Ontario’s gas tax boost won’t help environment
How many car owners are going to rearrange their lifestyles to avoid a 4.3-cent a litre tax?

thestar.com
Feb. 26, 2016
By Edward Keenan

Just a plain old cash grab.

You can be pretty sure that’s what the guy on the next bar stool is saying about the new carbon taxes confirmed Thursday in the provincial budget, the 4.3-cent-a-litre levy on gasoline and the $5-a-month premium for the average natural gas household. And he’ll be right, in as much as any tax or fee or levy or price on virtually anything is a “cash grab.”

Income taxes are just a plain old tax grab. Sales taxes are just a plain old cash grab. Property taxes and land transfer taxes and hotel taxes and transit fares, too. When you get right down to it, the bake sales my kid’s school runs to pay for extracurriculars are nothing but a cash grab. You need to grab cash somehow if you want to pay for things - like government services - that cost money.

And as new cash grabs by government go, these carbon taxes are fine. It seems to me that a modest increase in the gasoline tax, in particular, is a pretty good move. In the maintenance and policing of the roads, in congestion, in pollution and in its effect on human health, driving imposes a high price on society, so taxing it more makes as much sense as taxing anything. Toss it in the file next to increased sin taxes on alcohol and cigarettes. Besides, people have already shown they are willing and able to pay a lot more than they do now for gas, and in fact they have been used to doing so - the price was 30 cents a litre more expensive two years ago than it is now, for instance.

But that last point, that people have very recently been used to paying much more for gas than they’re being asked to now, is an argument that a $2.50-a-car-tank fuel fee is relatively painless as far as tax increases go. Which is also an argument for why I don’t expect it to be particularly useful in reducing carbon emissions.

How many car owners are going to rearrange their lifestyles - move closer to work, or switch to public transit, or take up cycling - to avoid a 4.3-cent a litre tax? How many people are going to renovate their homes to avoid a $5-a-month increase in heating costs? I expect the answer to both questions is “not many.” And the truth is we probably won’t soon - or maybe ever - see a tax in this province that really does effectively fight carbon emissions. And what makes me think that, in part, is precisely that the guy on the next barstool will be red in the face raving about cash grabs in response to this 4.3-cent-a-litre increase.

It pains me to admit this, as someone who has long made the argument for pricing carbon - yes, through carbon taxes - as a way to slow climate change. But Simon Fraser University professor of sustainable energy Mark Jaccard - an economist who has studied carbon taxes in the past for both the federal government and for B.C.’s provincial government - wrote this month in the journal Policy Options that his research shows that to convince consumers to switch to electric or biofuel options, you’d likely need a gasoline tax increase of about 40 cents a litre. It’s hard to imagine a politician with the fortitude to actually implement a carbon tax that steep (about $160 a tonne, more than 10 times the price in the Quebec and California cap-and-trade market Ontario has announced it will link with in its system).

Jaccard argues pretty persuasively that the politically viable path to real emissions is not through taxes but regulation. Ontario made the decision that is responsible for the bulk of all of Canada’s recent emissions cuts when it eliminated its coal-fired power plants, he points out, and in California strict auto emissions and other standards have been responsible for 90 per cent of reductions. “Even Scandinavian countries, famous for two decades of carbon taxes, mostly used regulations to reduce emissions. For example, the greatest CO{-2} reductions in Sweden happened when publicly owned district heat providers were forced to switch fuels.”

Those kinds of regulations often carry high “implicit” costs, economists point out, of more than $100 per tonne of carbon, which Jaccard points out is a feature, not a bug. It’s the very fact that they are not explicit that makes them politically viable. So perhaps, as Jaccard argues, the way to environmental success lies in harder regulatory caps than in consumer tax pricing.

But in the meantime, we also need to pay for initiatives that themselves help reduce carbon emissions - public transit and retrofitting housing infrastructure and so on. For that, we need cash, and if you ask me, the gas pumps are as good a place as any to grab it.