By Sierra Rayne ——Bio and Archives--December 2, 2014
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"In Canada and the US, 'tax' is often considered a four-letter word, such that it is politically toxic to consider increases in the rate of any tax. Some consider carbon taxes to be especially divisive, since they are highly salient and are aimed at tackling climate change, which is not a goal universally considered important. Indeed, one [sic] the political lessons drawn from Stephane Dion's failed election campaign in 2008 seems to be that support for a carbon tax renders a candidate unelectable. Of course, anecdotal evidence is a poor basis for important decisions, and at any rate, points both ways: Gordon Campbell was re-elected in British Columbia following his introduction of a carbon tax Polling results are perhaps more useful. The polling firm Environics has tracked stated support for carbon taxes in annual public opinion surveys since at least 2008, and finds that carbon taxes are supported by the strong majority of Canadians. Support is not limited to individuals either. Carbon taxes have been supported in a number of open letters from industry associations to government. For example, in 2010, the Canadian Council of Chief Executives wrote that 'governments at all levels should commit to a national approach to GHG reductions and carbon pricing.' This sentiment is echoed by 13 out of 14 industry associations in Canada surveyed for a report by Sustainable Prosperity. A national carbon tax even receives strong support from major oil and gas companies in Canada, who see it -- like others -- as the most efficient solution to reducing greenhouse gas emissions."The claim that carbon taxes are not unpopular would come as news to Australians who voted for Tony Abbott's Liberal Party as they defeated an incumbent government over precisely this issue. Similarly, recent federal and provincial byelections have clearly shown voters prefer the non-climate alarmist candidates, and specifically rejected the alternative candidates who were openly advocating for formal carbon taxation. In the United States, the GOP victories in both houses of Congress during the 2014 mid-term elections demonstrated that voters south of the border were also rejecting climate alarmism, and by extension -- carbon taxation. Stefan Dion's decisive loss for the Liberal Party during the 2008 Canadian federal election also proves the point that carbon taxation is politically unpopular.
"Indeed, when carbon taxes have been discussed in recent House of Commons debates, they are almost always referred to as 'job-killing.' Yet, there is very little evidence that supports the idea that carbon taxes harm employment -- in fact the available evidence suggests the opposite. A useful recent analysis is based on the UK's Climate Change Levy (CCL), which is a tax on industrial fuel use that raises prices of energy by an average of about 15 percent. The study finds that the CCL reduced energy intensity in manufacturing plants by about 18 percent, but that there was no measurable effect on employment, total factor productivity, or plant exit. A similar study examines the impact of the European Union's Emission Trading System on German manufacturing firms, and finds the policy reduced emissions intensity by about 20 percent but had no identifiable effect on employment, gross output, or exports. Preliminary evidence from British Columbia likewise suggests that overall employment in that province increased as a result of the carbon tax."On the contrary, Australia's unemployment rate spiked upwards immediately following implementation of its carbon tax. The effect was striking. After remaining approximately constant for the two-year period before the carbon tax was brought in, Australia's unemployment rate suddenly began a rapid rise coinciding with the carbon tax -- and the rate continued to rise right up to when the carbon tax was finally repealed this summer. Since the UK brought in its Climate Change Act, its economy is going backwards. So is that of Denmark. Among the G7 nations, greater carbon dioxide emissions reductions correlate with lower economic growth, and this extends to other economic groups around the globe. Nations with lower electricity prices have higher rates of economic growth, and reducing greenhouse gas emissions only drives up energy costs -- thereby harming the economy. As for British Columbia, since it brought in its carbon tax during 2008, its real per capita GDP, primary household income, and household disposable income have all underperformed the national average after outperforming the rest of the country before carbon tax implementation. Other economic indicators suffering in BC during the post-carbon tax regime include the rising levels of inflation, lower household saving rates, and the highest average consumer debt in Canada. The unemployment rate has risen in BC almost three-and-a-half times faster than the Canadian average since the carbon tax began, and BC's employment rate has declined almost twice as fast as the rest of the nation. All this evidence appears to support concerns that carbon taxes are job killers. The costs of carbon taxation are immense. As the Canada 2020 report notes, an "analysis for the National Roundtable on the Environment and Economy suggests that reducing greenhouse gas emissions by 70 percent by 2050 would require a carbon price between $200 and $350/t carbon dioxide." According to Environment Canada, "Canada's total greenhouse gas emissions in 2012 were 699 megatonnes (Mt) of carbon dioxide equivalent." At this emission level, a $350/t carbon tax would cost Canadians an astonishing $245 billion per year. The Canada 2020 report proposes an alternative:
"One potential choice for the level of carbon tax would be the social cost of carbon (SCC) as calculated by Environment Canada and counterparts at the US Environmental Protection Agency. The SCC is a measure of the present and future damage associated with emissions of greenhouse gases. Although there are significant uncertainties associated with the calculation of the SCC, it reflects our best current understanding of the external costs associated with activities that generate greenhouse gas emissions. By setting a carbon tax at the level of the SCC, Canada could cost effectively internalize the external costs associated with its greenhouse gas emissions. The current best estimate for the social cost of carbon is about $40/t CO2, and this value increases over time in real terms to about double that value by mid-century."There is little chance the social cost of carbon has been accurately estimated. We lack the analytical tools and predictive capacity to reliably estimate the costs and benefits -- yes, there will be benefits -- of any anthropogenic climate change. The problems in this field start at the basic level: we cannot even reliably predict the climate (witness the nearly two-decade long pause in global warming), nevermind the complex suite of socio-economic and political impacts. These types of attempted predictions are a classic example of modeling hubris, and are of no practical value. We may as well consult a crystal ball instead. To base far-reaching economic policies on such unreliable projections is pure folly. The science isn't settled, and we should act -- or not act -- accordingly.
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Sierra Rayne holds a Ph.D. in Chemistry and writes regularly on environment, energy, and national security topics. He can be found on Twitter at @srayne_ca