Burning the poor

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Carbon taxes in Europe have resulted in massive job losses

Several Canadian academics promote “carbon taxes” as the best way for government to combat greenhouse gas emissions. By “carbon tax,” they mean that government puts a price on carbon and applies that price as a new tax, either at the point at which fossil fuels are produced or consumed.
Mark Jaccard, among others, has implied that this kind of carbon tax has been used to successfully curb emissions in Norway and the United Kingdom. The truth is that high energy and emission tax policies introduced in those and other European nations the 1990s have proved highly regressive, have directly resulted in massive manufacturing job losses, and have had no otherwise discernible impact on carbon emissions.

In response to this policy disaster, most European nations have recently committed to freeze, reduce or phase out their carbon taxes in favour of better measures. To an academic, the new measures are also carbon taxes. To the person on the street, they are not.

The new measures are “product standards” like fuel efficiency standards for auto makers and mandates that require electric utilities to buy a certain portion of their total sales from zero-emission generation sources. When governments introduce product standards, they are limiting the environmental impact of the consumption decisions we make. This method leaves it up to the market to compete to deliver cleaner energy products and appliances to us at least cost.

It is essential that Canadian policy makers study why carbon taxes (where government sets the price) have failed. Otherwise, we will simply waste 15 years and countless manufacturing sector jobs repeating European mistakes.

Carbon taxes shift the tax burden from the richest to the poorest families. Lower and middle income Canadian families spend $5,000 to $8,000 per year on energy. Since most of their energy purchases are not discretionary, this eats up a large portion of their disposable incomes. Wealthy families typically spend $8,000 to $12,000 per year on energy, 30% to 50% of which is discretionary, representing a small share of wealthy-family disposable income.

The Financial Post (Canada)