In the public space, the climate debate is often polluted, on the one hand, by environmentalist pressure groups with an anti-capitalist tendency and, on the other hand, by a climatosceptic right hostile to any measure to reduce greenhouse gases. (GES). In this context, it is too easy for relatively centrist political parties to propose solutions that appear reasonable in the fight against climate change, but which in reality are far from being so. Will we observe this phenomenon during the provincial election campaign in Quebec?
Posted at 12:00 p.m.
For the moment, it is clear that the theme is not central to the campaign. This is problematic given the magnitude of the climate challenge, but also the ineffectiveness of certain systems in place, such as the Green Fund and the Quebec cap-and-trade system for emission rights (SPEDE).
We propose to replace these mechanisms which scare away capital and jobs with a carbon tax on consumption accompanied by a carbon dividend redistributed to taxpayers.
The existing system: carbon leakage and jobs
SPEDE subjects large emitters to a system where the government (in partnership with California) sets the maximum amount of GHGs that can be emitted annually. Companies must obtain emission rights at the current price and the emission cap decreases each year. Theoretically, the price of these rights should increase over time, which should guarantee a reduction in GHGs emitted by Quebec (and Californian) industries. It’s reasonable, right? Not so fast!
Imagine a Quebec without polluting industry. Would that make Quebecers greener citizens than others? Not if Quebecers consumed tons of products made abroad, requiring the emission of phenomenal quantities of GHGs in other countries. It would only relocate the problem elsewhere. This is called “carbon leakage”. The gains for the climate would be non-existent.
The economic losses for Quebecers would be very visible: jobs and capital relocated to our international competitors, where companies are not subject to carbon pricing.
In short, the carbon market is equivalent to a tax on the production of our companies, which penalizes them vis-à-vis their competitors.
A more efficient option: tax consumption rather than production
In order to solve this problem, we propose an alternative solution: the implementation of a carbon tax on consumption accompanied by a carbon dividend. The tax would apply to all consumer goods and would be set by the government based on the carbon footprint of the products. To offset the additional cost to taxpayers, and to ensure that it is not a pretext for new government spending, the amount of the tax would be paid back to them in full in the form of a universal dividend.
This price would serve as a compass to encourage everyone to behave more climate-wise.
On the one hand, the tax would encourage consumers to choose end products with less emissions; on the other hand, it would encourage companies from here and elsewhere to reduce their emissions on the Quebec market so that their products are sold at a competitive price. By applying to all products regardless of their origin, the tax would not penalize our local businesses vis-à-vis their international competitors.
Finally, the carbon tax on consumption would have an educational virtue, since it would inform consumers about the climate impact of the products they buy. One could very well imagine a double labeling of products: a label with the price without the tax and a (green) label indicating the amount of the carbon tax. It would certainly make you think!
A reflection to have in the election campaign
In short, Quebec should get rid of the weight of its carbon market and replace it with a consumption carbon tax backed by a universal dividend. This change would reduce the bureaucratic burden on companies while encouraging them to reduce their carbon footprint. Moreover, it would provide additional information to consumers while respecting their freedom of choice.
Some will reply that our proposal is inapplicable. On the contrary, its main advantage is precisely its feasibility: not only are there already applications and technologies for measuring and tracing GHGs, but also the application of a consumption tax would not require any negotiation (endless) involving other countries (as required by the expansion of the carbon market in which Quebec currently participates). Furthermore, why get bogged down in a system that penalizes our local industry when a credible option exists?
Let’s hope that Quebec will take advantage of this election campaign to at least initiate this reflection.