What we could do with Dion’s carbon tax revenue: $150 million and counting

If carbon emissions were being taxed at $10 a tonne, as they would be under Stéphane Dion’s new proposal, then so far this year Ontario power plants would have generated over $150 million in carbon-tax revenue. That’s because so far in 2008, Ontario power plants have put over 15 million tonnes of carbon into the air.

On a positive note, you could also say Dion’s tax would have raised $150 million so far in 2008.

The question of course is what’s the best way to use that $150 million. Dion says we should cut personal taxes by an equivalent amount. His reasoning is that adding a cost to something, in this case electricity, will get people to use it less. If people cut back on electricity use, Dion thinks that will reduce emissions.

Dion has the right general idea and the right revenue-raising mechanism. But he is wrong to expect that increased electricity prices will compel people to use less electricity. And even if they did, the emission reductions would be negligible in provinces like Quebec, British Columbia, Newfoundland, and Manitoba, where electricity is already very clean.

A better idea would be to use the carbon tax revenues from each industrial sector to jump-start investment in proven low- or zero-emission technologies. In power generation, the two proven large-scale zero-carbon technologies are hydro and nuclear. Since Ontario’s big hydro resources are already tapped out, the province’s only alternative is nuclear.

At the rate Ontario is going, its power sector will be responsible for over 30 million tonnes of carbon emissions this year. Under Dion’s proposal, that would raise $300 million. Is that enough to jump start investment in more nuclear power reactors?

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15 years ago

I like your idea about investing the collected taxes appropriately. But this whole approach is so wrong headed I sometimes despair about the future of our culture. Lets see – we encourage people to give their money away to charities, yet we expect them to not give their money to the government? Now that is a nice contradiction. What if you like what the government is doing, and want to pay taxes? Ooops – no incentive to reduce carbon in that case. The whole discussion of taxes as a motivator is based on deeply held cultural biases that are never discussed. Consequently these kinds of plans and approaches seldom work because that are not based on what is really real.

On top of this, there is nothing that can be done in Canada to influence the climate change situation in the atmosphere. We could reduce our carbon emissions to zero, or we could raise them by a factor of ten, and nothing would change. Canada is too small to make any difference. Now, if we could do something to influence China, perhaps getting them to use less cement, or burn less coal, then we could have an effect. But all this home based discussion is just “me too-ism” and does nothing to advance the cause. With our eyes firmly locked on our illusions, we step off the cliff without complaint.

Canada should build nuclear reactors like crazy, use them here to the max, get really good at maintaining them, and give them away free to China and India. That would set the cat among the pigeons!

Steve Aplin
15 years ago

Randal, I agree with you that taxes are the wrong approach. It is wrong to think that changing consumer behaviour is the way we will reduce emissions. Few people would notice an incremental increase in the electricity price and fewer would act on it, unless the price increase is astronomical which would be economically and socially harmful. It is also, as Harper said, just crazy politically. Here we are talking about taxes when we should be talking about emission reductions. Dion is gambling that he can drive the agenda back to emission reductions, and I guess we’ll see if his gamble pays off.

Regardless, Dion should go with cap and trade, with a permit auction, and then plow the auction proceeds into the technology most likely to reduce emissions without bankrupting the country and ruining our way of life. I know that’s the NDP plan (I can’t believe I agree with the Dippers on this one), but the Liberals have always been experts at stealing other parties’ policies.

[…] out their own carbon tax plan (which currently does not envision hitting retail gasoline; see article), hope that any positive reaction to the BC tax rubs off on them and that negative reaction […]