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?