I hope my readers will forgive me for engaging in more cynicism than usual, but nothing has so convinced me that the federal carbon tax is not long for this world than an open letter that was released last week and signed by scores of prominent Canadian economists. In it, they reiterate the consensus of their profession — that a price on carbon pollution remains the most effective way to reduce climate-changing emissions. The letter itself is a mixed bag for the federal Liberal government: it largely defends the design of the federal carbon tax-and-rebate scheme, while its authors have noted elsewhere that overall federal climate policy is far from the ideal of an economist’s blackboard.
The signatories of the letter have received more than a little blowback for something that ought to be pretty uncontroversial, insofar as it’s an expression of the opinions of economists: if they can’t publicly say utterly banal things like “higher prices make people consume less,” then maybe we should remove economics from its privileged position as the arbiter of policy merit.
But, more than anything, the whole episode is reminiscent of the people who tried to defend globalization in mid-2016 as then-candidate Donald Trump was railing against multinational trade agreements like the Trans-Pacific Partnership: this isn’t fundamentally a debate about the details of policy implementation. The opponents of carbon pricing — including Premier Doug Ford and federal Conservative leader Pierre Poilievre — aren’t going to be convinced by the Econ 101 instruction.
And given that Poilievre is the odds-on favourite to form government after the next federal election (scheduled for fall 2025 under current law) and that repealing the Greenhouse Gas Pollution Pricing Act is likely to be his first order of business or at most his second, it bears thinking about what climate policy is going to look like in the absence of a federal backstop in Ontario.
In one sense at least, a Poilievre victory would be a blessing to all of the opposition parties: they would be free to craft a climate policy without even needing to consider whether it would meet the nominal requirements of the GGPPA, which requires that provinces meet an effective price per tonne of carbon pollution or face the federal backstop.
Green leader Mike Schreiner has nevertheless reiterated his party’s support for carbon pricing; the NDP have oscillated between hot and cold on carbon pricing in the past decade; and Ontario Liberal leader Bonnie Crombie announced last month that she would not be making a consumer-facing carbon tax part of her party’s pitch to voters next time around. Ford, of course, appears to believe the appropriate carbon price for individuals is zero, so we’ll assume that his party’s reaction to a change at the federal level would be to celebrate and otherwise change nothing.
The problem with trying to think of alternatives to a carbon tax is that it’s hard to argue the most central point those economists make in their open letter: sure, there are alternatives to carbon pricing, but they all tend to be more expensive, less effective, or both. The classic alternatives are subsidies for less carbon-intensive products and industries or a heavier hand with regulation on everything from building codes to vehicle fuel efficiency.
These measures, when evaluated purely on a tonne-per-dollar cost metric, regularly score worse than the carbon tax. They are, nevertheless, consistently more popular. (Even Ford is happy to spend billions subsidizing electric-vehicle manufacturing, and his hostility to EV infrastructure has waned the longer he’s been in government.) It’s not surprising that some climate researchers have all but concluded in the US context that visible, painful carbon taxes are so politically toxic it’s better for climate-serious governments to simply skip themselves the trouble. Notably, the Biden administration’s Inflation Reduction Act avoided that hornet’s nest in favour of massive, economy-reshaping subsidies.
The alternatives to a carbon tax may all end up being more costly than the tax itself. The problem for political parties to solve is that voters have had all this explained to them and prefer the alternatives anyway.
For provincial governments, the good news, such as it is, is that there are large areas under their control where they can engage in climate policy that won’t show up on a person’s receipt. That includes improvements to the building code to emphasize insulation and compatibility with things like electric vehicles and changing the rules around natural-gas connections for new homes and businesses. And, of course, there’s the provinces’ central role in determining the layout and composition of the places where people live — from highway and transit planning to the planning powers bestowed on municipalities.
The bad news is that Ontario knows, from painful experience, how easy it is for governments to go overboard on stuff like this — and how stubbornly costs can insist on revealing themselves no matter how politically inconvenient they are. Nobody in the Liberal government from 2003 to 2018 ever intended for things like the coal-power phaseout, the support for renewables, or the incentives for conservation to drive up electricity costs. Each incremental measure seemed small and manageable on its own, and nobody was keeping an eye on the overall picture until after the auditor-general reports started coming in.
Every major party trying to replace the Ford government in the next election will be challenging it, in part, on its record of climate policy. The end of federal carbon pricing may offer the promise of more freedom in terms of what policies parties can run on. But it’s worth considering the potential pitfalls of a world where hiding the costs of policy is easier than being honest about them.
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