Home > Carbon Tax, Global Warming, Kyoto, pimply minions of bureaucracy > The Cost of Bill C-288: Report

The Cost of Bill C-288: Report

April 25th, 2007

The Environment Ministry last week produced a report, The Cost of Bill C-288 to Canadian Families and Business, suggesting that the cost to Canada of Bill C-288 would be a 6.5% GDP decline (the largest post WWII recession), a doubling of Natural Gas prices, $1.60 litre gasoline, pestilence and locusts – lots of locusts. While the last two may not be in the report, both opposition leaders, Stephane Dion and Elizabeth May, have insinuated as much about the report.

The criticisms are based on the figure of a $195/tonne carbon tax the report says is required. Elizabeth May suggests that realistic figures are more like $30 – $50 tonne. I can only guess she is confusing a carbon tax with carbon credits, which most experts agree need to be in the $40-$50 range. If she thinks $50 would do it, consider that it would increase gas at the pump by 12c litre (not including increase in refinery costs). That’s a long weekend jack-up, not a fix to reduce carbon by 33% (even more laughable is Dion’s $20-per-tonne ‘deposit’ for companies – a 5c litre increase. I get that now between going to and leaving work).

In order to test Dion and May’s theory, I put the numbers to a quick test: $195 tonne gives an at the pumps increase of .47c (1 litre of gasoline produces 2.4 KG of CO2. 1KG – .001 tonne. $195x .001 = .195. 195 x 2.4 = $0.468/litre of gasoline increase.), before refining costs. Considering the carbon tax will be on both sides of the equation, pump and refinery, it is not unreasonable to assume a 60c increase in gas. If the gas numbers are accurate, then I can accept the others without evidence to the contrary.

But is that too much, can we make Kyoto reductions next year with a 12c litre increase. The report says we need to make a 33% total reduction in GHGs. It estimates that 25% of those credits can be bought on international markets, leaving every person and industry to make a 25% cut in their emissions. How much would gas have to increase to make you reduce consumtion by 25%? Twelve cents? Four? Or John Bairds Sixty Cents a litre? (In fairness, Elizabeth Mays number should be closer to 20c.) Same rule for home heating. To cut your Natural Gas use 25%, what does the price have to be?

I have analyzed various reports in the past few months, and 60c a litre on gasoline is the number I expect to see from any serious report. Frankly, I think it’s low – I expect a doubling of gas prices from current prices are required. Sixty cents a litre is the low end of the scale. So I have no trouble accepting the environment ministry’s report.

There are however, various problems that crop up with the report, and Kyoto, when you read this. A carbon tax is expected to produce a significant decline in energy exports, as tar sands production loses some of it’s cost advantage. This energy production has to be made up somewhere, so while Canada is suffering a Kyoto induced recession, someone else is producing the carbon we refused to.

Then there is electricity. Coal will be hit more than Natural Gas, which will be more expensive than hydro. However, Alberta and Ontario are more reliant on coal. While long term “… planned new hydro-electric generation capacity in northern Quebec, Manitoba and Newfoundland and Labrador that together with development of an east-west electricity grid, could dramatically reduce the dependence of Canadian industry and consumers on high GHG-emitting energy sources…” sounds good, how does Ontario and Alberta becoming dependant on Quebec and Newfoundland for hydro affect provincial politics. Does Ontario really want to be beholden to confederations blackmailers? (I know Alberta doesn’t.)

Meanwhile, doubling Natural Gas prices implies much more for dirty electricity generation. A person wonders how high prices would have to go to make new nuclear generation a worthwhile investment? Sooner or later an Ontario Premier will have to consider it.

Further economic activity that can be anticipated, according to the study, is a weakening of the dollar and “effects on monetary policy.” I presume that to mean stimulative effects, i.e. lowering of the interest rate, but as a lower dollar and increased carbon prices are not inflationary, I can’t rule out higher interest rates.

And in the end, how effective would all this be? Consider this statement:

Revenue received from a broad carbon tax could be recycled back through the economy through changes in other tax rates, although at the same time it would be essential to ensure that the government’s overall fiscal situation be kept whole in order to avoid returning to deficit.

Translation: they will give some of the extra tax money back through other tax relief (although not all), however expect tax increases as you decrease usage. You benefit what from cramming yourself into a tiny car, and wearing sweaters to bed in February? Nothing, because that savings will be taxed back to protect government revenues. Now isn’t it funny how Stephan Dion and Elizabeth May never got upset about that bit of sophistry?

And who said that would happen? And what was that quote again? Something about farthings and “pimply minions of bureaucracy?”

Carbon Tax, Global Warming, Kyoto, pimply minions of bureaucracy

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