Manitoba should carefully consider carbon-tax options

Opinion

Hey there, time traveller!
This article was published 16/09/2022 (1122 days ago), so information in it may no longer be current.

Dylan Robertson wrote last month about Manitoba mulling over its own version of a carbon tax to meet federal requirements (“Manitoba quiet on provincial carbon tax front,” Aug. 12). It is worthwhile to provide feedback, thoughtfully understanding implications and carefully moving forward, whether for the current government or a possible future government.

No government of Manitoba should be eager to jump on board with federal carbon taxes, given that this bandwagon is becoming a massive boondoggle. Provinces are under some duress regarding carbon taxes, which is important to emphasize, and endorsing carbon taxes means assuming blame.

I am a well-known critic of carbon taxation as rolled out in Canada, for simple reasons. First, carbon taxation has never been effective for reducing emissions. Since 2015, under the Liberal government, annual emissions have gone upwards. A slight dip occurred in 2020, only about nine per cent, which everyone knows was related to COVID-19 and is not something to repeat.

Data for 2021 suggest emissions will be storming back, to at least as high as in 2019. Canada, under the Liberal government, has thus made no progress, and indeed has the worst record of the G7 on reducing emissions. In 2017, Justin Trudeau was even bested by Donald Trump, which is hardly positive.

Carbon taxation is ineffective, and second, is unfair, particularly to lower-income Canadians. This is where things get interesting. Economic analysts, collectively, appear overly dependent on and often led to improper conclusions by fancy computer models.

As mentioned in Robertson’s article, the government of Manitoba is working with Navius Research, a highly competent firm. Its work is valuable, but there are limits.

What Navius Research does is macroeconomic computer modeling. Computer models can provide a useful understanding of broader impacts, but have never done a good job predicting consumer responsiveness in the face of carbon taxes.

It is true, in a recent report cited by Robertson, that computer modeling by the PBO suggests in the future, eight of 10 households could receive more back than they pay in carbon taxes. But it’s just a computer model; actual results from the Greenhouse Gas Pollution Pricing Act annual reports are available, and they tell a different story regarding fairness.

Households in Manitoba, on average, paid more in carbon taxes than they received in incentives — about $73 more in 2019 and about $69 more in 2020. Under these conditions, it is mathematically impossible for eight of 10 households to receive more back.

So how, then, to proceed? Three aspects are critical: first is to address unfair taxation that should not be occurring in the first place; second is to use collected revenues to directly fund mitigation efforts; and third is better using collected revenues to ensure disadvantaged households are not excessively impacted.

Manitoba has, for a long time, maintained the highest renewable content in transportation fuels across Canada, but people are surprised to find out Manitobans are charged carbon tax by the federal Liberals on renewable fuels.

On principle, this should be eliminated, but the amounts of money should continue to be tabulated and counted against carbon-tax levels. Currently, this represents about $15 million, and will rise to about $50 million by 2030.

Many people suggest more incentives should be offered for light-duty electric vehicles, but caution is needed on this, including not disadvantaging lower-income households.

My suggestion is providing a modest $3,000 incentive for all new hybrid, plug-in hybrid or electric vehicles. All these options reduce gasoline consumption, which has been a problematic “addiction” for Manitobans. Such incentives would also provide a net payback to Manitoba.

A better way to reduce transportation emissions is use of public transit, but transit was devastated by COVID-19. It must be restored and enhanced as a priority. Analyses by my students show two diesel buses can achieve the same overall reductions as a single electric or fuel-cell bus, but at less than half the cost each.

Diesel buses get people out of cars, too, so should not be considered bad. Having more buses available, in Winnipeg and across the province, would reduce emissions and be fair for lower-income households.

Manitoba also needs to find better ways to address agricultural fertilizer field emissions. Proposed federal fertilizer reductions, in the current environment of growing global hunger, are unacceptable. It is worthwhile spending some money to identify and trial positive solutions.

Lastly, we need to better address fairness on carbon taxes in general — a trickier problem requiring further discussion. More on that later.

Robert Parsons teaches on topics of sustainability economics, mathematical methods and supply-chain management at the I.H. Asper School of Business, University of Manitoba.