Thursday, April 22, 2021

Inputs and outputs

There's rightly been plenty of pushback against the Cons' sad excuse for a climate change plan. But it's worth highlighting that there's one way in which the principle behind it could accomplish more than the Libs' one-sided approach to carbon pricing.

It would seem too obvious to bear mention that the way to get the most bang for any given amount of carbon price collected would be to ensure that it operates to reduce emissions at both steps of its operation: creating incentives for people to reduce their own emissions to avoid having to pay it in the first place, and also ensuring that money collected gets put into emission-reducing activity. 

In 2019-2020, the total amount collected by the federal government was about $2.8 billion, with that amount increasing with the carbon price in the years to come. But there's nothing additional to ensure - or even incentivize - the use of that money to actually reduce emissions, as most of it has instead been returned in the form of an unrestricted rebate.

That means the Libs' choice has been to limit the effect of the current carbon price to the first step. There's an incentive to minimize carbon-intensive activity to avoid paying the initial price - but nothing to ensure the amount collected actually gets reinvested in emission reduction.

In contrast, the Cons' plan at least somewhat addresses the second step. In theory, the money collected as a carbon price would be used specifically for the purchase of carbon-efficient products.

Of course, it would take some work to design a manifestation of that theory less efficient or fair than the Cons' proposal for individual savings accounts tied to carbon levies actually paid. The Cons are insisting on creating a corporate-administered bureaucracy to dictate individual decisions, while doing nothing to ensure that money collected in the name of emission reductions is applied on a scale sufficient to make a difference.

And more importantly, the Cons are dedicated to keeping the carbon price at so low a level as to be counterproductive in the broader fight against a climate breakdown. There's value in trying to double the impact of each dollar of carbon price collected, but it pales in comparison to the demand to keep the actual price at under a third of the amount included in the Libs' plans.

All of which is to say that while the Cons' plan is predictably the worst on offer among the major federal parties, it also highlights one of the longstanding weaknesses in the Libs' scheme as well. And that should open the door for alternatives which use the strengths of both - rather than limiting our climate change discussion to a debate over the merits of the Libs' one-sided price.


  1. Mind you, the only reason the Liberals went with a rebate model in the first place is that the Conservatives, and conservative media, successfully went to great lengths to portray a non-rebate version as a Big Government "tax grab". So the Liberals came up with a version that didn't actually take net money from people as a way to take the wind out of critics' sails, and although the Conservatives continued to talk that way the broader media didn't really take it up, so now I think it's mostly just the right wing social media crowd who believe it. In short, the Liberals don't really believe the rebate is good policy, just good politics.

    On the third hand, in my opinion it doesn't really matter WHAT money gets spent on reducing emissions as long as the money is spent. I'm fine with getting that money from taxes on the rich or even deficit spending. And there are potential problems with carbon taxes hitting the poor hard, though they have fewer ways to do anything about their emissions, which are mitigated by the rebate (and of course not mitigated in any real way by the Conservative approach--when you need to put food on the table, being offered a way to instead buy some insulation for your landlord's house if you spend time you don't have jumping through bureaucratic hoops isn't much use). So the rebate isn't terrible policy even if it was put in place for purely political reasons.

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