Friday, June 06, 2008

More carbon shifting validation

More third-party validation around the emerging Liberal proposal around carbon shifting. In addition to such folks as David Suzuki, Elizabeth May and Sierra Club Canada’s Stephen Hazell, among many others, you can now add Christopher Ragan to the list. Ragan is an economics professor at McGill, and offers a very reasoned explanation of how it’s not quite fair to say a carbon shift would disproportionally impact low income Canadians. It's an interesting read.

More is probably needed, but the carbon tax would be an excellent start. It creates the right incentives to reduce fossil-fuel use while not increasing the government's tax take. Few economists doubt that such an idea has real merit; indeed, a carbon tax recently appeared at the top of a long list of policies in a fascinating priority-setting project published recently by the Institute for Research on Public Policy.


First, they
(the NDP –ed.) dislike the carbon tax because it would raise prices for gasoline, heating oil, and many other things bought by ordinary Canadians. They favour instead a cap-and-trade system imposed on large industrial polluters. They appear not to understand that a cap-and-trade system, even if it applied only to large industrial firms, would nonetheless increase the prices of most products because firms would be required to purchase costly "emissions permits," thus increasing their costs. Some of these higher costs would clearly be passed on to consumers.

The NDP also argue that the Liberal carbon tax would be especially bad for low-income households because they spend a relatively large fraction of their monthly income on gasoline and heating oil. But they miss the crucial point that higher-income households spend more - in absolute terms - on carbon-based energy than do lower-income households.


Here is the neat part, at least for the low-income households. The easiest way to reduce personal income taxes across the board would be to increase the basic personal exemption by the same amount for all taxpayers. If this approach were taken, the tax reduction for low-income households would be larger than the amount they paid in higher carbon taxes.

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Mike514 said...

Endorsing a carbon tax is not the same as endorsing the Liberals' proposed carbon tax, simply because we don't know what the Liberals will propose.

An expert supports a carbon tax, and that's fine, but the Liberal plan has too many unknowns. What if Dion's carbon tax is steep, while cuts in personal income tax are tiny? Would the experts still support it?

I just find it a little ironic that the Liberals are trotting out experts to support their idea, when they haven't even announced their idea yet... It's like a Kafka novel.

Jeff said...

Do you therefore also find it amusing, Mike, that the Conservatives and NDP are trotting out and attacking the Liberal non-proposal as the end of life as we know it?

Anyway, they're validating the concept, and providing advice on how the under-development Liberal plan should get it right. Hopefully, the advice from assorted experts is considered and incorporated into the plan that is released.

The point, however, is that the idea of a carbon shift is a good one, and as a concept is supported by many.

Mike514 said...

"Under-developed Liberal plan" is an over-statement. How about "non-developed?"

As for the Tories defining the Liberal policy for them: that's called politics. Define your ideas or have them defined. This puts the Liberals on the defensive rather than offensive.

Jeff said...

OK, the Cons launching attacks on a policy you define as "non-developed" is politics as usual.

The Liberals actually getting input from experts on the topic rather than just relying on Doug Finley's polling data, that's good policy making.

Frankly, I'd rather good policy making than political smears, and I don't think I'm the only one.