Hello, #onpoli people,
This will sound weird for a journalist to say, but some of my favourite work has left the audience with questions instead of answers. I know, I know. One of the main job descriptions for a journalist is to answer the big questions: the who, what, where, when, how, and sometimes why.
But some of the best journalism gives people enough information to ask new questions, ones they wouldn’t have thought of otherwise. It removes them from a black-and-white environment and places them in a territory known as the grey area. You must know *this much* to enter the grey area. Or to put it in a way that would impress your first-year philosophy class: you must know enough to know how little you know. At that point, more questions come tumbling into view.
This is related to what is known as the Dunning-Kruger effect, coined by psychologists David Dunning and Justin Kruger in a 1999 paper. It’s a phenomenon that helps to explain why some people who know the least about a topic can be the most confident about it, too. (Which family member are you picturing?)
As Dunning puts it, “[T]he knowledge and intelligence that are required to be good at a task are often the same qualities needed to recognize that one is not good at that task.”
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For me, a goal of good journalism is to push people through the threshold of the Dunning-Kruger effect and provide enough information so they are left with useful questions instead of empty confidence.
In this week’s episode of #onpoli, John Michael McGrath breaks down the long and strange journey of carbon pricing in Canada. He provided some answers, but also left some of you with questions. We’re answering them below.
What happens with the revenues from a carbon tax?
Some critics have maligned the carbon tax as a government cash grab. In the case of the federal government, it grabs that cash to the tune of $20 per tonne now, up to $50 per tonne in 2022, and puts the money back in your pocket.
More specifically, the feds give that revenue to provincial governments and the provinces kick back 90 per cent of it in the form of a tax rebate, with the other 10 per cent going to other sectors such as schools, hospitals, small businesses, colleges, and Indigenous communities. This is known as a revenue-neutral carbon tax.
The other option, of course, is for the government to take the revenues and do whatever they want with them. In many cases, to fund green investments, which Ontario did under the previous cap-and-trade program.
Will I get all the money back I pay in the rebate?
That’s the federal government’s plan, anyway. In Ontario, for example, the average household will pay $243 in costs associated with the carbon tax. They will be rebated $300, for a tidy profit of $57. And each year, that number will increase: in 2022, when the carbon tax is ratcheted up to $50 per tonne from 2019’s $20 per tonne, it will cost $594, with a rebate of $697.
Those are the government’s projections, but has that actually happened?
Well, yes. In April, the Parliamentary Budget Officer crunched the numbers and agreed that taxpayers will get more back than they paid.
Ottawa’s carbon tax is less than a year old. But in the first five years of British Columbia’s own carbon tax, between 2008 and 2012, that province committed to revenue neutrality through cuts to income tax and other taxes. According to the Smart Prosperity Institute, those cuts exceeded carbon tax revenues by $500 million.
Who pays the most?
According to the Parliamentary Budget Officer, over the next five years every Canadian household will receive more in rebates than it paid for the carbon tax, except for the wealthiest 20 per cent of households.
The rebates are the same for all households, but wealthier people tend to buy more stuff, drive more, and have bigger homes, which all adds up to a higher total. But the difference a wealthier household ends up paying is minimal: between $13 and $50. And in the case of Manitoba, wealthier households will still pocket about $37.
What in the Friedrich Hayek would a conservative carbon tax look like?
Even conservative economist Friedrich Hayek supported a carbon tax back in the ’70s. We didn’t get into what a liberal-versus-conservative carbon price could actually look like in the episode, so let’s do that now.
For starters, a conservative carbon tax would be revenue-neutral. That’s the debate that was shaping up in Ontario under Patrick Brown’s Progressive Conservatives. A classic big-versus-small-government debate. Brown supported a carbon tax, but would not use "climate change as an excuse for a government cash grab." While Kathleen Wynne’s Liberal government had made green investments with the revenues from the cap-and-trade program, Brown planned to use some of the revenues to cut taxes.
Second, a conservative carbon price would also involve cutting regulations. In 2017, Preston Manning defended a carbon tax and said the focus for conservatives should be “attacking the implementation rather than the market-based concept itself.” The implementation should include, he said, “a significant reduction in environmental regulations, and a no-subsidy policy with respect to alternative energy sources.”
Did B.C.’s carbon tax work?
Listener David Bogart emailed us: “I wish you had confirmed or corrected the accusation that B.C. had not reduced emissions after they introduced carbon pricing.” He’s referring to a clip in the podcast in which Jim Karahalios, founder of Axe the Carbon Tax, said, “In B.C. the emissions have not gone down, they have not met their targets.”
A 2015 Energy Policy review of research on the carbon tax’s effectiveness in B.C. found that all the studies showed a 7 per cent to 17 per cent reduction in gasoline sales and a 9 per cent reduction in carbon emissions. The province is not, however, on track to meet its 2030 reduction targets. For some, that’s not an argument to get rid of the tax, but an argument to do more.
To properly answer this question, though, it would take a whole other article — so here’s a whole other article, if you're interested.7
Thanks for some of these questions and comments around carbon pricing. As always, please write to us at email@example.com.
That’s all for this week!