Technology Matthew Lau: Costs of the carbon tax to Canadians are much higher than Ottawa is letting on

18:30  14 february  2020
18:30  14 february  2020 Source:   financialpost.com

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Several Canadian provinces have already implemented or plan to implement carbon pricing But rebates will more than offset higher fuel costs . One key component of the federal carbon tax is With this carbon tax , Canada is recognizing that reality, and in fact is offsetting the financial impact

As Canadians fill out their income tax returns ahead of the April 30 deadline, advocates of carbon When tax filers claim their carbon tax rebate this spring, they should be well aware that the cost of the tax is far higher than the Matthew Lau is a contributing writer to Canadians for Affordable Energy.

a man standing next to a truck: The PBO says most Canadian households will receive more in rebates than they are paying in carbon taxes. But that’s not really the case, argues Matthew Lau.  © Postmedia The PBO says most Canadian households will receive more in rebates than they are paying in carbon taxes. But that’s not really the case, argues Matthew Lau.

Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN.ca or Microsoft.

Last week, the Parliamentary Budget Officer (PBO) furnished the Liberal government with the confirmation bias it was looking for in order to be able to claim its carbon tax system would enrich most Canadians. According to the report the PBO released, “most households will receive higher transfers than amounts paid in fuel charges. They will therefore be better off on a net basis because the rebate exceeds the household carbon cost.”

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It took some poking and prodding and (finally) committee testimony, but now we know what the bill will be for a -per-tonne carbon tax , similar to one the federal Liberals plan to impose. In a report to the Senate Standing Committee on Energy, the Environment and Natural Resources

The majority of Canadians support battling climate change but don’t want to cough up more than 0 a year in carbon tax . Think-tank SecondStreet.org hired polling company Nanos Research to conduct the poll that found 47.5% of Canadians are willing to pay 0 or less a year in carbon tax .

One of the charts in the report purports to show that almost all households in Alberta are enriched by the carbon tax — and that the higher the tax rate, the higher the net benefits. Most readers will find that hard to believe. And with good reason: the PBO report arrives at its conclusion that the federal rebate exceeds the cost of the carbon tax only by excluding much of the cost.

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The cost of any tax is much higher than simply the flow of dollars it produces for the government levying it. For example, in the case of provincial personal income taxes, a recent study by tax economists Bev Dahlby and Ergete Ferede found that the marginal cost of public funds — that is, the cost to the private economy, including lost economic activity, from raising an additional $1 in government revenues — ranged from $1.77 in Alberta to $6.76 in Ontario.

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Carbon pricing in Canada is implemented either as a regulatory fee or tax levied on the carbon content of fuels at the Canadian provincial, territorial or federal level. Provinces and territories of Canada are allowed to create their own system of carbon pricing based on the needs and

Reports this morning that Canada ’s Ecofiscal Commission says Canadians will need to pay 0 a tonne carbon tax to meet its Paris Agreement on Climate Change isn’t going to be cheap. The report estimates an extra 40 cents a litre at the pumps, but in reality that cost is much higher .

The cost to households of raising $1 in carbon tax revenues is also much higher than $1. A carbon tax functions like a tax on labour and capital but is actually more distortionary since it is applied to the narrower base of carbon-intensive activities. As with taxes on personal and corporate income, the effect of a carbon tax is to cut capital investment, eliminate productive jobs, and reduce income growth — costs that, if they had been included in the PBO report, would have swamped the reported net gains to households.

By excluding these costs, the PBO report naturally describes an outcome in which most households benefit from the carbon tax-and-rebate system. Using the PBO’s methodology the most harmful and absurd taxes could be justified as creating net benefits for most households.

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The reduced tax means businesses will have fewer costs to pass along, face less competitive pressure and likely produce higher emissions. Ottawa is assessing energy-intensive companies that face tough international competition to determine whether they qualify for special breaks on the carbon levy.

Long story short, higher -income Canadians will only be refunded a fraction of the carbon taxes they'll pay Premier Christy Clark's government began “investing” some of the carbon tax revenue in Let history be my guide. This column is part of CBC's Opinion section. For more information about this

Imagine, in an example adapted from economist Robert P. Murphy, that in order to discourage caffeine addiction the federal government imposes a $350,000 tax on each cup of coffee consumed. To make the policy revenue-neutral, every dollar collected in coffee taxes is distributed back to households in rebates. The result is that almost nobody in the country would buy coffee. But suppose one rich individual, perhaps as a marketing stunt, does purchase one cup of coffee and pays the $350,000 tax. If so, the revenues would be distributed back to the rest of the population at a rate of — dividing $350,000 by the 35 million of us — $0.01 per person (though no doubt the government would eat up a good part of the $350K collecting and redistributing the revenue).

If you look only at cash flows, you might well conclude such a tax enriches almost all Canadians. After all, every household in the country but one receives more from the coffee tax rebate than it pays in coffee taxes. But, of course, by depriving Canadians of coffee, the tax makes coffee-drinkers — of whom there are many! — worse off, some much worse off.

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Those that insist otherwise are simply ignoring the historical and scientific evidence. - Peter Shawn Taylor for Canadians for Affordable Energy. BC's carbon tax has raised the price of gasoline to some of the highest prices in North America. But the carbon tax doesn't just make driving more

The modeling teams examined four carbon tax scenarios, with starting prices of or per ton Expected economic costs (not accounting for any of the benefits of GHG and conventional pollutant The analyses also found that the rate of increase of the carbon tax was more important than the

So it is with the carbon tax, except that instead of depriving Canadians of coffee, it deprives many of them of jobs and income growth.

Carbon-taxers would argue that, even if the tax is not financially beneficial to Canadians, the financial losses are at least offset by the environmental benefits of reducing carbon emissions. Yet even this much weaker claim is questionable. In a study published last month in the journal Environmental Economics and Policy Studies, Kevin Dayaratna, Ross McKitrick and Patrick J. Michaels produced estimates of the social cost of carbon (the present value of damages caused by future climate change due to emissions today) by updating the FUND climate model, which is co-developed by academics David Anthoff and Richard Tol, with the latest  — mainstream — estimates of the effects of greenhouse gases on plant growth and climate.

This latest evidence suggests the climate is less sensitive, and plant growth (which is a good thing) more sensitive, to the concentration of carbon dioxide in the atmosphere than originally thought. As a result, the marginal damages of carbon emissions are, as McKitrick puts it, “basically zero through the mid-21st century. In other words even if you accept mainstream climate science it still doesn’t justify costly policy measures.”

Indeed, the study found that by improving plant growth and crop harvests, carbon emissions might actually yield net benefits — over the next 30 years, at least. The federal carbon tax, on the other hand, does no such thing.

Matthew Lau is a Toronto writer.

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Carbon price cost estimate edges up in Sask., but most still gain from rebate .
Carbon pricing will cost Saskatchewan households more than previously stated, according to updated estimates released Tuesday, but most families will still come out on top after getting tax rebates. The impact isn’t spread evenly, however, and the province’s main farm association says producers will take a 12 per cent hit to their bottom line by 2022. A report from the independent Parliamentary Budget Officer (PBO) pegged the average cost to Saskatchewan households at $475 per year in 2019-20. As the carbon price rises to $50 per tonne of emissions in 2022-23, Saskatchewan families will pay about $1,070 in price hikes.

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