Things that are unlucky (or lucky?): Carbon tax game on when gas prices high.

So, there's been much argument lately in my neck of the woods, over the BC's new carbon tax. This is coming online in a few days (July 1st), and will be responsible (amongst many other things) for what has been figured to be a 2.4c/litre hike in gas prices.

Anyway, folks are getting quite antsy here, with the opposition government saying all the usual things about getting rid of it, etc.

In many ways, however, I think the timing couldn't be better. Mainly because this convergence of activity has just raised the "carbon tax" and "things concerning fossil fuels" to a whole new, almost zeitgeist level. I'd argue that as long as the powers that be, stick to their guns, this massive increase in dialogue (heated though much of it may be) could only be a good thing.

Paradigm shifts, especially ones that involved set-in-our-ways cultural points, need to start somewhere, right? And I'm guessing, that more often than not, these shifts take a little getting use to.

And just for those of you, who still want to rant and rave about this or that inconsistency concerning how we go about penalizing fossil fuel emissions, please take a gander at the below opinion piece, published at the Vancouver Sun yesterday.

Couldn't have said it better myself.


We shouldn't 'axe' B.C.'s carbon tax

David Green, Kayhryn Harrison, John Richards and Nancy Olewiler, Special to the Sun
Published: Tuesday, June 24, 2008

Last fall, 70 economists sent a letter to British Columbia's finance minister, Carole Taylor, calling for a revenue-neutral carbon tax. The list of signatories included some of Canada's top economists.

Since then, the B.C. New Democratic Party has attacked the carbon tax relentlessly, prices at the gas pump have skyrocketed, and now a poll suggests a majority of British Columbians are against the new tax.

Are the critics right? Are the economists off their collective rocker? The answer is no. We argue that the B.C. carbon tax remains the right policy.

It is worth setting out three key principles.

First, the need to act on climate change is now. A legion of scientists say so.

Second, any real response requires people to change their behaviour, and changing behaviour involves costs to all of us. Anyone who tells you change can be had at zero cost either understands no economics or is lying.

Third, whatever policy we adopt -- a carbon tax, a cap and trade system, regulation, subsidies, or some combination -- involves costs. The question is, Which approach gives us the best combination of lowering carbon emissions, maintaining fairness and minimizing the cost of reaching targets?

The first argument critics raise against the carbon tax is that it is unfair to the poor. This is simply wrong. The B.C. policy includes tax cuts to the lowest two income tax brackets, plus a $100 per adult ($30 per child) low-income credit (based on GST credit eligibility). In most situations, the least well off in our province will pay less in carbon tax than they receive from tax reductions and credits. Since the credit is not explicitly budgeted in later years, the opposition argues the system will turn regressive. We cannot predict what future governments will do. We should keep pressure on the government to continue to fund low-income credits. To argue against the carbon tax based on this point appears to us to misdirect the debate.

The carbon tax is also said to be unfair because it puts an undue burden on rural residents. This argument is also wrong. As Nic Rivers, of Simon Fraser University, has shown, people in the Interior drive less, not more, than those on the Lower Mainland and their winter fuel bills aren't high enough to offset this. Admittedly, rural residents have fewer transit alternatives, but using transit is only one of many ways to change behaviour and reduce carbon emissions. Changing car and truck choices (hybrid SUVs do exist), heating choices, better insulation and driving less are all possible.

Small changes in behaviour can add up to big savings. For example, reducing gasoline consumption by two litres per week can be done by idling less, consolidating shopping trips and carpooling kids to school. This will save $150 per year in gasoline costs, more than enough to offset the carbon tax that most people will incur, without even taking into account the amounts people get back from lower taxes and credits.

These choices impose costs, but failing to address climate change has already created large costs (pine beetles, floods, landslides, storm surges). We can pay now by making feasible changes in our lifestyle or pay much more later as the climate spins out of control.

The tax is also argued to be unfair because transit alternatives don't exist for parts of the province. If people don't want the carbon tax revenue back in the form of tax rebates but want instead to spend it on more transit options, they should tell political leaders so. We can't have our cake and eat it, too.

What of the recent rapid increases in prices at the pump? Isn't the carbon tax just piling it on the poor consumer?

Unfortunately, fossil fuel prices must rise if we are to reduce greenhouse gas emissions meaningfully.

The issue of the day is not "axe the tax," but helping people to adjust to higher fuel prices and reduce their dependence on fossil fuels.

A clear, long-term, legislated commitment to raise carbon taxes slowly is one of the best ways to signal the need for all of us to change our consumption of fossil fuels.

Other responses to climate change will also impose costs. Regulating and taxing industry (which appears to be the NDP plan) will raise costs to business, and you can be sure those costs will be passed on to consumers.

Don't be fooled by the fact that you can see the carbon tax clearly. If anything, we should count its transparency as a virtue.

Other approaches, or inaction, will ultimately cost us more and not bring in the revenue to provide offsetting tax cuts and aid to the poor.

We support B.C.'s innovative revenue-neutral carbon tax.

(David Green and Kathryn Harrison teach at the University of British Columbia; John Richards and Nancy Olewiler teach at Simon Fraser University.)

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One argument left out is that by incrementally decreasing the demand for oil, it will incrementally decrease the price of oil. What that means if that oil producers will be indirectly subsidizing the tax revenues. Of course since BC is a relatively low population province of a relatively small population country, the effect on the world price will be small, but if a significant fraction of the OECD would do something similar the effect would be significant.

2.4c/litre? That's it? To throw a well-worn anti-AGW argument back in their faces, the price fluctuates more than that daily.

By focusing only on the tax and the credit when thinking about the poor, you neglect the overall increase in all goods and services. If even only 20% of common-use items went up by a dollar, poor people get screwed.