Carbon Taxes: No different than any other user fee

After reading today's press coverage of Mr. Dion's announcement, I wonder if anyone in the press gallery understands how a carbon tax works. The Minister of the Environment assailed the measure during Question Period yesterday, making me wonder if he understands that the regulation of industry is nothing more than a revenue neutral tax on competitiveness.

Assuming the Government intends to follow the Rule of Law and be bound by C-288 upon Royal Assent, a new carbon tax on oil exports could be the perfect solution. Say what you want about Kyoto and the Clean development mechanisms found within it, but since that debate is now seemingly over, the government will have to come up with a plan - and pronto. Maybe I can help.

For every barrel of oil we export, we should stamp the barrel "Kyoto Compliant" and add a $3.00 levy to its price. Since the overwhelming majority of our oil exports go to the U.S. which remains addicted to oil, the sweet and crude (pun intended) irony is that America would foot Canada's Kyoto costs. Based on current market trends, world oil prices remaining stable (they will likely go up with Asian appetites growing) and the growing preference of Americans to buy oil from non-terrorists - Canada would have enough money to buy its way into compliance by 2010 with no "cost" out of the pockets of Canadian industry or taxpayers. Given the lead taken by many U.S. companies on this issue, I can see the Exxon Mobile commercials already.

Of course, we could just pocket the money and hide it from our supplier. Or we could charge an extra $5.00. Or $10.00. This is why selling drugs leads to shootings.

I would also like to remind everyone that based on the world price of oil, gasoline is VERY inexpensive in Canada and the United States. Adjusting for inflation, the price of gas remains a fraction of the levels it reached during the crisis in the 1970s. During last year's price surge, it was still cheaper in Chicago than it was in Paris (Chicago is the historically the most expensive jurisdiction in North America regularly getting to $3.00 a gallon) The only country where gasoline is cheaper is Nigeria - where they have a very strong government subsidy embedded into the price.

I would have exactly NO problems if the price of gas doubled in North America - income taxes would go drastically down; traffic congestion would diminish; vehicle fleets would become newer, smaller and safer; infrastructure would be improved...Let those who choose to use the service absorb the cost of it.

And someone from Alberta would shoot the Prime Minister. His successor, bathing in tax revenues, wouldn't change a thing (just like the GST).

Of course, my clear preference is to improve the Clean Development Mechanisms within the accord to make current international development funds and EDC investments qualify for accreditation. There is no doubt that the work done by these two organizations does more than any international treaty could possibly imagine for improving the local and global environment. Frankly, I find it insulting that (random country) Algeria can so happily accept tied aid from Canada so that they can have clean drinking water, and subsequently turn around and demand that we pay a penalty for failing to meet Kyoto domestically. I wonder if they would protest if we transferred CIDA's budget directly to Kyoto CDM payments. But I digress...

Rule of Law, Smool of Law. If Canada was really serious about climactic change and having an impact on the world environment, we should be driving our emissions up. Yes, UP. The bottom line is that investment is occurring globally, and for a series of reasons, those investments are happening in developing nations. The most important is burgeoning market proximity, but we still live in an export driven global economy. Those same nations are constantly engaged in a race to the bottom - and are (ahem) lax in the enforceability of their environmental rules. Canada record on enforcement is probably the best in the world.

We allow for the growth (on an intensity basis) knowing that by having this investment here, it would have an impact on the release of anthropogenic gases- but a lower impact than it would have in Bolivia because of the sustainability ethic that exists in Canada. There is such a thing as cleaner pollution, and the pollution is going to occur - so it might as well occur here where we get an effective double hit: Our tough enforcement, and our (relatively) cleaner power generation. Investment in Quebec is the cleanest investment in the world because they have emissions free electricity.

The concept of "Value-Added" is something that is not well understood by decision makers. The Alberta economy is currently based on "extract and export" to a jurisdiction which refines and remolds (a very carbon intensive process). Once the product leaves our borders, we lose control over how its life cycle continues. Sure, it creates high paying jobs, but there is so much more that could be "added" to the value chain at home - with the aforementioned assurances for environmental sustainability.

This is not an endorsement for the Conservative environmental position- far from it - but it is an acknowledgement that the existing public perception of tackling the human sources of global climate change at home is bass-ackward. We can reduce global emissions by ensuring that polluters pollute here- as it relates to C02, the location of the emission is irrelevant to a global problem. While polluting here, they pay for our roads. By discouraging emissions increases (code for investment) we drive that investment away to other locations where the exact same CO2 will be emitted, if not more.