In 2008, the Conservative platform promised to “develop and implement a North American-wide cap-and-trade system for greenhouse gases and air pollution, with implementation to occur between 2012 and 2015.” Now, however, the Conservative attack machine denounces a cap-and-trade system, as conceptually proposed by the NDP, as a “carbon tax,” a job killer “that will increase the price on everything.”
It was a heady time after Barack Obama’s election, when doing something about climate change seemed possible. Mr. Obama had campaigned on a cap-and-trade system. Those who wanted action against greenhouse-gas emissions believed that something useful would emerge from Washington, and that the Harper Conservatives would follow along, however grudgingly.
The Conservatives were never keen on attacking greenhouse-gas emissions, to understate the case. But with the Obama administration’s apparent determination to get something serious done, the Harper Conservatives signed on to the possibility of a cap-and-trade system for North America. Had they considered cap and trade to be a “job killer,” presumably they would’ve opposed any scheme for North America.
Maybe the Harper government reasoned that any Obama plan would be wrecked in Congress, and that, of course, is what happened. But that outcome couldn’t have been definitively assumed when the Conservatives committed themselves to a cap-and-trade system. They accepted the idea philosophically, or so their campaign documents suggested, and would work, along with the Americans, to give the idea practical life.
Cap and trade does put a price on carbon. Putting a price on carbon by whatever means is the indispensable method of any serious plan for reducing greenhouse-gas emissions. The essence of cap and trade is that limits are set on emissions. Companies falling above or below the limit buy and sell credits, thereby establishing a price. As the limits are lowered, the price shifts. Clearly, companies that have to buy credits will pay the price. It’s this price that the Conservatives scream constitutes a “tax.”
With a carbon tax, you know what the carbon price will be, as with British Columbia’s carbon tax. You don’t know by how much emissions will be reduced. With cap and trade, governments know the limits of emissions but don’t know what the price will be.
Call the price what you want, it’s a cost. Contrary to what NDP proponents would have us believe, that price will be passed on to consumers, who will adjust their buying behaviour and energy consumption. The NDP argument is wrong in fact that only “big polluters” will pay whereas the mythical “ordinary Canadian” won’t.
Just as wrong is the unstated assumption underlying what the Conservatives are now doing. Having opposed a carbon tax and switched positions on cap and trade, the Conservatives dropped market mechanisms for dealing with emissions and opted for detailed regulations on industry – a rather strange choice for a government that decries the “heavy hand of regulations.”
These regulations, it’s assumed, won’t burden the “hard-working Canadian taxpayer” (another favourite attack machine cliché), whereas, in fact, the costs of complying with the regulations constitute a new cost of production or operation for companies that will eventually be passed on to suppliers and consumers. As most economists (as opposed to politicians) would understand, regulations are much less efficient in getting low-cost outcomes than market or tax mechanisms.
Cap and trade, in principle, would let the market work to establish a price for carbon in a more efficient way than government regulation – and a much more efficient way than pouring huge sums of public money into carbon sequestration experiments and ethanol subsidies.
The selective amnesia of the attack machine, however, has now whitewashed from the record what the Conservatives once favoured and for which they now denounce the NDP for supporting.
Original Article
Source: the globe and mail
Author: JEFFREY SIMPSON
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