Carbon pricing seems obvious to economists, but for many voters it just doesn’t click: Don Pittis – Business


If you want to stop climate change — and most Canadians say they do — economists insist they know the most efficient way of making it happen.

But as provincial opposition parties in two of Canada’s biggest provinces seek to eject sitting governments, both will be running on a policy that says no to carbon taxes.

Speaking on CBC Radio yesterday, the newly elected leader of Ontario’s Progressive Conservative party, Doug Ford, made it very clear that carbon taxes are off the table if he is elected premier.

“A tax is a tax is a tax,” said Ford, whose brother Rob served a controversial term as the populist mayor of Toronto.

If Ford wins in Ontario, he’ll face a federal government that is betting on carbon prices to help reduce emissions and tackle climate change.

Conservative opposition

Ford’s position is by no means an outlier in his party. While former Ontario PC leader Patrick Brown had a carbon tax in his platform, after Brown was pushed out over allegations of impropriety all of the candidates running to replace him opposed the tax.

Ontario is not alone. The leader of the United Conservative Party in Alberta, Jason Kenney — who wants to oust Rachel Notley’s NDP government in the next election — is taking a strong line against carbon taxes.   

While newly elected PC Ontario PC Leader Doug Ford (far left) supported Patrick Brown who had a carbon tax policy, once Brown was pushed out, all four who ran for his job rejected the tax. (Chris Young/The Canadian Press)

And yet according to the vast majority of market economists, there is no more business-friendly, efficient way to save the world from the dire effects of climate change than to put a price on carbon. 

“[There’s] lots of evidence and lots of economic logic that says people do respond to prices, but the instinctive mainstream view is that this isn’t going to do anything,” says Chris Ragan, who chairs Canada’s Ecofiscal Commission, a privately funded group that advocates market-friendly solutions to climate change.

​”That’s a really important disconnect and if you do believe that it doesn’t change behaviour then it really is just a tax grab and conservatives don’t like tax grabs, for good reason,” says Ragan, a pro-market professor of economics at Montreal’s McGill University and a well-known author. “I don’t like tax grabs.”

Ragan and others at the Ecofiscal Commission are currently working on an educational campaign expected early in April to try and convince people that carbon pricing and carbon taxes work.


These demonstrators show that some of those who want to defeat climate change don’t like carbon emissions trading, used in the so-called cap and trade variation of carbon tax. (Wolfgang Rattay/Reuters)

But research by economist Brady Yauch, executive director of the Consumer Policy Institute, shows that even when carbon is not involved, many people either don’t grasp, or don’t believe in, the use of pricing to change behaviour, even when it saves them money.

During Toronto’s most recent municipal elections, Yauch proposed a scheme designed to save Torontonians billions of dollars while improving many lives.

The plan involved the city’s crowded subway system, which is so full during peak morning rush hour that riders often wait for several trains to go by before they can squeeze aboard.

The city’s long-term solution is to build something called the downtown relief line, but the hefty price tag means city politicians have been reluctant to commit.

No to peak pricing

Yauch’s alternative plan? To make the subway free before 7:30 a.m. Proven elsewhere, notably Singapore, the system is known in economics as congestion — or peak — pricing.

The lower non-rush hour cost encourages travellers who can do so to go early, reducing the load at peak times when the service is full price. According to Yauch’s calculations the savings would cover the cost of the free fares, but the plan never caught on.


Ice floes float in Baffin Bay above the Arctic Circle. The Arctic has just had its warmest winter on record. (Jonathan Hayward/Canadian Press)

Similar schemes to end crowding on highways or to cut demand for electricity at peak times have not been popular, even though economists can clearly show the benefit.

When I wrote about a plan to increase electricity costs during times of peak load, a reader pointed out that those higher costs came at a time she needed electricity to do things like get the kids ready for school.

“It almost sounds like social engineering!” she wrote in an email.

To economists it’s clear that while there are people like her who must use power at peak times, others who can adjust their schedules will do so, reducing the need for expensive peak power plants and cutting costs for everyone.

And that difficulty in translation from economist-speak to regular understanding is the reason why Mark Jaccard says that for all their economic efficiency, carbon taxes may not be the best way to stop climate change.

Jaccard is a Simon Fraser University economist who helped B.C. premier Gordon Campbell develop that province’s 2008 carbon tax policy. He says carbon taxes were politically unpopular even though the province returned every penny to voters.

“Almost everyone benefited from the carbon tax in B.C. and almost everyone believed they did not benefit,” he says.

While they are economically efficient Jaccard says carbon taxes are not politically efficient. He quotes the book The Myth of the Rational Voter which says that unlike economists, voters don’t like fixing problems with tax policy.

And when it comes to effectiveness, Jaccard says the impact of flexible regulations — including rules designed to replace coal fired power plants or cut auto emissions — have dwarfed those of carbon taxes. Part of the reason is that while economists can show carbon taxes have worked, it has been politically impossible to repeatedly raise them so that they are effective. 

“Yes, we should try to make these things as economically efficient as possible, but that’s just one objective,” says Jaccard, who fears Canada will not reach targets it agreed to in Paris. “The pursuit of pure economic efficiency by economists has been part of the reason we have failed on climate policy.”

Follow Don on Twitter @don_pittis

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