Tuesday, September 20, 2016

You Want a Carbon Tax? Then Do It Right.

One of the greatest hurdles facing mankind in the struggle with climate change is the political factor. It's a terrible thing to leave the major decisions on this up to our political caste.  They're far more focused on getting elected in three or four years than they are in what might befall your grandkid 40 years down the road. Of course it's a massive conflict of interest and of course they get to decide whether they'll come down on their own side or your grandkid's. How do you think that's bound to turn out?

Carbon "pricing." Apparently Justin Trudeau intends to go that route. It's actually carbon taxing but what politician can bear to be that honest?

This is where we run into trouble. Carbon pricing is an exercise in political number fixing. Most of the numbers that constitute climate change orthodoxy are political numbers. That's because politics overrides science. We'll have no scientific numbers thank you very much. That would be irresponsible.

It'll be a gathering of the sphincters. Justin will pull a number out of his ass. Rachel will pull another number out of her ass. Brad will hunt around endlessly before angrily insisting there is no number up his ass.

The idea is that a carbon price discourages consumption of fossil fuels and it does, somewhat. Yet it only works if it hurts and if it hurts you've got another political football. Brad Wall has chosen to kick.

The sop for the hurt is to claim the tax will be revenue neutral. You're paying more at the pump but that'll be offset by cost reductions elsewhere. At the end of the day you'll come out about the same. Don't worry, be happy.

I've got a better idea. The first one concerns Canada's ailing, aging infrastructure. Even if we hadn't kicked Earth's climate into overdrive, a lot of our once awesome infrastructure is crumbling. Highways, overpasses, bridges, electrical grids, sewers and water mains - that sort of thing. It has served us well in the post-war era. It has allowed us to enjoy incredible prosperity. Yet now it's nearing terminal mode.

That infrastructure is what keeps the economy ticking over. It goes down, the economy goes with it. Think of it as the roof that keeps the rain out of your house. It doesn't last forever. Every 20 to 40-years it has to be replaced. Your house won't last long if you don't.

Climate change makes our infrastructure predicament much worse. I was reminded of this last night when we received another of our newfound biblical downpours. My eavestroughs were doing fine until the series of squalls passed overhead and then they quickly were overrun. Message: if we're going to be getting rains like this, and worse, I need new, larger capacity eavestroughs, downspouts and, probably, drainage tiles. Think of it as the first greeting card from the Anthropocene.

Climate change will be bringing the same reality to our core (can't live without it) infrastructure. Our aging infrastructure was designed by engineers to meet conditions of their day. It was not designed for today's severe weather events of increasing frequency, intensity and duration. The deluges that swamped first Toronto and then Calgary, utterly defeating their storm sewer systems demonstrate how vulnerable we've become. When a once-a-century flood starts turning up once in every five or ten years, you're facing a new reality and you have to figure out how to cope with it.

From sea to shining sea to shining sea we've got a looming infrastructure crisis of massive proportions. Think several hundreds of billions of dollars to do the job. One Canadian expert suggested it could reach upwards of a trillion. He also pointed out that the cost of not dealing with it will be far greater, potentially an economy killer.

Money isn't the only problem. As with most aspects of climate change, there's a big time factor. Time is not on our side. Even a Herculean effort would probably take 20 to 30-years. There's a lot of process involved - study, analyze, propose, evaluate, decide, plan, fund, contract and implement. That takes time.

What if, instead of fixing our carbon price based on some half-assed, negotiated political number reflecting a notional revenue-neutral pipedream, we decided to be honest? What if we decided the carbon taxes should be used, federally and provincially, for essential infrastructure rehabilitation and replacement? Why not take those carbon taxes and invest them in assets, infrastructure, that will yield economic dividends for decades to come?

If we're not going to let the economy and, with it, our society collapse, we're going to have to find the money somewhere for a massive infrastructure makeover. That's code for "tax." Why not get some estimates for how much this is going to cost and work out what percentage of that cost should and could be realized through carbon taxes?

See what that does? That cuts out a whole lot of political numbers. Politicians instead would have to use numbers of calculated precision formulated by engineers, scientists and contractors. It won't be pretty but at least it will be grounded in reality. Doesn't that sound like a good idea?


Toby said...

"The sop for the hurt is to claim the tax will be revenue neutral. You're paying more at the pump but that'll be offset by cost reductions elsewhere."

In BC I think the offset was lower taxes and gifts to oil and gas companies. The first priority for all governments should be to eliminate the subsidies to carbon industries. It accomplishes nothing positive when governments cut taxes, build roads into remote places, negotiates cheap electricity, assists with employment and training grants or simply gives money for construction or R&D. It has to stop. Subsidies need to go toward developing alternatives; subsidizing the past is just corporate welfare.

You are right that carbon taxes are only effective if they hurt enough to make people choose other options. As it is now, it is cheaper to burn natural gas and use electricity off the grid than to install solar. We had it priced out for our house and were shocked at how expensive solar is. We will be in nursing homes or caskets before we could pay it off. We have taken several good looks at hybrid cars and given up; they make great ads but the numbers don't add up.

The Mound of Sound said...

Ah, Toby, such is life for the Green Banana crowd. That said, I've done some things that improve my carbon footprint while enhancing the value of my home - casement windows for free air conditioning in the summer, a high-efficiency wood stove to heat the house on the coldest days of winter, LEDs, that sort of thing. They've made a real difference on my hydro and gas bills while making the place much more comfortable. I'm surprised about your experience with solar. I thought it was coming way down in cost. There's a lot more the government could do starting with shifting subsidies out of fossil energy and into consumer-level alternative power.

crf said...

Installing panels is a murderous cost that you'll never make up most areas in Canada. Also, our electricity system is also decarbonized, for the most part: which makes adding a panel a wash, climate wise, from the start. We are not the United States: different solar insolation, different electricity generators.

If you want to help the climate, by all means buy a panel, and pay to have it shipped and installed in Haiti, Jamaica, or Mexico, because they get their electricity largely by burning oil, and are much sunnier.

crf said...

I disagree with you Mound, about what to do with Carbon Taxes.

A tax on carbon is meant to make it more expensive to emit. Period. For example, taxing gas on its carbon content encourages drivers to use less gas (by taking transit instead, or buying a more efficient car when they next in the market). Carbon taxes can work in concert with regulations (Jaccard's main point). They can even be rate-adjusted in various sectors. Where we are today, it is not going to be feasible to set a tax rate equal to net cost of carbon emissions.

But a carbon tax shouldn't be tightly tied to funding carbon-reduction or infrastructure replacement programs. If any such program is a good idea, fund it the way any other government program is funded. Why tie the funding to the revenue from any one particular tax? We are not short of revenue (governments all over the world can sell bonds at zero to negative interest rates).

The B.C. government has a "revenue neutral" carbon tax (in reality, revenue negative: since they give away more in income tax credits than the carbon tax brings in, at the moment). This doesn't mean that for any individual it will be wash: for the wealthy, they surely come out behind. For the individual who doesn't use a lot of taxed fuel (natural gas, gasoline) they will come out ahead. Someone who has to drive a lot will come out behind (pay more in carbon taxes on the fuel than they get from the tax dividend).

Toby said...

In countries that do not have their own oil the price of fuel is much higher than here in Canada. In places where the average wage is much lower than ours people pay more than double what we pay for fuel. In that situation, V8 engines don't find their way into family cars. If a carbon tax is to be meaningful it has to be high enough force people to chose smaller vehicles with smaller engines, to steer people into public transit, to encourage alternatives.

Mound, we were shocked at the high cost of solar. I have a garage with a long south facing roof, perfect for panels. The price we were looking at was double what the cost of a new fuel efficient gas furnace for a system that would not provide any sort of backup power if the grid goes down. For some reason that I never could wrap my head around the solar system has to be connected to the Internet. It became obvious that the power company (Fortis) begrudges private solar and will only allow connections and minimal rebates because they have to. It is also obvious that the BC government does not encourage private solar. This is not about sun; Here in the Okanagan one would expect solar to be a natural. The powers that be are discouraging solar.

The Mound of Sound said...

As Chris suggests, most electricity in BC is hydro generated and, barring the environmental issue concerning dams, therefore "clean" energy.

If, as Toby and Chris indicate, the costs of solar remain prohibitive, even for the Okanagan, then they're a definite non-starter for coastal areas.

How we handle carbon taxes is a policy question. I'm not big on the "revenue neutral" approach. It is pretty clear that fossil energy has been the driving force behind climate change which is and will play a powerful role in our infrastructure problem. Hence I see allocating those carbon taxes and redirecting our fossil fuel subsidies to infrastructure as entirely defensible.

Anonymous said...

Anyong: Just in case no one has heard, Europe is getting rid of LED's due to the lead content in the coil.

Anonymous said...

Pick Your Poison - Mercury In CFLs Or Lead In LEDs (or Just Go Back To Incandescent Bulbs)

The Mound of Sound said...

I can't find anything about the EU banning LEDs. They've banned CFL bulbs because of the mercury content "in the coil" and early this month they banned halogens. There is concern over lead in some LEDs but opinion seems to be that the manufacturers can replace lead and other worrisome components with benign substitutes.