A carbon tax is the method by which government, either directly or indirectly, places a price on carbon.
A straight up, "classic" carbon tax, raises taxes directly on most goods and services that emit carbon dioxide. This is the type of carbon tax which Alberta NDP Premier Rachel Notley has imposed on Albertans in 2017 and the sort of carbon tax which Ontario PC Party Leader, Patrick Brown, has in mind for Ontario in 2018.
The "cap and trade" method of carbon pricing is just an indirect carbon tax, or a carbon tax by a different name. It sets a limit for how much carbon dioxide businesses can emit and forces them to buy permits from the government for every tonne of carbon dioxide emitted, at a price set by the government. This cost is in turn passed on to consumers by increasing the costs of most goods and services that emit carbon dioxide.
THE "CAP AND TRADE" CARBON TAX
"Cap and trade" carbon pricing is the type of carbon tax Premier Kathleen Wynne has imposed on Ontario taxpayers as of January 1st, 2017. Wynne has set her cost of emitting carbon dioxide for 2017 at $19 a tonne. This results in an increase in the price of gas by 4.3 cents a litre and on average will increase household heating bills by $80 a year. The Ontario government could generate almost $2 billion in 2017 alone, with government revenue likely rising every year thereafter. This tax revenue for the Ontario government will continue to increase with the corresponding increase in the price per tonne of carbon dioxide that the Ontario government has pledged to raise every year thereafter.
Wynne’s "cap and trade" carbon tax will also link Ontario’s program with "cap and trade" carbon tax programs in California and Quebec, creating a “market" for carbon dioxide emissions. What this means is that Ontario companies will be subsidizing emission cuts by businesses in California and Quebec to the tune of almost $500 million dollars by 2020.
THE "CLASSIC" CARBON TAX
The Globe and Mail recently reported on research that found “a straight carbon tax of the kind advocated by Patrick Brown would have to be roughly $72 a tonne” compared to the $19 a tonne Wynne’s “cap and trade” carbon tax is currently costing us.
The result would mean that a "classic" carbon tax, as a direct tax, could cost almost four times as much as the indirect costs of a "cap and trade" carbon tax.
On January 1, 2017, Alberta's economy-wide carbon tax came into effect, putting a price on carbon dioxide emission at $20 per tonne. This cost will be increased to $30 per tonne of carbon-dioxide emissions by 2018. Alberta’s carbon tax is expected to raise $9.6 billion over five years - government revenue equal to a 3 percent sales tax! The vast majority of revenue generated by Alberta's NDP government will be spent on government programs with only a third of taxpayers receiving rebates for the carbon tax. Premier Notley has stated that Alberta will be increasing their carbon tax price to $50 per tonne of carbon dioxide emitted by 2022. Analysts have projected that Alberta's carbon tax will cost a household anywhere between $600 to $2,569 per year by 2022.
The Manitoba government estimates that a $10 per tonne direct "classic" carbon tax would generate about $100 million a year for their provincial coffers. By 2022, the Manitoba government's own modest estimates project that a $50 per tonne carbon tax would produce a staggering $500 million a year - well above the $300 million that is generated for every point that the PST produces annually for the province.
British Columbia's Liberal government established a carbon tax of $10 per tonne of carbon dioxide emitted in 2008 and has increased the price o $30 per tonne. This works out to about 6.7 cents per litre of gasoline. When originally introduced in 2008, the BC Liberal government generated $306 million in revenue. By 2015/2016 the BC Liberal government generated $1.2 billion annually on their carbon tax.
PUBLIC OPPOSITION TO CARBON TAXES - THE LESSON FROM AUSTRALIA
On July 1, 2012, the Australian government instituted a carbon tax of $23 (Australian dollars) per tonne of carbon dioxide emitted. This was raised to $24.15 per tonne a year later.
After promising that there would be no carbon tax under any government she would lead, Labor Prime Minister Julia Gillard made a deal with the Green Party in order to form a minority government and agreed to legislate a carbon tax.
Within a year, household electricity rates increased by 15 percent and unemployment rose by more than 10 percent, hurting an already struggling Australian economy.
Since Australia's exports tend to be emission-intensive, the carbon tax was found to serve as a tax on exports, which contributed to decisions by businesses to lay off workers or shut down entirely.
Australia's carbon tax proved so unpopular that it led to the Labor government's defeat in the September 2013 Australian federal election.
Incoming Prime Minister, Tony Abbott, framed the election as a referendum on the carbon tax. After his "axe the tax" campaign pledge proved successful with voters, Abbott ensured that removing the carbon tax was at the head of his legislative program.
PUBLIC OPPOSITION TO CARBON TAXES IN CANADA
Consistent with the Australian experience, antipathy to carbon taxes in Canada has also set in.
In Alberta, 64 percent of those aged 18 to 34 (who ironically are also most likely to be receiving rebate cheques) are against Alberta's carbon tax. 62% percent of Alberta seniors oppose the carbon tax and 61 percent of 35 to 49 year olds.
In Ontario, a Nanos poll released in February 2017 found only 31 percent supported Premier Wynne's "cap and trade" carbon tax, with 61 percent opposed - with opposition spreading across PC, NDP and even Green voters.
The carbon tax is the leading fiscal policy issue of the day in Canadian politics and will be for years to come.
Whether a direct carbon tax is used, or an indirect cap and trade carbon tax is introduced, the end result is the same - a higher cost of living for the taxpayer, paid either through higher prices or higher taxes on most goods and services.