Canada’s Carbon Tax vs. a Green New Deal

As Canada approaches the 2019 election this fall the discussion of climate policy has focused on the carbon tax. Meanwhile in the US (and increasingly in Canada and elsewhere) the debate around climate action has focused on the idea of a Green New Deal. What are the key differences between these strategies? Are they mutually exclusive?

Canada’s Trudeau government has spent a huge quantity of political capital pushing the carbon tax forward. In fact, weeks ago here in Ontario they imposed the tax on the province against the wishes of the province’s Premier, Doug Ford. Ford hates this new tax so much that he has organized a taxpayer-funded campaign to draw attention to the issue that includes insisting gas station owners put stickers on gas pumps across the province highlighting the additional costs. He feels so strongly about it that he is threatening them with 10k a day fines if they don’t put these stickers on their pumps.

In fact, the Ontario government is currently in court trying to stop the carbon tax from being imposed.

Alberta’s newly elected government has also pledged to axe their own carbon tax and fight Trudeau imposing it in court as Ontario is currently doing. They are also planning a 30 million dollar “war room” to fight environmentalist pushing climate policy in various forms.

Clearly, politicians on the right in Canada feel fighting the carbon tax is a strategic move for them. Heck if you look at the Conservative Party Leader Andrew Scheer’s twitter account right now it looks like he is obsessed with the carbon tax.

Beyond ideological opposition and a general disregard for climate science, there is a communications component to this as well. Is the focus on the carbon tax the right strategy for Trudeau? Let’s explore the effectiveness of the policy itself as well as the communications strategy and why the right is so eager to talk carbon tax. On the other end of the spectrum, progressive politicians in The United States and in Canada are increasingly focusing on the

First a Little Context – Climate Change and Canada  

Back in the world of climate science, a report came out the day after the tax was implemented on unwilling provincial governments that showed Canada is already warming twice as fast as most other countries thanks to our geography.

And shortly after that, an audit report came out from the offices of Canada’s independent Environmental Commissioner showing that we are not actually taking adequate steps to even be on track to hit our conservative pollution reduction targets. The Commissioner went so far as to call Canada’s lack of action was “disturbing”.

What seems clear is that Trudeau and his team sure give you the impression that they genuinely care about climate change, at least enough to go to war with several provinces over the carbon tax. Trudeau’s policy adviser stressed climate policy as the most important issue to focus on in his resignation letter. Trudeau himself has stressed the issue at various international meetings of leaders and has been greeted as a hero by the international community. Activists in Canada often question his true commitment to climate change given his support for the expanding the tar sands. Banners that say climate leaders don’t build pipelines have followed him around for years at this point.

But the fact remains that this is a government that has campaigned on the issue and sees themselves as champions of the issue in our House of Commons and on the world stage. They seem to have been willing to “bet the bank” and stake their political future (and our literal futures) on using market forces to affect change. I find this point particularly distressing for a number of reasons.

The Fallacy of Supply and Demand – A Closer Look at the Invisible Hand

Now please don’t misinterpret my concern for this approach with an agreement with Doug Ford. In fact, his opposition to this along with the other dinosaurs in our political landscape only really highlights one of my main problems with the carbon tax as a core climate policy strategy. The whole point of the carbon tax is to noticeably change the price of pollution and to nudge if not shove taxpayers into changing their behaviour, purchasing decisions, and business strategies. To do this the price must be high enough to really create sticker shock. That sticker shock is exactly what Ford and others are raising alarm about even at this low price.  Economists have suggested this price needs to be somewhere between 100 and 300 a ton? The carbon tax imposed by Trudeau falls well short of that target at 20 dollars a ton. In a sense, a carbon tax without adequate levels of public support is like putting the cart before the horse.

The carbon tax also may not even have the desired effect even if the price was high enough to make a difference. Dan Ariely is one of the worlds leading Behavioural Economists. He has questioned the effectiveness of the carbon tax in particular as well as questioning the fundamental ideas behind the invisible hand of the market.

His argument, in a nutshell, is that paying a carbon tax creates what are referred to as “moral offsets” in other words if you pay a price for something like pollution it gives you permission to pollute. A carbon tax can actually lead to less environmental responsibility.

There is a far more complicated issue about the use of market solutions overall. Ariely explores the idea of “arbitrary coherence“ in his book Predictably Irrational. He shows that choices are more complex and the fundamental principles of free-market theory based on the invisible hand are fundamentally flawed. The prices we are willing to pay have more to do with “anchoring” based on the initial price based decisions we make initially about a product (see the video below for more on this). To quote Ariely:

“It seems that instead of consumers willingness to pay influencing market prices, the causality is somewhat reversed and it is market prices themselves that influence consumer’s willingness to pay. What this means is that demand is not, in fact, a completely separate force then supply”

Furthermore, Ariely goes on to highlight the implications of his finding:

“Now, if we can’t accurately compute these pleasure values, but frequently follow arbitrary anchors instead, then it is not clear that the opportunity to trade is necessarily going to make us better off…. if anchors and memories of these anchors — but not preference — determine our behavior, why would trading be hailed as the key to maximizing personal happiness (utility)”

Now I would probably be smart to leave the debate of capitalism for another time and place but I will say this.  Personally, I think that debate is a trap and in fact, reading Ariely’s work is a solid reminder that what we call capitalism is more branding than the reality of how decisions are made. In truth, powerful actors use the idea of free markets to push their own industries and their personal agendas. In a sense it’s the same trap that Trudeau and his team have fallen into by focusing so heavily on the carbon tax as a solution to climate change. Some might say it’s the belief in the market trumping all other considerations others might see it as a progressives trying to win the support of conservatives by couching their policies in the logic of market forces. Whichever way you see it the end result does not seem to be winning the support of conservatives or progressives.

At the core what seems to be missing is a sense of urgency around the issue. It seems like there has been very little effort made by the government of Canada to communicate the day to day realities of living in a world already being affected by climate change and the severity of the threat to all people in Canada and worldwide. Still too often we hear about the risks to our grandchildren as opposed to the very real problems happening here and now. Furthermore very little has been done to talk about the solutions beyond the carbon tax.

Communicating Canada’s Climate Action Plan

Interestingly if you actually dig a little deeper you will see that Trudeau and his team have not focused entirely on the carbon tax. In fact they have also pushed for a mix of investment and regulation to effect wide-scale change. Economist Mark Jaccard has highlighted that in fact its regulation more than the carbon tax that has actually resulted in reduced emissions in BC (where the carbon tax has now been in place since 2015).

Why the heck this government didn’t cover the country in signs highlighting how they were taking action on climate change while creating jobs is beyond me. Harpers Economic Action Plan ads littered the country. I saw them EVERYWHERE while traveling from coast to coast in our Prius. Now these were arguably taxpayer-funded political campaign ads for Harper but at least they highlighted some of the ways our money was being invested (often on very much the wrong things in terms of the environment or even maximizing jobs created per dollar). Maybe Trudeau opted to not take this approach because of moral opposition to this kind of advertising, but the Liberal Party has a long history of questionable similar tactics.

So then why haven’t they been raising alarm on climate change to build support for these policies and why do they think a tax is the best thing to focus on?

Some would suggest that polling tells us the majority of Canadians (and Americans and the global community) are already concerned about climate change and support action being taken. Polls done by the government of Canada which were made public by journalists using a freedom of information request found that a thin majority of Canadians support the carbon tax in the form being implemented by Trudeau. Another poll shows that people in Ontario don’t support

Of course polls only tell us part of the story.

So What About the Green New Deal?

Another new poll actually shows 66% of Canadians supporting a Green New Deal similar to the ideas currently floating around in American politics in no small part thanks to the popularity of political spitfire Alexandria Ocasio-Cortez (aka AOC).

One of the main critiques we have heard about the Green New Deal is that it’s trying to do too much. The plan calls for, amongst other things, national job guarantee. This may seem like trying to bite off too much all at once but the flip side of this approach is that it makes actually be resulting in broader support for the proposal given the direct connection to the idea of creating jobs. Often environmental initiatives are seen in the framing of jobs vs the environment. In this case, its a proposal explicitly focused on creating jobs. This could result in creating new coalitions with unions, workers and environmentalists. In contrast, the carbon tax has been attacked by conservatives for hurting working people and slowing the economy. Now it should be said that there is very little evidence of this being the case, in fact BC’s economy grew while being the only province in the country with a carbon tax. Now if we look closer there is a lot of nuance to this discussion. BC was already blessed with a more than ample supply of hydropower and very little manufacturing or other pollution oriented industries. Also, the tax is arguably still far to low to really effect change. The idea behind the tax is that it’s supposed to increase annually at a predictable rate so those impacted have time to plan and make change. This was undermined by BC’s past premier, Christy Clark, putting a freeze on the carbon tax for several years. But regardless of the details lets not forget facts increasingly have little to do with politics. In the US politicians have claimed that the green new deal would ban cars and cows and anything else they think they can think of to scare people away from supporting it.

At the end of the day the question is what is the best approach to take action on climate change. If the carbon tax is ever going to reach a price high enough to make real change to Canada’s economy there will need to be widespread public support. Even at the low prices, we see today (which are offset by rebates given to Canadians on their taxes) already there are many Canadians who are strongly opposed to this new tax. At its core campaigning for a new tax is generally a bad idea. People don’t particularly like paying taxes. Unless of course those taxes are being paid by someone else. Support for the Green New Deal actually goes up across Canada if its framed as being paid for by the wealthy and large corporations.

Making it Relevant to the “average Canadian”

No matter what you call your plan for taking action on climate change what seems critical is that we connect it to the day to day lives of Canadians, and not just when they fuel up for gas.

Reducing the cost of retrofitting your home to be more energy efficient, making the grid more resilient in case of blackouts, providing farmers opportunities to earn additional funds through wind and solar projects, making electric vehicles more affordable and making it easier to find a place to charge up. All of these are just pieces of the puzzle. What seems clear is that we need a vision for the future that is better than today in a variety of ways. Safer, healthier and more attractive.

Urgency is the Bottom Line

Let’s not forget that science trumps politics. We need to stop talking about the impact on future generations if we don’t act on climate change. We are already feeling the effects of climate change today. We are living in the future right now and we are already feeling the effects of climate change in our day to day lives. For many people around the world its already life-threatening due to more intense and more regular extreme weather events, heat waves, floods, desertification, and reduced agricultural capacity. This is already destabilizing the world in a myriad of ways. This isn’t just an issue for the southern hemisphere although they are already feeling a disproportionate burden (even though they have done the least to create the problem). This is only going to get worse in the years to come with all kinds of complicated implications as the result of increased migration and conflict. We have to stop acting like this is an issue for our grandchildren to face. To me, this is actually the biggest failure of our government’s climate communications. There is a serious lack of urgency. The average Canadian going about their day to day lives is rarely if ever made aware of these issues. Communications strategists have cautioned that to paint too bleak of a picture actually disempowers people and makes them feel hopeless. I think our government should take climate science as seriously as the scientists do and they should treat us as adults and clearly express these concerns. If we are ever going to mobilize the scope and scale of changes required people will have to understand why. That requires a communications effort of the same scale that the problem requires. Instead what we have seen is nothing even close to that. It’s not too late for this to change. My hope is that we see the conservative attacks on the carbon tax backfire as the issue of climate change is thrust into centre stage. Let’s hope progressives who understand what is at stake take the opportunity to mobilize Canadians around a bold vision that is equal to the scale of the problem in a way that connects to a vision for how things could be better for all of us.