Guest Opinion: New Trudeau carbon tax plan smashes original ceiling — and original promises
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In August 2019, then-environment minister Catherine McKenna reiterated there were no plans to increase the ceiling.
Yet in December, the government changed all that, with its new environmental plan.
After the carbon tax reaches $50/tonne in 2022, it will begin rising by $15 per year until maxing out at $170/tonne in 2030 — a whopping increase of 240%. (Interestingly, the government’s main document doesn’t contain the jarring “$170” number; readers must do the math themselves to calculate the new ceiling.)
Besides violating earlier pledges, the new $170/tonne carbon tax is arguably above the correct level.
The “social cost of carbon” (SCC) is defined as the negative impact of emitting an additional tonne of CO2 in a particular year.
A proper carbon tax should be set at this level to cause businesses and consumers to properly account for climate change in their decisions.
In 2016, the Obama EPA produced a schedule showing that the SCC in the year 2030 (using standard assumptions) was about C$80 in today’s dollars.
Therefore, assuming normal inflation over the next decade, the actual environmental harm of additional carbon dioxide emissions by 2030 (in dollars at that time) would still be under C$100 per tonne.
Thus the new target of $170/tonne for 2030 is far too high — even if the carbon tax were implemented perfectly.
But again, the carbon tax hasn’t been implemented perfectly.
Ideally, the new revenue wouldn’t fuel additional spending but would be returned to the private sector via tax rate reductions, or at least it could be rebated “lump-sum.”