Could a carbon tax have political legs?
TORONTO — Americans who couldn’t care less that British Columbia had an election last week are in good company — most Canadians living outside the west coast province feel the same way.
In fact, many Canadians would be hard pressed to name any premier — similar to the governor of a U.S. state — apart from their own. There are only 10 of them, but a vast geography and small population have made parochial regionalism a defining element of Canadian identity.
Yet provinces have been known to launch initiatives so attractive that the federal government eventually transforms them into national programs. The most famous example is medicare, Canada’s publicly financed health insurance for all residents, which emerged from a 1947 policy in Saskatchewan.
A policy with similar trailblazing potential was implemented in British Columbia last July, under Premier Gordon Campbell’s Liberal government. With the new policy, the province became the first jurisdiction in North America to fight global warming with a tax on carbon emissions.
Last week, British Columbia’s Liberal government achieved another first by being re-elected while running on a carbon tax platform. The feat breathed new life into a policy considered essential to combating climate change by many scientists, but feared as a vote-killer by many politicians.
Campbell’s resounding victory is timely. A United Nations conference will take place in Copenhagen in December on greenhouse gas emissions cuts beyond the Kyoto Protocol, the sputtering international treaty that expires at the end of 2012.
North American governments heading to the conference have been loath to consider a carbon tax. Canadian Prime Minister Stephen Harper, U.S. President Barack Obama and congressional Democrats instead propose a more conventional “cap and trade” system to fight global warming. (Both Obama and House Democrats propose plans that fall far short of the 25 percent cut in emissions, below 1990 levels, that most scientists insist is needed to avoid the worst effects of climate change.)
Essentially, a capped system sets a limit to the amount of carbon gas targeted industries can spew. Companies that emit less than their limit can trade what is left of their allowance — their credits — to companies that have exceeded them. The European Union has used this system for several years.
A carbon tax is simpler: It places a direct tax on the global warming gas. The British Columbia government imposed a $10 (CDN) per metric ton tax on the carbon produced by gasoline, diesel, natural gas, heating fuel, propane, aviation fuel, kerosene and coal.
The idea is to change addictions to fossil fuels by making their use more expensive. The British Columbia tax added more than 2.3 cents a liter to the price of gasoline this year. Annual increases will add seven cents to a liter of gasoline by 2012 and 9.5 cents to a liter of heavy fuel oil.
The British Columbia tax is revenue neutral: The $1.5 billion (U.S.) collected annually goes to reducing personal and business taxes. The plan is to cut greenhouse gas emissions by 30 percent by 2020. Sweden, Denmark and Norway have had carbon tax systems since the early 1990s.
The debate about which system would more effectively reduce greenhouses gases grows louder by the day. Critics of the capped system argue that it’s complex and bureaucratic. It would prompt Wall Street to create new instruments for the trade of carbon credits, and given the record with subprime mortgages, concerns are understandable.
These concerns were voiced by none other than Exxon Mobil chief executive Rex Tillerson in January. He warned that a cap and trade system would produce “a Wall Street of emissions brokers.” He then surprised many by announcing his support for a $20 (U.S.) per ton carbon tax.
The main knock against a carbon tax is that the mere sound of it makes voters cringe. That became political gospel in Canada after the trouncing voters gave the Liberal Party in federal elections last fall. Their hapless leader at the time, Stephane Dion, made a revenue-neutral carbon tax the party’s main election plank. He was painted by Harper as a tax-and-spend liberal, and lost.
Michael Ignatieff dropped the carbon tax proposal from the Liberal Party platform when he replaced Dion as leader last December.
“We took the carbon tax to the public and the public didn’t think it was such a good idea,” he said earlier this year. “I’m trying to get myself elected here and if the public, after mature consideration, think that’s the dumbest thing they’ve ever heard then I’ve got to listen.”
But Campbell changed that political equation in British Columbia. He won a strong majority government — his third in a row — despite the socialist New Democratic Party opposition vowing to replace the carbon tax with a cap and trade system.
“To others who may have looked at this (carbon tax) with trepidation and said this can’t be done — it should be done and it must be done for our children and grandchildren," Campbell said after his triumph.
Environmentalists describe the British Columbia election as a watershed moment. It signals to North American politicians that a carbon tax can be the kiss of life, for both the environment and their careers.
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Glacial melting in Chile’s Patagonia region
US considers ‘greening’ the tax code
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