A rough guide to the Conservatives’ carbon tax farce

By Aaron Wherry - Friday, September 21, 2012 at 8:00 AM - 0 Comments

Herein, everything you need to know to understand the Harper government’s latest attempt to attack the NDP.

So what is the basic issue here?

In terms of public policy, this is a debate about putting a price on carbon. There are two ways to do this. You can directly tax major emitters for the carbon they release into the atmosphere. This is generally referred to as a “carbon tax.” Or you can set a limit on the amount of carbon a company can release into the atmosphere and then issue permits to exceed that limit which companies can sell amongst each other. This is generally referred to as “cap-and-trade.” Either way—either set by the government or the open market—a price on carbon is established. And if it costs money to release carbon into the atmosphere, companies will have an incentive to produce less carbon. That incentive will presumably encourage companies to find ways to pollute less (consumers will also presumably have an incentive to seek more environmentally friendly options). And that will presumably help counter the problem of climate change. If the government takes in revenue as the result of a carbon tax or cap-and-trade, that revenue can be used to fund green energy and emission-reducing policies and initiatives, as well as reducing income taxes to counter the impact of the higher costs that impacted companies might pass on to their customers. Here is the Pembina Institute’s briefing on carbon pricing, here is the OECD’s briefing on carbon markets and here is the Environmental Protection Agency’s guide to cap and trade. Here is Wikipedia’s rundown of countries and states that have considered or implemented carbon pricing. And here is Stephen Gordon’s guide to the economics of pricing carbon.

What has the NDP proposed?

In its 2008 and 2011 platforms, the NDP proposed a cap-and-trade system. When he was seeking the leadership of the NDP, Thomas Mulcair presented his own cap-and-trade proposal. (Brian Topp quibbled with Mr. Mulcair on one aspect of Mr. Mulcair’s proposal.)

What do the Conservatives say about what the NDP has proposed?

The Conservatives say the NDP proposal is a terrible, ruinous thing.

That sounds very serious. But your use of the word “farce” seems to suggest something silly is going on here.

You are very perceptive. There are at least three parts to the farce. Continue…

The carbon pricing debate in the United States

By Aaron Wherry - Wednesday, September 19, 2012 at 11:11 AM - 0 Comments

In 2007, economist Greg Mankiw wrote an op-ed for the New York Times to argue for a carbon tax. Mr. Mankiw is now an economic advisor to Mitt Romney. Mr. Mankiw is, in fact, among three advisors to Mr. Romney who have advocated carbon pricing (though Mr. Romney officially opposes a carbon tax).

A spokesperson for the candidate’s campaign, meanwhile, did not mince words: “Governor Romney opposes a carbon tax,” she said. A stand-alone tax on carbon will never fly with Republicans, economists and analysts say. But one that is pitched as a single dish in a buffet of tax reforms just might, says Arthur Laffer, an economist who worked in the Reagan administration during the last major reform of the tax code in 1986.

“The one reason why we all just go dingers and hate carbon taxes is because it’s a tax add-on,” Laffer said in an interview. “It’s an additional tax and an additional encroachment of government on the private sector and will actually hurt the economy. That’s a real problem. So therefore, if you can find another tax that is worse than a carbon tax and replace that tax with a carbon tax, I don’t know of many people who would disagree with that.” Laffer called income taxes the “single most damaging tax that you can imagine,” because they penalize nearly every American for contributing to the economy.

Democratic Congressman Jim McDermott has introduced carbon tax legislation and former Republican congressman Bob Inglis is advocating for a carbon tax. Ezra Klein has a dream that carbon pricing will be part of a grand bargain between Democrats and Republicans. Matthew Yglesias recently made the case again for taxing carbon.

Both Barack Obama and John McCain proposed cap-and-trade during the American presidential election in 2008, but cap-and-trade legislation stalled in the Senate.