I've blogged (here and here) that the Green Party of Ontario (GPO) should be in the Legislature, to help keep Climate Change on the agenda. I agree with many points in their 2007 Platform, and I still think that they should have a voice in the Legislature (and I still support MMP). Having said this, I have problems with the GPO's proposal to shift revenues from the income tax to a carbon tax ("pay for what you burn, not for what you earn"). Better alternatives exist, including direct regulation and cap-and-trade.
The GPO wants to tax carbon and to cut carbon emissions to zero. In fact, they want a 100% renewable energy system (including a nuclear power phase-out). I support this goal, but I question the GPO's proposed way of getting there. There is a conflict of interest between relying on carbon revenues and eliminating the revenue source (remember Tobacco Taxes and Lotteries?..).
I raised this concern, among others, directly with GPO Leader Frank de Jong on a CBC radio phone-in on September 20, 2007*. Unfortunately, his answers made me even more wary. He said that once carbon is phased out, the GPO would make up the revenues by raising taxes on things like food, clothing and shelter:
“Your point about you know, let’s say if we continue to raise the tax on cigarettes, and sooner or later everyone will stop smoking, and then up -- uh, your revenue stream will dry up. But I think we will always need products, we’ll always need resources, we'll always need, you know, clothing, and food, and stuff to build houses with, so there will always be something to collect as much General Revenue as you need. And it will be a a continuous virtual spiral toward sustainability. It’s a long process but we got to get started at it” [my transcript of Frank de Jong's remarks; my bolding].Hear for yourself: on the ODEO player below, click Play, wait for the player to buffer the whole file, and drag the slider to around 00:04:19.
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First, they’ll tax your carbon, and then they’ll tax your shirt!
(With apologies to Leonard Cohen :-)
Some "spiral toward sustainability"!
Sure, taxing carbon instead of income today would mean "taxing bad instead of good". But taxing food, shelter and clothing instead of income would mean "taxing good instead of good". Worse yet, consumption taxes are notoriously more regressive than income taxes. Consumption taxes do not take into account ability to pay. The GPO leader seemed to have no problem with that. I do.
I had actually started debating carbon taxes with one of the candidates for the federal Green Party of Canada (GPC), Glenn Hubbers, Newmarket-Aurora, on his blog (here and here -- see my Comments). The GPC also supports carbon taxes, e.g. "$50/tonne".
Then the GPO announced that a carbon tax would be an even bigger part of their 2007 Platform. Frank de Jong, Leader of the Green Party of Ontario (CBC profile), was on the CBC Radio Ontario Noon Phone-In show on September 20, 2007. I managed to get through and challenge him on-air to justify his Party's carbon tax plan. In particular, I asked:
- What is the price-elasticity of carbon emissions, i.e. how much would their tax really reduce emissions? Where is the economic modelling?
- The GPO Platform calls for a transition to a 100% renewable energy system—what would happen to the revenue from the carbon tax then?
- There is a conflict of interest between wanting more revenue and less carbon emissions. This would weaken incentive for Government to drive emissions to zero—think of the Tobacco Tax & Lotteries.
- A carbon tax is regressive, like any consumption tax. Income tax relief may help some of the poor, but not all. Increased Northern/Rural subsidies may help others, but at cost of encouraging further inefficient development (e.g. the proposed Green Party subsidies to airports, even if they would be in the North?..)
- They also want to phase out nuclear power, but they are not proposing a tax on Uranium. Apparently, nuclear power would be phased out entirely by regulation, not taxation. Why not use regulation instead of taxes for carbon as well?
- Why not expand the carbon cap-and-trade system that GPO also proposes? (See more below.)
Unfortunately, I don't think that he answered most of my questions, though in fairness the phone-in format makes it difficult to conduct an in-depth debate. Further comments from GPO supporters (and opponents) are very welcome.
You can listen to the part of the show that contained my questions and Frank de Jong’s response using the ODEO player below, or you can download the MP3 from mediamax.com (4.3 MB).
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[UPDATE, September 26, 2007: After posting this blog entry, I discovered that Marc Lee, a Senior Economist with the Canadian Centre for Policy Alternatives, had made many similar points about carbon taxes in the Progressive Economics Forum here and here. He also agreed somewhat reluctantly in a Comment to a post that putting carbon tax moneys into an arms-length fund might be better than putting them into General Revenue. I prefer cap-and-trade, which sounds simpler and more direct to me -- see below.]
More on cap-and-trade:
One advantage of cap-and-trade is that it does not make governments dependent on carbon revenues. The money from high emitters goes to low emitters through a private (regulated) carbon market. The incentives to reduce emissions are very clear, with no conflicts of interest. Prices on carbon-heavy products go up, but prices on carbon-light products come down, which eases the effect on consumers. Progressive income taxes and redistribution can help take care of the rest in the usual way.
* You can hear the entire September 20, 2007 phone-in on the CBC Ontario Today archive site (in Real Audio format - direct link). Unfortunately, they only keep these free links for 30 days, after which you have to pay some other company for a recording or transcript.
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