Contradictory Carbon Tax Catastrophe

Average consumers will suffer, corporations have wiggle-room

A new carbon tax will be implemented as part of the Pan American Framework on Clean Growth and Climate Change next January.  

The purpose of this tax is to save our environment and act on climate change–to meet the carbon emission targets set by the Intergovernmental Panel on Climate Change (IPCC).  

The logic behind the tax is simple economics: higher prices mean lower demand, lower demand for carbon means carbon emissions will reduce.  

And that will save our environment, right? 

Unfortunately, the answer is not that simple. 

When we think of a carbon tax, the most natural thing that comes to mind is increased gas prices. But carbon tax will also increase the price of almost everything that uses carbon – like groceries that need to be transported by trucks. The price for almost everything will rise as many products require the use of carbon, whether indirectly for transportation or directly in production.   

Inelasticity of demand means that a rise in price for a product will not significantly alter its consumption. Things that don’t have substitutes, like home-heating and gas for example. If you raise the price of gas, families who drive to work, to school or to hockey practice will still have to do these things but will pay more. 

The US pulled out from the IPCC agreement, to avoid the adverse impact it would have on jobs, fossil fuel industries and the overall GDP 

Economic concerns 

New businesses mean new jobs, and when you increase the costs for investing in Canada by imposing an additional carbon tax, companies are hesitant to invest. This means fewer jobs will be created and as productions costs rise, current jobs may be threatened as companies look to reduce costs. 

There are serious economic concerns when it comes to investments, loss of jobs and more expenses for basic needs. While Canada may emit less greenhouse gases, companies can just move their money elsewhere and invest in countries where there are less regulations on pollution. Meaning that the overall greenhouse emissions from our planet – which is what truly matters – might just remain the same.   

Consumer concerns 

The government plan exempts large polluters from bearing the full cost of the carbon tax. Most firms that produce 50 megatons of carbon dioxide per year won’t face any penalties until its emissions reach 80 per cent of its industry’s average. Other industries faced with high competition like cement and oil might be exempt for up to 90 per cent.  

If the heavy polluters aren’t being taxed, what’s the point? 

Average consumers will bear the burden of the carbon tax, paying more for basic necessities like gas and home-heating.  

Currently, there are significant exemptions for firms that heavily emit carbon dioxide, which might dampen harm to our economy, but the carbon tax is expected is to keep rising over the next few years – which means that the economic threats are looming. 

Different pollution solutions  

There are other pathways to effectively tackle climate change.  

The government can encourage investment in sustainable tech by reducing regulation.  

The government can also invest in green technology as opposed to subsidizing fossil fuel industries 

Other methods include replacing fuel-consuming cars with electric cars, or switching to biodiesel (a vegetable-oil based diesel fuel) when possible.  

But let’s assume all these hurdles have been calculated for and the plan is flawless- it protects our economy, jobs and investments while reducing pollution. A recent IPCC report that shows even with carbon tax, Canada needs to do more to meet its targets.  

For the carbon tax to cut emissions enough for us to meet our climate targets, it needs to be significantly higher. The current tax is nowhere near what it should be, and with the exemptions for large corporations, one wonders whether this tax fulfills its intentions.  

Protecting our environment and our economy at the same time is very important. A proper carbon tax cannot logically achieve both.  

A high, environment-saving carbon tax would raise the costs of production, which leads to the adverse economic issues. A lower carbon tax, like the one being implemented, is just not enough to reach our climate targets.   

1 Comment

  1. Mason Maxwell on January 5, 2019 at 5:31 pm

    The author writes that “Protecting our environment and our economy at the same time is very important. A proper carbon tax cannot logically achieve both.” But this is false, and the recent Nobel laureate in economics, Paul Romer, has even said that a carbox tax could lead to massive economic growth. See this CBC interview with him:

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