Wall hits a local [Calgary] chord with his criticism of federal carbon-tax scheme
- 2 Nov 2016
- Calgary Herald
- DEBORAH YEDLIN
Wall hits a local chord with his criticism of federal carbon-tax scheme
Saskatchewan Premier Brad Wall delivered a number of bon mots when he was honoured by the Fraser Institute in Calgary last week. The remark that delivered the biggest response, including a whistle or two, involved the issue of a carbon tax.
“A carbon tax, whether it is revenue neutral or not, by definition will impact carbon intense industries,” he said. “In Saskatchewan, we have carbon intense industries. They are the bulwark of our economy … they are agriculture, oil and gas, mining and some large manufacturing.
“Our point is this: if the carbon tax, by definition, is going to be harmful to, or hurt the competitiveness of carbon intense industries, what good is revenue neutrality?”
Canada is galloping toward a carbon tax that could impact an industry that accounts for 20 per cent of the country’s gross domestic product. South of the border, where the oilpatch is competing with this country’s oil and natural gas production, there has been no cohesive movement in that direction.
Are there other countries similarly willing to handicap their primary industries and related economic prospects for the greater good? Would the United States, the world’s largest exporter of arms, contemplate a move that would make the industry less lucrative? Not likely. It’s not that putting a price on carbon is wrong, but it must be done in a way that is constructive, not destructive.
The challenge in Canada, given the absence of federal leadership on the issue, led provinces to move on their own, in different ways.
Alberta and British Columbia chose the more transparent approach of a carbon tax. Quebec and Ontario signed on to cap and trade, which is much more opaque and perhaps the reason that route was taken.
And then there is the recent federal government pronouncement that come hell or high water there will be a national price on carbon.
What that looks like and how it affects existing policies is the big unknown. It’s therefore premature for the Alberta government to release a study on how its carbon tax will impact the provincial economy.
The one-page report determined the economic impact would be relatively small because of the “design of the program and benefits of reinvesting every dollar back into the local economy.”
Under what economic model does subsidizing two-thirds of households to offset the cost of the carbon tax constitute a reinvestment in the local economy?
Governments don’t have all the information related to costs and technology within each sector of the economy, making it difficult to quantify the impact of a new tax.
Chris Ragan, chair of the Ecofiscal Commission and a professor of economics at McGill University, says the federal government must structure its carbon policy so the price doesn’t cause businesses across different provinces to play a game of arbitrage and seek out the lowestcost jurisdiction.
An editorial published last week by members of the Ecofiscal Commission stated “all governments need to recognize the significant costs associated with carbon price differentials across jurisdictions, and think carefully about how prices can be best aligned.”
The bottom line is that a carbon pricing policy is simply unworkable.
In addition, there is the usual challenge of what’s referred to as “unintended consequences.”
For example: natural gas and the not-for-profit sector.
We’ll all agree that compared with coal, natural gas is a much more attractive fuel source for electricity since it’s cleaner burning with similar energy density.
But what does the price per thousand cubic feet of natural gas look like when a $30-per-tonne tax is tacked on?
Some number crunchers have come up with a value that adds $1.57/mcf to the price of natural gas, rising to $2.20/mcf at $50 a tonne. With natural gas prices of $0.65/mcf to $3/mcf in the past six months, it’s tough to swallow, and in the end means only one thing — higher power costs for consumers and businesses.
The irony is that the electricity will be generated by a cleaner burning fuel.
No wonder Capital Power and Enmax announced they were deferring a decision on their jointly owned Genesee 4 and 5 power plant until there is more certainty around compensation for the retirement of existing coal-fired facilities and the climate for future investment in the province’s electricity market.
Then there are the not-forprofit organizations, which squeeze value out of every dollar raised. Each one will be impacted by the carbon tax. They fundraise for programs and services delivered to the community, not to cover the cost of a carbon tax.
The Alberta government’s carbon tax analysis — which it calls preliminary — is contingent on defining too many as yet undefined variables. These include the bill for phasing out coal-fired power, subsidies required to incent investment in renewables and the need for an electricity grid to support this transition.
If the Alberta carbon tax facilitates market access off the east and west coasts of Canada, the economic picture of this province will be decidedly rosier, even with the added costs of the tax. However, it’s too early to determine whether there will be currency for the Climate Leadership Plan in that context.
In short, the government’s economic analysis posed more questions than it answered.
It would have been better advised to come forward with more clarity regarding the policies underpinning its climate strategy.
An economics professor would have fun with a red pen, asking for backup analysis and evidence for the statements made.
This province needs policy certainty.
The government’s half-baked economist impact analysis offered nothing of the sort.