Carbon taxes remain a great way of ... collecting more taxes

National Post, 28 February 2017

Alberta promises, like British Columbia, that the tax will be revenue-neutral. Unlike B.C., Alberta is not even trying to tell the truth

“A tax on everything.” That’s how the Conservatives attacked the carbon-tax proposal of Stéphane Dion when he proposed it in 2008. Yet for economists, that is a feature, not a bug. A tax on everything does not distort the choices producers and consumers make; it’s akin to a consumption tax, which is supposed to be a tax on everything. If the revenues were returned to the taxpayers as a whole — for example by a cut in income taxes — then a tax on everything might well encourage earnings, savings and investment.

Carbon taxes are much in fashion. Senior American Republicans (albeit retired) have called for a national one south of the border. The Trudeau government has mandated one here. And as of Jan. 1, a carbon tax of $20/tonne of emissions is in place in Alberta. That means 4½ cents/litre at the pump. Next year, it will increase to $30/tonne, or 6¾ cents/litre. Alberta’s carbon tax will apply to all carbon-emitting combustion, so the cost of home heating will go up, and all goods and services that might use carbon-emission energy in production. Alberta joins British Columbia, which adopted a broad-based carbon tax in 2008.

Will the carbon tax reduce the amount of Alberta’s emissions? Perhaps. In principle yes — put a tax on something and people will buy less of it, all else being equal. Part of the reason that energy demand in Ontario has gone down is because the price of energy has risen rapidly, though not due to a tax, but rather massive mismanagement of energy policy.

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