September 20, 2020

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Clearing the air on carbon taxes

Hey there, time traveller!
This article was published 10/9/2019 (375 days ago), so information in it may no longer be current.


Reducing emissions has become a topical discussion point in Manitoba’s election ("NDP promise carbon tax freeze, annual $350 energy-bill rebate," Free Press, Aug. 27). This task, however, is made difficult compared to the rest of Canada given we are already environmental leaders, in particular on electricity and biofuels. We simply do not have low-hanging fruit that could make it easy. Based on media reports and available information from the parties so far, comments can be made on policy platforms proposed for reducing emissions.

The focus of too many of the parties is still singularly on carbon taxation. As I discussed in a recent letter to the editor, this is a poor tool on its own to meaningfully reduce emissions. My letter elicited thoughtful responses both online and in further letters, but with a key point still being missed by many — that carbon taxation is or should be about quantitative reductions, not attitudes, and if the numbers aren’t enough, it is time for other policies.

Ken Klassen specifically noted Sweden. Nordic countries certainly have done better than Canada in reducing emissions and managing public expectations. The Swedish tax, however, is complex and not directly comparable. Even at the indicated $168-per-tonne level, which is high, Sweden isn’t close to the 2030 reduction target. Their tax, too, is insufficient.

Recent announcements by the Progressive Conservative party are most concrete and also do not involve carbon taxation, i.e. increasing renewable mandate levels to 10 per cent ethanol in gasoline, and five per cent biodiesel (or renewable diesel) in diesel. These are legitimate moves, doable in the near term. They significantly reduce emissions in a direct and readily measurable manner. Elevating mandates maintains Manitoba’s tradition of leadership on biofuels, with added advantages, including applicability to agriculture and other fuel categories exempted federally.

These moves also show significant carbon-pricing equivalence, at least $36 per tonne for ethanol, and $26 per tonne for biodiesel compared to federal benchmarks. Unfortunately, the federal government still applies its carbon tax on elevated renewable fuels in Manitoba, a move by the federal Liberals that is indefensible, and that could and should be changed.

The Liberals’ platform was rolled out first, but in terms of emission reductions falls in the trap of being overwhelmingly futuristic and conceptual. Suggested reductions are too far in the future to be meaningful today. A key consideration is missing, too: technology readiness. Carbon Engineering, the Squamish, B.C.-based company lauded as a way for Manitobans to reduce emissions, does not commercially produce any of its "fuel-from-air" and is years away.

Similarly, giving out tree seedlings is good public relations, but less certain in terms of emissions. It does, however, serve to highlight the recent closure of the Pineland Nursery. This resulted ultimately from a regrettable policy under the Selinger government to relax forest replanting by Tolko in an attempt to forestall plant closure, a negative environmental decision.

The Green party is most vested with the environment, but its platform items for emission reductions are overly generalized. The only real focus is further escalating carbon taxes, a problem given their ineffectiveness. In common with the Liberals, the Greens do propose to employ carbon taxation to help fund green projects, but it is not fully detailed.

This brings us to the NDP, which appears focused on other social issues. Its direction on emissions actually hearkens back to the earlier position of Brian Pallister, proposing a carbon tax fixed at $20 per tonne, then providing funds back to Manitobans in the form of a $350 annual payment per household, as the current federal system is supposed to do.

Given Manitoba’s experience so far, this sort of approach would inevitably result in a standoff. NDP Leader Wab Kinew likely would end up having to take the federal government to court to ensure Manitoba is treated fairly, in terms of the equivalency of activities here, exactly the same situation as Pallister.

While Kinew has been roundly criticized from all sides, his statements unintentionally serve to highlight another serious problem with the federal carbon tax: Manitobans are being gouged. During the first year of the federal carbon tax, Manitobans were supposed to receive back a total of $170 million in rebates, according to published information. This translates to close to $350 per average household, as outlined by Kinew.

Except, Manitoba households will never get back what they should, based on stipulated rebate levels per individual, with the average household only receiving $276. There is a huge difference, confirming that we are overtaxed. This, too, needs to be corrected.

The environment is certainly a major political issue today. That said, in terms of reducing emissions, politicians should not be judged based on rhetoric, but rather based on results, especially near-term measures, that should be identified, quantified and verified.

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


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