The unpalatibility of the carbon tax on retail gasoline and diesel was the reason given by Mark Carney for axing the C-tax. I consider that to be a weak reason, although I acknowledge that it was brilliant politics. I would argue that there is a much better reason: the carbon tax has not reduced the consumption of gasoline. We have evidence: Statistics Canada reports the annual sales of motor fuels by province. British Columbia paved the way with its carbon tax, introduced in 2008 at 2.3 ç/L. That coincided with the financial shock, which put a dent of 5% in the consumption of gasoline in BC, but by 2017 it had recovered and then climbed by 10%. The wrong way. COVID also put a dent in sales in 2020, but they started climbing from that level in 2021, and in 2023 were on the way back towards the 2019 level.
Motor fuels have been an easy source of revenue for governments for a century. The carbon tax was simply the most recent, introduced at a very modest level in comparison to the existing taxes, and then raised annually by an amount that hardly anybody noticed. In Vancouver, that starts with the federal excise tax of 10 ç/L, plus GST, plus motor fuel tax of 27 ç/L (pays for transit). Then there’s the noise (volatility) of the gasoline market.
How could a tax of 2.2 ç/L have any effect in this mountain range of market volatility? (The deep dive was the result of the 2008 financial crisis). In subsequent years, the C-tax initially went up annually by 1.2 ç/L.
My conclusion: At the pump, nobody noticed. For the occasional citizen who may have noticed, it didn’t matter anyway because as a letter in the Vancouver Sun put it: driving is so useful, picking up the kids and bringing the groceries home. The price elasticity is vanishingly low. Greengrocers understand price elasticity, the federal government seemed to think simplistically: price up, demand down in proportion.
A big problem that I have with the C-tax is that it was an enormous political distraction. The claims made by the feds were not well founded and it took until 2018 for that government to formulate the beginning of a climate policy and programs that began to make sense.
Gary Mason, a regular columnist, understood something that Justin Trudeau did not. Here’s a letter published in the Globe and Mail:
Re: Gary Mason: An inconvenient truth: The carbon tax helps more than it hurts, 2023 Dec 8
When this tax was introduced in B.C., it was a relatively small addition to other taxes on retail gasoline, It didn’t make any difference. Citizens of B.C. carried on driving anyway. Not a surprise, because driving is so useful, picking up the kids or bringing the groceries home. And if we consult Statistics Canada’s reports on the annual sales of gasoline in B.C., we find that they have increased, despite a drop at the beginning of COVID-19.
The so-called carbon tax is not a tax, it’s a rebate, often a donation, an act in a circus.
The reduction of global heating is an imperative for the welfare of humankind and ecosystems overall, including the species on which we depend directly. The rate of increase in provincial and federal taxes does not recognize this fundamental point. The increases have been modest and leisurely, not commensurate with the task. Canada needs to change gears. What is required is a fundamental and broad examination of the pathways in our human activities that could balance the consumption of energy with the imperative of reducing global heating. This is a tall order in a democratic society. A strong intellectual foundation is essential along with the tools to make the adopted solution work in practice.
John Hollins, Ottawa
John Hollins, was a lead-author, Pathways to Reducing Canada’s Greenhouse Gas Emissions, Canadian Association for the Club of Rome
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