Conservative Party Leader Pierre Poilievre is misleading Canadians about the carbon tax in his attempt to sink the governing Liberals, experts say.
According to Poilievre, the carbon tax takes money out of people’s pockets. He points to a report from the Parliamentary Budget Officer (PBO), which he says confirms his claim, and said he would “dare the Liberal media” to double-check him. At the same time, Prime Minister Justin Trudeau and his senior cabinet ministers insist the opposite is true: more people get more money back through rebates than is collected from the tax.
So who is telling the truth? It depends who you ask.
According to the PBO, “both are truthful, depending on whether you view it from a fiscal standpoint only or within a broader economic context.”
It’s a bit like saying it depends on whether we’re talking about a policy in a vacuum or in reality.
Experts interviewed by Canada’s National Observer say defenders of the carbon price are right that more people receive more money back than they pay, making it a useful tool to address climate change and affordability and note the PBO’s analysis was severely lacking.
The PBO report found two things. One is that 80 per cent of families receive more money back through rebates than they are taxed. But it also calculated the carbon price’s impact on economic growth and jobs could ultimately mean less money for 80 per cent of families.
The dual findings suggest political leaders are cherry-picking facts from this report to suit their narrative. Indeed, Parliamentary Budget Officer Yves Giroux took to the media after the report was published last year to say he was “concerned” about the political spin at play.
University of British Columbia political science professor and carbon price expert Kathryn Harrison said that the conflicted findings speak to a subpar methodology. She explained there are two types of benefits and two types of costs when it comes to the carbon price, and the PBO didn’t properly account for this.
First are the specific carbon price costs and benefits. That refers to how much people pay in a carbon tax (cost) and how much they receive back through rebates (benefit). This is the most simple calculation to make, and the PBO was unequivocal that more people receive more back through rebates.
Second, there are the economic costs and benefits, which refer to the economic impact of the carbon tax on consumer behaviour. If someone installs a heat pump or purchases an electric vehicle, that is a cost. But those types of investments lower planet-warming greenhouse gas emissions in the real world and lead to benefits, like improved air quality. These investments also incentivize growth in the green economy.
The PBO added together the carbon tax and economic costs and subtracted the rebates, but “didn’t even try to take into account” the broader economic benefits, Harrison said. “They also didn't take into account other complementary policies, like subsidies for heat pumps and electric vehicles.”
Senior associate and economist with the International Institute for Sustainable Development Aaron Cosbey similarly took issue with the PBO report, calling the messaging “terrible.” Any tax has a cost to the economy, and if you don’t model the benefits alongside the costs, you’re left with a “faulty” conclusion, he said.
“Poilievre is giving Canadians an incomplete picture,” he said. “Judge for yourself why he's doing that — it looks pretty political to me — but it's an incomplete picture.
“It's a cynical play to boil the whole thing down to what you're going to pay at the pump, what you're going to pay for your heating bill. And if you cast climate action in those terms, you're going to win a popular vote. That's the sad truth,” he added. “But it's such a mischaracterization of climate policy and climate action.”
The real affordability issue for Canadians is the “overdependence” on fossil fuels, Cosbey said. Over the lifetime of the product, it’s cheaper to power a car with electricity than gasoline, it’s cheaper to heat a home with a heat pump than natural gas, and it’s cheaper to cook on an induction stove. As long as Canadians use fossil fuels for electricity generation, heating and transportation, “we are going to be subject to the kind of inflationary impacts that we saw as we came out of COVID,” he said.
Given the price of renewables keeps falling as the price of fossil fuels increases, continuing to burn oil and gas is a “ticket to unaffordability, and there’s nothing like a carbon price to get you off fossil fuels,” he said.
Since Poilievre took the reins of the party a year and a half ago, he’s rallied tremendous support and posted record-breaking fundraising numbers with a consistent message: axe the tax. With a scheduled increase to the carbon price approaching on April 1, he’s built on his core message with a campaign to “spike the hike.”
His anti-carbon price politics came to a head last week, when Poilievre’s party tabled a motion calling on the federal government to cancel the planned increase and days later, filed a non-confidence motion that if successful would have toppled the government. It failed, but experts told Canada’s National Observer it didn’t need to succeed in order to serve a purpose. Rather, the consistent and escalating attacks on the carbon price are framing the next election as a referendum on Trudeau’s signature climate policy — a tactic that appears to work to Poilievre’s benefit.
"People are opposing a policy that is putting money in their pockets and is contributing to the kinds of action to address climate change that they say they want," Harrison said. "So this is very disturbing to me that we are seeing misinformation have such a big impact on Canadian politics."
Since the carbon price was put in place in 2019, the tax on each tonne of carbon pollution has increased every year. It started at $20 per tonne and if the planned trajectory holds, it will climb to $170 per tonne by 2030. The purpose of the policy is to make planet-warming greenhouse gas emissions steadily more expensive to incentivize investments in clean alternatives. That’s why on April 1, the start of the next fiscal year, the carbon price will increase by $15 to $80 per tonne.
At the same time a carbon tax is levied, a rebate is provided to Canadians that returns more money than is taxed to 80 per cent of households. Only the most wealthy Canadians find themselves out of pocket.
Comments
"Only the most wealthy Canadians find themselves out of pocket."
Inaccurate. Household results depend on lifestyle and consumer choices, not income.
The calculation is based on direct and indirect fossil-fuel consumption (fiscal side) as well as employment sector and investment portfolio (economic side). All of which are discretionary. I.e., Canadians can choose to work and invest in fossil-fuel exposed sectors or not.
Income brackets are only a proxy for energy consumption and carbon costs. [ Any household may receive more in rebates than it pays in fuel charges.
Typically, affluent households buy more stuff, consume more energy, and are more exposed to fossil-fuel stock prices. Rich Canadians typically pay more in fuel charges, but there is no such rule. Conversely, a modest-income household that spends exorbitantly on fossil fuels may receive less in rebates than it pays in fuel charges.
Losses and gains are determined by your consumer choices, not by your income bracket. If your fossil fuel exposure falls within the range of the bottom income bracket, you will come out ahead, even if you are a millionaire. And vice-versa.
V. charts "Federal carbon tax costs vs rebate: Households with incomes above $250K" in CBC article:
"If Canada axed its carbon tax — and rebates — this is how different households would gain or lose" (CBC, Dec 05, 2023)
"High-income households would TEND to be the biggest winners, lower-income households hurt the most"
https://www.cbc.ca/news/canada/calgary/axe-the-tax-and-carbon-rebate-ho…
Your analysis here was meant to point out where the article flawed in its explanation of whether the carbon tax was a cost or benefit to folks…..I appreciate your getting into the niggly details, and sure maybe there’s much more to it than what is described here, but this “broad-strokes” effort by the author did help my understanding!
Agreed, nit picking with extra ordinary long comments. As a general rule lower income homes spend less. How much carbon tax is built into food prices! Who knows? Certainly getting it to Canada is carbon tax free so local distribution.
As low income purchasing 200 litres gas per month I pay $35 CT. 3 months about a hundred. Even driving a PU or SUV , I would still be aheada lot.
"Second, there are the economic costs and benefits, which refer to the economic impact of the carbon tax on consumer behaviour. If someone installs a heat pump or purchases an electric vehicle, that is a cost. But those types of investments lower planet-warming greenhouse gas emissions in the real world and lead to benefits, like improved air quality."
This description fails to capture the PBO report's definition of economic costs.
The PBO's 2022 analysis accounted for both "fiscal" and "economic" impacts under Ottawa's "A Healthy Environment and A Healthy Economy" carbon pricing program (HEHE).
"Economic" impacts refers to loss of employment (wages) and investment income (returns to capital) due to carbon pricing.
i) The analysis first estimates "the household carbon costs from energy and nonenergy consumption net of rebates, across all households in Ontario, Manitoba, Saskatchewan and Alberta." I.e., both direct and indirect carbon costs.
According to the updated 2022 PBO report, rebates exceed direct and indirect carbon costs for most households even in 2030. Projected losses are due to the decrease in employment and investment income. The "economic" side.
PBO: "The finding that most households incur a net loss in 2030-31 from federal carbon pricing under HEHE contrasts with the results based on the fiscal impact only where, for the vast majority of households in the backstop provinces, their rebates exceed their carbon costs (that is, a net gain)."
ii) The PBO analysis now incorporates the loss in "economic efficiency from federal carbon pricing on household incomes" — "the loss in real, or inflation-adjusted, employment and investment income due to carbon pricing."
"The finding that most households incur a net loss in 2030-31 from federal carbon pricing under HEHE contrasts with the results based on the fiscal impact only where, for the vast majority of households in the backstop provinces, their rebates exceed their carbon costs."
The Observer's analysis misses a key point:
The PBO report's main flaw is that it compares net carbon costs with a scenario without any climate policy, which is not realistic.
Even if the Conservatives "axe the tax", federal and provincial governments will still retain other climate policies, which will still incur costs. Rules, regulations, and subsidies tend to be less direct, visible, efficient, and more costly than carbon pricing.
"… University of Calgary economist Trevor Tombe also said, however, that it's hard to imagine a real-life scenario with no form of national climate policy.
"'If we were to think about eliminating the carbon tax today, we shouldn't be thinking about replacing it with nothing,' Tombe said.
"'We still have targets around lowering emissions, targets that all parties at least rhetorically support … and so if we're going to be achieving the same target but with tools other than carbon pricing, which is generally the most efficient way to incentivize emissions reductions by individuals and businesses, then we'll be replacing that system with something that has greater economic costs.'"
"If not a carbon tax, then what?" (CBC, Dec 05, 2023)
https://www.cbc.ca/news/canada/calgary/axe-the-tax-and-carbon-rebate-ho…
Trevor Tombe and Jennifer Winter, "Don't Blame Carbon Pricing for Affordability Challenges" (Policy Options, Dec 7, 2023)
"In fact, Canada's carbon pricing rebates ease affordability pressures for most households.'
"… Importantly, were it not for carbon pricing, Canada would have to adopt other, less efficient policies that would have an even larger drag on growth and therefore larger costs to households — all without the current rebates."
https://policyoptions.irpp.org/magazines/december-2023/carbon-price-aff…
Regulation works.
Regulations also face pushback. The O&G industry — and Alberta's UCP government — reflexively oppose just about every climate regulation out of Environment Minister Guilbeault's office. Think O&G industry emissions cap. The Clean Energy Regulation (CER). Fertilizer emissions reduction. EV mandate. Single-use plastic ban.
Carbon pricing vs regulation is not an either-or proposition. For the fastest results, we need both.
Preventing and correcting market failure using full-cost accounting (e.g., carbon pricing) is a type of regulation. Regulating the market is a key responsibility of government.
Climate change is the biggest market failure in history. Producers and consumers externalize or download the health and environmental costs of goods and services to the public purse, the environment, and future generations. Fossil fuel producers and consumers use the sky as a free dump.
To solve climate change and other environmental problems (e.g., urban sprawl), we need to address the market failure. Under full-cost accounting, all health and environmental costs are internalized in the item's ticket price. Unsustainable goods and services are priced out of existence. Until then, we subsidize our own destruction.
The main flaw of carbon pricing is that it is too slow. Given the gradual increase in the carbon price over time, the market would not respond in time to achieve our emissions targets.
Regulations also imply costs. Producers must change or invent new methods, systems, and technologies — and they pass those costs on to consumers.
With regulation, the costs are often hidden from the consumer. If the full costs are indicated on the price tag, that sends the most direct, efficient price signal to producers and consumers.
The main flaw of carbon pricing is that it is too slow. Given the gradual increase in the carbon price over time, the market would not respond in time to achieve our emissions targets.
Optimally, the federal government would rely on the most efficient, least costly tools in the toolbox. Carbon pricing chief among them. Carbon pricing is not only the most efficient tool, but it is also technology agnostic. Absent carbon pricing, the government will have to pick winners and losers — and we all know how well that works.
Highly flawed and hugely expensive industry-friendly technologies like carbon capture, SMRs, blue hydrogen, EVs, and even LNG will be big winners, while far better but less sexy solutions — basic public infrastructure like transit — are neglected.
"the consistent and escalating attacks on the carbon price are framing the next election as a referendum on Trudeau’s signature climate policy"
The Liberals should welcome a climate election. Likely their only hope of victory. Time it for summer 2025 at the height of wildfire season when climate is top of mind for voters.
"Axe the tax" and “spike the hike” are slogans. Aimed at that half of the electorate with double-digit IQ who think in slogans — not in complete sentences.
How far has politics devolved from Lincoln and FDR?
One thing to keep in mind is that the PBO's economic assumptions are, basically, false. The idea behind the finding that the tax will reduce economic growth and therefore indirectly cost Canadians money, is the idea that markets are perfectly efficient and therefore any reallocation of money by government leads to a less-efficient allocation of resources, thus reducing economic growth. As Black Adder said, "There's only one problem with that: It's bollocks."
Markets are not even close to perfectly efficient, there are a whole host of practical and theoretical reasons why not, and it is often possible for government reallocation of money to lead to the same or higher economic growth. In effect, what people pointing out the advantages of the shift to renewables and how a carbon tax will contribute to that, are ultimately pointing out that markets left to themselves are not leading to efficient outcomes in this case and so a government intervention will improve things. So it's not really that the PBO is right about the costs but there are countervailing gains, it's that the PBO is fundamentally wrong about costs because the basic assumptions in its economic models are incorrect--and biased always, in every case, against every kind of government intervention. The PBO should be made to remove that assumption from its economic modeling so that it will not be consistently in the way of useful government intervention.
Government intervention....b-but that's, um .... s-s-s-SOCIALISM!
In some instances the PBO is right. Take TMX. Independent economists and analysts had a field day dismantling the stupidly flawed assumptions by CAPP in 2015 mainly on construction and operating costs and future market projections. Not to mention the fact that the private oil industry wasn't the slightest bit concerned about government welfare directed to their already massively profitable bottom line.
And here we are, sunk nearly 40 B's in cost and debt coverage on this pipe with renewables starting to nibble at oil demand in those very export markets.
I once did an illustration titled 'The Most Indidious Form of Socialism Ever Invented.' It was a close up of a typical yellow line painted down the middle of a typical road, illuminationg the fact that publicly- owned assets have a vital role to play in society. The graphic was a comment on our deep car dependency underpinned by one of the largest yet most invisible public subsidies ever paid on an annual basis.
The PBO does seem to be selective in its concern about government involvement in the economy, and just how effective it can be either way.
This PBO sounds incompetent in his methodology AND disingenuous when he's "surprised" how his report has been used politically, being "non-partisan" and all. Right.
So now I'm wondering who this guy is; he must be a "captured" official, i.e. one of the cons who doesn't accept the climate science, so yet another threat to worry about when we're all so worried already.
Sigh. So tired of this stupid, mean, dangerous bad boys' game, and Trump, one and the same and basically interchangeable with Putin, i.e. pathological liars.
The side that lies should simply be disqualified, would certainly have been a few years ago, but that would end this ongoing, insane game that is literally loved more than life itself somehow.
Short note: I want to congratulate the National Observer, and the author, for continuing to observe the fundamental expectations of journalism: truth.
It's appalling to me, and heart-breaking, that the federal Cons lie, consistently and repeatedly, in their obscene rage-baiting, click-baiting, efforts to misinform and rile citizens.
I fear, more and more, for my country, with vandals like this in the pool. It feels to me as though we've already lost that battle on most of the provincial grounds.
I count on the National Observer for truth, accuracy, and complete and impartial information. Thank-you.
Did we expect more! Misleading Canadians on every issue is his specialty
This problem begins with the politics of opportunity. Me first. Don't tell anyone. Blame anyone and everyone. But keep your finger on your penny. Do you know where your penny is? Is anyone suggesting that our future depends on our relationship, not just money, but everything, requires an emotional investment in what we all can lose when "the economy" is the only focus.