O O Ø O O O O
A Kyoto Accord
Tax consumers, not producers.
With all the sturm und drang these days about the Kyoto Protocol and climate change, I thought I should wade in from the vantage point of my lofty perch on this soap box.
First, I am generally fully supportive of any measures taken to reduce Canada’s output of potentially climate-changing gases. Without getting into the debate over whether or not human-produced CO2 is accelerating the pace of global warming (or countering the effects of global cooling), I accept that our actions have consequences in an infinitely complex and variable world, and since our understanding of those consequences is not yet complete, we must take reasonable precautions to ensure our behaviour doesn’t eventually turn out to be deleterious.
Second, I am fully supportive of Alberta’s attempts to derail the federal ratification of the Kyoto Protocol. Ottawa has made no attempt to clarify how Canada will reach its emissions targets under the protocol, so it is right that Alberta—and most of the other provinces—should resist. This is a federal executive, after all, that has always questioned the provinces’ jurisdiction over their own natural resources, totally contrary to constitutional law. We’ve been through this sort of Alberta-Ottawa dust-up before, and we can recall where it wound up: with then-Premier Lougheed circling his wagons on CTV, turning down the taps. Until we see a clearer picture of Ottawa’s plans, the provinces should question this parliament’s intentions.
The crux of my problem is this: if we want individuals and corporations to reduce their output of restricted gases, we will need to use measures more powerful than Ottawa’s pathetic request that people drive a little less. Economics teaches us that if we raise the price of a commodity, demand will fall, as people opt to either do without, or to find reasonable substitutes. The thinking is that if we use some variety of green tax to raise the price of fuels popularly considered harmful, people will walk more, wear thicker sweaters in the winter, fill fewer hot-tubs, drive their SUVs off cliffs, and generally be better all-’round greens.
Although I dislike any sort of government tinkering in markets, I generally can’t argue that this would have the desired, positive outcome.
The problem that Ralph Klein and I have, is in the answer to the question “Where do you apply the tax?” Alberta wants any proposed green tax to be applied at the pump. (Actually, Alberta doesn’t want any sort of green tax, but let’s get beyond that.) Ottawa wants the tax applied at the wellhead. The difference in these two positions is vast, and they demonstrate why the provinces are lining up on different sides of the issue.
Tax At The Pump
This is the most democratic method, as it guarantees that those who consume carbon-dioxide-producing fuels will pay a premium to do so. Car drivers, factory operators, campers, home owners, and propane BBQ-ers, will all have have to pony-up an extra XX% every time they fuel up their offending piece of equipment. It’s easy to see how this could provide at least some incentive to consume less fuel. It’s also easy to see why this solution would be madly unpopular with the voting public. Would this be political suicide of a sort worse than the GST? Who knows, but why risk finding out when there’s the much more alluring second option?
Tax At The Wellhead
This is the oil patch term for a tax that is applied to the producer, before the commodity is sold. That means those dirty, nasty, bad producers of dirty, nasty, bad fuels like oil and gas have to pay the tax—and here’s the part that Ottawa loves—then sell their commodity at world prices.
Alberta companies are price takers when it comes to crude oil and natural gas, as the volumes they can currently produce and deliver are not sufficient to have any bearing on the world market price. That means that oil companies can’t pass the green tax on to consumers, since buyers can simply purchase world oil at cheaper, market prices.
This strategy has two potential consequences. One, the tax is paid out of the profits of the oil patch, and two, an incentive is created to buy foreign, untaxed oil and gas. Since the federal Liberals have shown no qualms in the past about buying offshore oil while penalizing domestic producers, we can safely say they really appreciate all the benefits of this approach. This plan also sounds good to Joe Eastie Consumer, who doesn’t have to pay that extra dime to fill up his Cadillac Escalade, but here’s the flaws:
- As has happened before, Canadian producers will shut in production and leave the country.
- Canada’s dependence on foreign fuel increases, as does its dependence on such environmentally questionable technologies as hydro-electric power. (This is why Manitoba and Québec support the Protocol.)
- Canada looks better according to the Kyoto Protocol, because it is no longer producing as much environmentally-dreadful oil and gas, but its consumption needs have turned to suppliers who are not part of the agreement, and whose environmental records are dramatically worse.
- Consumption habits won’t change.
Most would argue that hydro-electricity is a cleaner and more desirable power source than coal, oil, and gas. This is an argument I would eventually have to concede, but would make the point that no power source is without environmental impact, and although I love the dams themselves (as pure, man-made objects writ large), I still find their deployment terribly obtrusive. A better solution is the widescale deployment of windmills, as we are seeing in the Pincher Creek, Alberta region, and on the Gaspé penninsula in Québec.
Regardless of your preferred method of altering the ecosystem to achieve man’s needs and desires, taxing at the wellhead is a terrible solution, and won’t help anyone change anything.
If Canadians are serious about reducing emissions, then they should support the tax at the pump. I do. And here’s an idea: Why don’t people start behaving as though heating oil, gasoline, and jet fuel were actually scarce, non-renewable resources, and make some moves to use a little less of it?
Did you think I was kidding about driving your SUV off a cliff?
Evan Spence
Tuesday, November 12,
2002
PD DLXXIII