projections by Canada’s Parliamentary Budget Officer, a typical household earning less than $100,000 will get back more than they pay. If you earn more than $100,000, the net cost of the carbon tax will be around $10 per month.
About 80% of families in Alberta, Manitoba, and Saskatchewan will receive more in rebates than they pay in carbon taxes. In Ontario, the number is 60%.
it’s effective
Carbon emissions are a part of almost any economic activity—from driving a car to making concrete. A carbon tax puts a price on carbon pollution across the economy so that everyone has an incentive to reduce their emissions. Other policies don’t cover the whole economy.
it’s simple & transparent
A carbon tax is easy to administer—the government collects the tax from fuel producers or distributors and the rest works itself out. This means there’s no expensive government oversight required, and less likelihood of special interest groups getting exemptions.
it encourages innovation
A steadily increasing price on carbon encourages innovation. Companies will invest in new technologies to lower emissions if it saves them from paying the carbon tax. Car drivers become more likely to switch to a lower-emission vehicles next time they purchase a car. Homeowners become more likely to install a smart thermostat if they know they will save money on heating costs. Builders become more likely to install geothermal heating, solar panels, or high-efficiency insulation.
“If Canada is serious about cutting carbon dioxide emissions, most economists agree a carbon tax is the cheapest and least heavy–handed way for the government to do it.”
we’ve done it before,
we can do it again
a carbon tax works
the same way
carbon taxes shrunk BC’s emissions
We know carbon taxes work. BC has had a carbon tax for over a decade. Even at a low price, the policy has shrunk emissions between 5 and 15%, all while BC has been the fastest growing economy in Canada.
“The evidence, and simple logic, are overwhelming that putting a price on something incents people and businesses to produce less of it. Imposing a price on carbon emissions, even a relatively low one to start with, is the smartest and most efficient way to reduce emissions. Economists from both right and left agree on that.”
carbon taxes are being adopted around the world
Over 40 countries now have a carbon pricing system, including China, the E.U. and 1/3 of the US economy (via action by individual states).
“Carbon pricing is probably the most effective mechanism of emissions reduction.”
the alternatives to carbon
taxes have major downsides
Broadly speaking, there are 3 other ways to reduce carbon
emissions, each with their own shortcomings:
traditional regulation
The government could legislate reductions in emissions, but this would be tremendously expensive and require massive government intervention into the economy. In contrast, a carbon tax relies on individuals and companies to figure out how to respond to a price signal.
subsidies
Supporting specific technologies seems appealing but is very expensive. The EV subsidies provided by the Quebec government, for example, are estimated to cost the equivalent of a $400/ton tax on carbon. Plus, the government is typically not well-suited to picking the right technologies to subsidize.
cap and trade program
A cap and trade program, by putting a price on carbon, is the closest alternative to a carbon price. But it still relies on the government to design and supervise the program, which adds cost even if the government gets the design perfectly right (they often don’t). Plus, industry has historically done an effective job at lobbying for special treatment.