Manitoba must challenge carbon tax

Hey there, time traveller!
This article was published 12/04/2019 (2449 days ago), so information in it may no longer be current.

Manitoba is taking the federal government to court over the carbon tax, but with a challenge substantially different from Saskatchewan and Ontario (Province to take Ottawa to court, April 4).

It focuses on equivalency, a constitution-related principle described by Bryan Schwartz, who earlier provided Manitoba with a legal opinion. Manitoba has been an environmental leader, as our record shows, but our leadership seems perpetually ignored, even including where significant carbon-pricing equivalent values can be shown. The importance of the court challenge is elevated, given that under the federal Liberal scheme, Manitobans will be overtaxed, facing an unnecessarily large penalty.

In the fall 2018 edition of the local Eco-Journal, an article by MBA students from the Asper School of Business showed Manitoba has long been a leader in renewable biofuels. Further, it was estimated that higher biofuels in Manitoba are worth at least $25 per tonne in terms of carbon-pricing equivalent, likely much more. On this basis alone, it should have been easy for the prime minister to agree to Manitoba’s original proposal.

More recently, MBA students studying sustainability economics put a dollar value on the emission-reduction contribution of Manitoba’s electricity exports to the U.S. Midwest. This analysis stemmed from an opinion article by Scott Forbes of the University of Winnipeg, who suggested that through our exports, Manitobans already pay for reductions (We already pay for carbon reduction, Nov. 29, 2018, Winnipeg Free Press).

Public data from the National Energy Board show Manitoba’s U.S. electricity exports have averaged just over nine billion kWh annually. Using average Midwest grid-intensity, current carbon price and a reasonable estimate of Manitoba’s taxable carbon-emissions means our electricity exports are worth the equivalent of $11 per tonne. Some might object to this proposition, but it can be legitimately justified. Adding the two offsets together means Manitobans already contribute the equivalent of almost double the current carbon tax, yet are still obliged to pay more.

On the carbon tax itself, federal Liberal emphasis, unfortunately, has been overwhelmingly on touting rebates, not discussing tax efficacy or details of how much will be raised, from where and going where. The numbers literally do not add up. A major problem is that rebate levels are fixed, whereas carbon taxation is variable, depending on fuels consumed. Federal sources consistently note an average Manitoba household of four will face a tax burden of $232 during the first year, and at the same time receive a rebate of $336. A positive outcome is implied, but questionable. More realistically, an average household will face a tax burden of $375 over the period, but only receive a rebate of $276. This is very different, and demonstrably negative for Manitobans.

Regarding the stated rebate, 2016 census data show the average Manitoba household size is actually 2½ people.

From the suggested tax burden of $232, it is possible to back-calculate, based on average household size and Manitoba population, estimating a total tax-take of $121 million over the first year. Considering the carbon price, this translates to annual taxable emissions of only six million tonnes, an unrealistically low estimate. It becomes apparent the federal government may be lowballing emissions to downplay the effects and lessen refund payments.

A more reasonable estimate of taxable emissions is about 9.3 million tonnes annually, i.e., much higher. This is based on the National Inventory Report of annual emissions for our province, but somewhat lower than the Government of Manitoba’s own projection under its earlier scheme. Federal GST will be further charged on the carbon tax. As such, Manitobans will be paying more for carbon tax than intimated.

How the carbon tax burden affects households will vary. Using reasonable emissions, the cost over the first year, including GST, is about $150 per capita. This is lower than the rebate of $170 for a single person, which is positive. However, for families, the rebate for a second individual is only $85, and for each additional child is only $42. Families end up losing out, with larger families disproportionately affected, especially those at lower income levels.

Adding insult to injury, Manitobans are being charged carbon tax on elevated renewable biofuels, a move that appears in part motivated by spite.

None of this needed to happen, if the federal Liberal government had actually thought through the carbon tax, and was open and transparent about implementation. We can all look forward to the court case and the restoration of fairness for Manitobans.

Robert Parsons, MBA, PhD, teaches sustainability economics in the MBA program at the Asper School of Business, University of Manitoba.