An esteemed colleague of mine showed up in Twitterland on Tuesday to graciously offer me credit for the Liberal government’s carbon-pricing announcement this week. This fellow economist made the link to a 2008 paper I co-authored with Nancy Olewiler, which proposed converting the federal fuel excise tax into a carbon tax in Canada.
While recognition of my past work is always appreciated, I don’t think I can take credit for this Liberal plan. In fact, I am disillusioned with these evolving climate policies that seem to be laid out in a helter-skelter fashion — and with high economic costs.
I stand behind the points of the 2008 paper. I still maintain that a single uniform carbon tax is the least distortionary way to implement carbon policies. And we should integrate existing federal- provincial fuel taxes — for example, almost 25 cents per litre on gasoline in Ontario — by transforming them into general carbon taxes. With a single carbon tax rate, businesses and consumers can determine the best way to respond to reducing emissions.
But a single uniform carbon tax is supposed to make regulations and various subsidies (with their own implicit tax costs) unnecessary, except perhaps for funding research. If producers see that they can save more carbon tax by investing in a technology or process, they will adopt it. If the technology is prohibitively expensive (such as carbon capture and storage) they won’t.
This is how a carbon tax works: Not governments trying to make decisions for us, without any idea what new technologies might arrive tomorrow, lacking the wisdom to assign differential carbon prices. Yet that’s what the government will continue doing with a plethora of taxes, regulations and subsidies, despite politicians’ attempts to argue that the carbon tax is their “market-based” solution to climate control.
For the rest of this column: https://business.financialpost.com/opinion/jack-mintz-the-liberals-ignored-my-carbon-tax-plan-theirs-is-much-worse