Wednesday, April 3, 2013
Carbon taxes and sustainability in British Columbia: What IS a sustainable carbon tax?
by Kai Chan
Tuesday evening (Apr 2), I wrote to my candidate MLAs in BC to request that they campaign for a strong, effective carbon tax. The Better Future BC Fund is organizing a letter-writing campaign, and as a supporter, I jumped on. I also forwarded the email to colleagues at IRES. John Robinson, head of the UBC USI and Associate Provost for Sustainability, pointed out that a sustainable carbon tax might actually be one that doesn't invest the proceeds into clean energy projects.
The Better Future BC Campaign asks for several very reasonable developments, including closing loopholes that allow some businesses to avoid paying the carbon tax, and increasing the carbon tax rate so that the tax provides a meaningful incentive for corporations to reduce their greenhouse gas emissions. But John takes issue with the third component, which is to "invest in solutions". Sounds great, doesn't it--how could a sustainability advocate argue against this?
Well, see for yourself. Below, I've copied John's email to me (with permission), which lays out a compelling reason why the carbon tax should not be tied to green investments. In short, because doing so makes the carbon tax desirable only to governments that truly own 'green investment', whereas having carbon tax revenues go into tax rebates makes the tax invaluable to all governments, 'green' or not. And the carbon tax, if strong enough, is already an effective incentive for green development (in the reduction of greenhouse gases).
I have been arguing for some time with Matt Horne and other colleagues that it is a mistake to argue for using carbon tax revenues to fund green investments. My reasoning is very simple. The most important goal must be to preserve the tax. Using the tax revenues to fund green activities removes the greatest protection that the tax has, which is that since all the tax revenues are now used to reduce other taxes, eliminating the carbon tax would require a major tax increase in other areas to make up the lost revenues. In BC at the present this would mean that eliminating the carbon tax would create a need to raise other taxes to the tune of about $1.2 billion, as I recall.
In fact, I believe that this is the only reason we still have a carbon tax in BC. It was clear that Christy Clark was not interested in having this tax when she came into office but the political pain of having to create new taxes was too great and prevented her from eliminating the carbon tax. In fact it would prevent even the most ideologically opposed government from eliminating the tax, I believe.
I think our first goal should be to protect the tax, and recognize that its main effect, in environmental terms, is not to generate revenue but to penalize carbon intensive activity. That is, the behavioural consequences of carbon taxation is the main reason to have such a tax. Using the revenue for green purposes would be a good secondary purpose, if it did not make the tax vulnerable. Unfortunately, killing the tax is easy if there is no tax increase penalty in doing so. Note also that more right wing governments would consider reducing a carbon tax and also reducing green subsidies as both good things. But they are probably the least inclined to reduce a carbon tax, which, in the case of BC, has become more or less invisible to residents, if it means increasing other taxes.
I think if we direct carbon tax revenues to green investments, we are likely to sound the death knell of that tax.
John convinced me: the sustainable tool for a sustainable relationship between BC and the Earth's biosphere is a carbon tax that provides revenues for tax rebates(1). As a citizen, I remain an ardent supporter of a stronger, tighter carbon tax.
(1) Ideally these would address distributional consequences for the poor, who--according to another esteemed colleague Hadi Dowlatabadi--are commonly less able to shift their behavior in response to energy taxes. The BC carbon tax's associated rebates do seem to be somewhat structured this way already.