MONTREAL – Justin Trudeau celebrates the Supreme Court ruling that its carbon taxes are constitutional.
On the other hand, as economists like to say, Jason Kenney has to smolder with disgust. To be fair, he insists that the verdict was not unanimous.
As for Quebec, it may not like the decision on political grounds for violation of the federal government’s jurisdiction, but the decision speaks in favor of Quebec’s position on climate change. This gives Quebec a competitive advantage.
The federal government has announced that the carbon tax will increase from the current $ 30 per ton to $ 170 per ton by 2030. Quebec is tax exempt because of its cap-and-trade plan that requires issuers to buy carbon credits.
The Quebec system currently sets the price of carbon at around $ 17 per tonne. This is great for Quebec – especially when compared to Ontario. Quebec can tout its lower carbon price AND its much cheaper hydropower.
For the rest of Canada – take courage. While I am a scientist at heart and back to the idea that judges, senior officials or others who may or may not have a science education, can vote on whether or not climate change is real, I can make a simple economic case for it propose carbon taxes (and welcome the Court’s decision) that environmentalists will love. The intention is not the latter in and of itself.
Apart from all legal provisions, it should be noted that carbon taxes are not just another sales tax. In fact, they shouldn’t be called sales tax at all. Why? Because the purpose of the carbon tax is very different from the purpose of a sales tax.
Sales tax is levied on (almost) all goods and services, increasing the price of these goods and services in the same way, for example by 10 percent, in order to generate government revenue.
A carbon tax, like a sin tax or, more generally, an excise tax, is imposed only on carbon and increases the price of goods in different ways with the aim of changing consumer consumption patterns.
The price of carbon-intensive goods increases more than that of less carbon-intensive goods or services.
While carbon taxes are not sales taxes, they have one characteristic in common with sales taxes: they are less market-distorting than personal income taxes and corporate taxes.
I hate income taxes, both personally and as an economist. I would assume many readers would agree with me. As is known in my profession, they are “distorting”.
Carbon taxes, let alone. So some economists argue that carbon tax revenue can be used to reduce more distorting taxes by the same amount that they generate in revenue, making the tax revenue neutral and distributional neutral.
Revenue neutrality is currently the way the federal carbon tax is interpreted in Canada, but more can be done.
Like what Let’s look at the Supreme Court ruling and the notion of carbon taxes as a means of reducing the consumption of carbon-intensive goods and services, but pressure our electoral officials to do something good with those revenues, such as further lowering our income taxes (I like Tax credits, but I like lower tax rates better).
I hope this approach would bring left and right together. The left will receive its environmental tax to reduce carbon emissions and perhaps even address distribution issues that matter to them, and the right will make a profit from reducing its greatest tax enemy, income tax.
The challenge, however, is to get politicians to listen. Erin O’Toole, are you there?
– Dr. Anthony Noce is Professor of Economics at Concordia University in Montreal