The Quebec "Carbon" Tax

Letter to the Editor, Montreal Gazette,

The government of Quebec’s decision (Quebec to bring in Canada’s first carbon tax on fuel, Kevin Dougherty, Montreal Gazette, June 7, 2007) to tax carbon at the producer level (e.g. 0.8 cents/l for gasoline) starting October 1, and to ask the energy companies to absorb the tax, is a misguided policy that will actually hurt Canada’s effort to reduce greenhouse gas emissions. Minister of Natural Resources and Wildlife, Claude Bechard, said that the tax is based on the ‘polluter pays’ principle, so evidently they are hoping to discourage pollution with this tax. But consumers, not producers, are the ones who make the choice to pollute. I believe it shows a lack of understanding of economics to not realize that if consumers do not see this tax then their choice to consume more or less gas will not be affected. It scares me to think what kind of damage could be done by a government that ignores this concept.

I think it’s agreed that, in order to solve the global warming problem, one way or another there must be a price put on carbon. A carbon tax is one way to do that but a stumbling block is that there is substantial political opposition to imposing a carbon tax. The new “carbon” tax, if not passed on to consumers, is really a tax on energy producers’ profit margins, not carbon. Giving people the wrong idea about what a carbon tax is will foster political opposition to future efforts to truly put a price on carbon.

What about the fact that the expected $200 million a year in revenue from this tax was to finance greenhouse gas emissions reductions projects? That’s an irrelevant question because the government is about to cut income taxes. So if those green projects are worthwhile, there is money to fund them.