Politics are polluting the environment

Hey there, time traveller!
This article was published 9/5/2018 (531 days ago), so information in it may no longer be current.

I was fuelling my sensible SUV this morning, while furtively admiring an adjacent monster pickup truck. When asked, the owner gushed about how she liked the oversized vehicle, praising "sight lines" while almost apologizing for the cost of a fill-up and the obvious waste implied by her vehicle choice.

Many Manitobans have selected vehicles they acknowledge to be environmentally compromised. Most justify their choices by citing a variety of other benefits offered by their vehicles.

It may be easy to blame consumers for these choices, as many "greens" tend to, but the problem lies elsewhere. Consumers try to make sensible selections within a set of social and economic circumstances.

The political framework has an important role in shaping these circumstances.

It is hard to imagine how our political leadership could have made a finer mess of our energy policy than has the current crew of provincial and federal leaders. Despite having the third-largest oil reserves in the world, Canada has managed to work itself into a truly strange place where we export oil to the U.S. at well below world prices and import oil from the Middle East. All leaders profess that they wish to balance economic growth with environmental stewardship, yet the dog’s breakfast of policies we have created will penalize us economically while making scant progress at countering climate change.

The machinations of Manitoba’s political leadership, specifically Premier Brian Pallister and Opposition leader Wab Kinew, offer good case studies of the behaviour exhibited by most Canadian political leaders.

First, consider the imbroglio between Pallister and federal Environment Minister Catherine McKenna. Manitoba has taken exception to the federal proposal for a carbon tax of $10 per tonne of carbon emissions, rising to $50 per tonne in the next five years. Manitoba’s counter-proposal is an immediate $25 per tonne of CO2 that remains constant, a concept the province claims will lead to greater impact on climate change. How is this possible?

Manitoba proposes targeted actions such as "sustainable agriculture practices," "electric bus conversion" and "organics diversion." These programs all are planned and could have a role in reducing carbon emissions, but they are far from developed and most uncertain in benefit.

Enter the NDP’s Kinew, who recently introduced a procedural motion to delay implementation of the government’s carbon plan. He argues that with its commitment to reduce the provincial sales tax, the government is unlikely to use carbon-tax revenue to fund green programs.

On this point, Kinew may be right. By diverting these funds to general revenue, governments everywhere have failed to allow carbon pricing to work. Direct carbon pricing, not the complex and costly carbon-credit system that has not worked anywhere, is by far the best method for accelerating the transition away from fossil fuels.

Three essential elements support an effective carbon pricing program. First, the price (tax) must start low and increase in predictable steps. On that, the federal proposal succeeds and Manitoba’s plan fails.

Second, the tax must bite, meaning that within a few years it must represent a consequential cost for driving monster trucks to go to the 7-Eleven. This will encourage consumers, both individuals and fleet owners, to convert to fuel-efficient vehicles. Manufacturers also need time to roll out transportation options. With a serious carbon tax, perhaps my grandchildren will take the bus (in my dreams!).

No government has had the political courage to front a plan that would see taxes sufficiently high to affect consumer choices.

Third, before government imposes the carbon tax, it needs to reduce other high-profile taxes. If Manitoba linked the sales-tax reduction with carbon-tax increase, citizens would see a quid pro quo. Their net incomes would remain unchanged. The provincial government’s plan fails on this requirement.

What about using the proceeds of a carbon tax for "green" plans, as Kinew suggests? Two defects exist with such "earmarked" taxes. First, government-funded innovation rarely works quickly, except during times of national emergency. The case of penicillin development during the Second World War is a great example of government-driven innovation. The windmill-energy fiasco in Ontario is much more the norm.

Second, government often makes a great show of diverting the proceeds of an earmarked tax. Think about the stickers on gas pumps declaring how the increased gas taxes are going to save the environment.

At the same time, it becomes irresistible for politicians to quietly reduce existing support for green initiatives, and few citizens have the resources to track shifting expenditures within the complex public-accounting system. Such sleight-of-hand is common.

It is far better to unleash consumers into the marketplace. Sufficiently high carbon taxes will prompt consumers to move with alacrity. Capitalism is infinitely flexible and responsive to consumer demand and that will drive environmental stewardship much faster than bureaucratic directives.

The current squabbling among political leaders is profoundly harmful to creating a strong environmental agenda. It creates cynical taxpayers who conclude that we are unlikely to make progress on climate change, so why not buy a big truck for those short trips to pick up a slushie and doughnuts?

Gregory Mason is an associate professor in the department of economics of the University of Manitoba.