Carbon tax

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Categories: Taxation | Climate Change

According to a Canadian article, "U.S. economist wades into carbon-tax debate", by Bruce Cheadle, Jeffrey Sachs claims that there is no credible way to attack climate change without raising the cost of carbon emissions.

No other way

"Be sure that without a price on carbon, there is no (large) scaled solution to this problem... that is the first requirement." Jeffrey Sachs of Columbia University told the Liberal-dominated Canada 2020 conference. The Liberal Party of Canada lost power in January and had been engaged in a process of policy review under its Liberal Party of Canada Renewal Commission.

Sachs criticizes U.S. foreign policy and advocates a full-scale assault on Third World poverty. He was supposed to give a speech on improving Canada's international impact, but instead thew open the floor microphones with an angry question as to whether Canada is really abandoning the Kyoto protocol on greenhouse gas emissions. His caustic assessment of Prime Minister Stephen Harper's decision to "just blow off Kyoto because it's mildly inconvenient" was an easy sell for many of the 160 conference participants. The Liberals under Jean Chretien had signed the accord and made it a centrepiece of policy.

But of the Liberals' current leadership candidates, only Michael Ignatieff has raised the prospects, and was "pilloried by his fellow candidates and the Conservative government." Sachs had alluded directly to Ignatieff's talk of carbon taxes and stated categorically that: "Without that price, we are resigned to have an economic system that prevents responsible environmental action... You've got shareholders all over the world ready to sue environmentally sound companies because they do not face incentives to be environmentally sound." Sachs said the people who run utility companies plead for such measures because they can't justify clean technologies to shareholders under the current economic model.

Oil company reaction

Sachs' assessment was immediately echoed by oil executives present at the meeting.

"It's politically unpopular, but if you don't change the price of a commodity, don't expect the usage pattern to change at the consumer level," said Marvin Romanow, the chief financial officer of Nexus Inc., a Calgary-based oil and gas company with projects from Yemen to the Gulf of Mexico.

There are many ways to tax carbon, said Romanow, and the trick is to do it in a way that doesn't target a single industry, producer or province.

"I think industry, at the end of the day, would have very limited objections to stuff that's applied across all sectors that produce carbon dioxide."

Canadian political fallout

Shortly thereafter, Quebec Premier Jean Charest put forth a proposal from the Liberal Party of Quebec for a provincial level carbon tax, making front page news across Canada on June 16th, and earning widespread support from activists. Charest is facing a provincial election against Parti Quebecois opposition in 2007 - the Quebec sovereignty advocates have sworn to hold a Quebec sovereignty referendum in the first 18 months of their mandate. They also strongly support the Kyoto accord.

Anne McLellan, the former Liberal deputy prime minister from Alberta, quickly distanced herself from Sachs after the morning session, and verified that the federal Liberals in power had categorically ruled out imposing a tax on carbon emissions: "There are other ways to incentivize responsible conduct on the part of the private sector," said McLellan. "Our approach was the carrot" - not the stick. This resembles the George W. Bush administration's position that mandatory carbon tax inhibits business.

In Canada, talk of carbon taxes inevitably raises the political poison of the Liberal National Energy Program of the 1970s that many Alberta claims caused a downturn in the oil and gas industry in the 1980s. However, this was actually due to a global price dip, and a glut of Saudi oil.

The Alberta Tar Sands project is the world's largest and fastest-growing producer of greenhouse gases.