Carbon Politics & Pricing Tools

Third in a series on climate policy

The pitched battle between the parties over the carbon tax versus cap and trade reminds me of the first lesson I learned working in construction: how much more efficient you are when you have the right tool for the task. I put myself through university working construction. I wasn’t a master craftsman, mostly an ersatz draft horse that moved heavy things or dug foundation holes. But, in one day I learned that a wheelbarrow sure made moving boxes of nails easier as did a jackhammer for digging.

The partisan bickering between carbon taxes or cap and trade highlights the question: what is the best tool to address growing green house gas emissions. Unfortunately many politicians and pundits have mixed up discussions of the tool (either taxing carbon, ‘cap and trade’ or other mechanisms) with the goal (reducing emission fast).

Unfortunately, despite our suggestions, no political party has yet to endorse the best tool in our toolbox. Cliff Stainsby has convinced me that the ‘cap and dividend’ is the best tool. It has the best chance of ratcheting down heat-trapping carbon emissions quickly and equitably.

My main reasons for supporting cap and dividend are (1) that it is an incremental ban or prohibition on toxic green-house gases, and (2) it creates populist incentives for rapid action. Given their toxic effects on our climate, heat trapping gases like CO2 need to be banned. It is immoral to allow wealthy people or jurisdictions to poison our atmosphere if they have the means to pay a fee.

But the main reason I support ‘cap and dividend’ is that I can’t imagine a scenario under either of the approaches put forward by the Gordon Campbell’s Liberals or Carol James’ NDP where our political leaders would ever be able to quickly ratchet up the fees for polluting to where they need to be; – in the $200 to $600 per tonne range or higher. It would be political suicide. The well-funded spin machines of the polluting industries would grind down anyone that tried. But a paper by the Princeton economists suggests that a $200 per tonne price will produce 7% reductions. A recent Australian study suggests that for transportation $600 per tonne will get only produce 50% reductions. What would the price be for 100% or even 95% reductions that we need to achieve safe levels?

With either carbon taxes or ‘cap and trade’ the tool of the effective price is just too susceptible to political manipulation, or gaming by politically powerful high-polluting industries. We already see this phenomenon at work with the BC forest industry trying to manipulate the Western States ‘cap and trade regime’ to give carbon credits for their business as usual activities. The complexity of the ‘cap and trade’ system is ripe for hidden subsidies that provide windfalls in tradable credits to industries for doing little or nothing to reduce emissions. Just recently California’s Air Resources Board and Public Utilities Commission concluded “‘cap and trade’ is expensive to administer and won’t make a difference to emissions, but we have to do it anyway.”

Another problem is an unfriendly government could cut the carbon tax or manipulate the amount of emission allowed a particular industry under the ‘cap and trade’ and the system would quickly become a farce.

‘Cap and dividend’ solves these problems because it changes the politics. The ‘drill baby drill’ crowd is going to fight raising taxes, or implementing lower caps, with all their might. But they are a minority, and although they can make a stink, especially with the inevitable financing by polluting industries, they can be exposed as the minority.

Imagine how the politics would change if all the money paid for permits to emit polluting green house gases went into the pockets of every man woman and child? Imagine how aggressively people will push for dramatic lowering of emissions caps once they figure out that the lower the cap, the higher the price polluters will have to pay for permits, and the price difference will go to them? And imagine what would happen if at some future date a newly elected, climate-unfriendly politician tried to take that growing check away from people? Goodbye drill baby drill, hello path to carbon zero.

Now of course this is overly simplistic, but I don’t see another approach that can change the retail politics and create real incentives for Joe and Jane Canadian to support drastic emissions cuts.

But tools are just that tools. Having the perfect tool doesn’t mean a great house will be built. Building a great house means at some point you have to pick up whatever tools you have and get to work. Of course, you don’t use a jackhammer to remove nails, but we need to remember that even if our house isn’t perfect or our needs change, we can always remodel. Cliff’s five criteria provide a solid foundation for any structure we want to build. ‘Cap and dividend’ is the best tool now, but new ideas, new tools may evolve later. Given the enormity of the challenge we face stabilizing emissions at safe levels, we need to hold our political leaders to account to ensure they work together to ensure the best approaches are implemented without partisan bickering.  

Click here to read Cliff’s article, Ban Carbon Emissions, Don’t Price them: Why Cap and Dividend is the Best Approach


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