Rethinking Lifestyle

Last week the Trudeau government announced that it would continue to increase the carbon tax as a strategy for reducing the Canadian contribution to Greenhouse Gases and thus to climate change. This was long overdue. Anyone with any interest in sustainable living, must know that the prime purpose of the carbon tax is not to raise tax revenue, but to change habits – to change our lifestyle.

The current carbon tax results in a seven cent a litre increase in our gasoline price – not enough to affect anybody’s driving habits. The projection is that the new carbon tax will increase our gasoline price by $0.40 per litre by 2030, a price that is more likely to affect our driving habits. But this tax is still not enough to adequately change behaviour. And this is what the official opposition should be saying. But it isn’t.

Instead the Conservative opposition, joined by the Conservative premiers, continue to oppose any carbon tax. It seems conservatives in Canada have abandoned any notion of being progressive. This is most unfortunate, and hard to understand. I can think of at least three reasons why conservatives should be embracing a carbon tax (and I’m sure there are more):

1. The production of anything is the result of a combination of several resources, some renewable, others non-renewable. The most obvious renewable resource is labour, the most obvious non-renewable resource is fossil based energy. Common sense suggests that we discourage the use of the non-renewable resource by taxing it, and by removing tax on the renewable resource. Yet today the preponderance of our tax is income tax – on labour. The tax on income made sense when it was first instituted to help offset the cost of WWI. At that time labour was scarce, and oil was not considered a scarce commodity. Today things are very different.
2. The collection of a carbon tax is simple compared to the collection of any other tax. It requires little bureaucracy, and is, by its very nature, fair. The carbon tax is collected at the wellhead or at the border (if it’s imported), so oil producers and oil importers are the ones who pay, and then pass it along to the ultimate consumer. Wealthy people by their very lifestyle consume much more non-renewable energy, so even without any special adjustments, will pay progressively more. Tax havens and other tax avoidance schemes are minimal.
3. Historically the emphasis of taxation has been on generating tax revenue for governments to do whatever governments do. This is a very narrow view of taxation. Taxation could, and should be used to modify behaviour – to “reward” desirable, constructive behaviour and to “punish” undesirable, destructive behaviour. This principle is currently applied in the case of alcohol and tobacco tax, but only there. Progressive thinking suggests this can be applied more broadly. For example, consider a typical household. Most of the tax any household pays is property and income tax, with some GST. How does this tax affect behaviour? In only one way – the hiring of a tax accountant – whose only function is to reduce that household’s taxes.

Now let’s shift the whole tax to carbon. Obviously the price of gasoline and natural gas will be much higher. The price of food requiring a lot of energy to produce will be higher. The price of any gadget produced in an energy intensive way will be higher. But the household will have the tax saved on income tax and property tax in their pocket and will decide how to spend it. They could spend it on the same products they were buying prior to the tax shift, and be no better off – but also no worse off. But the household could chose to drive less, shift to an electric car, move to smaller house, insulate their house, etc. The household could chose to eat winter vegetables rather than California lettuce in February – the list goes on. Such a tax shift would result in massive behavioural change – for the better.

Many Conservatives are Climate Change deniers. It’s conceivable (although I think highly unlikely) that they are right. It may be that the climate change we are experiencing has nothing to do with human activity. Even if they are right, we are still better off with a tax shift from income to carbon consumption, simply because this would create a greater demand for labour.

With looming Climate Change and looming Resource Depletion, we cannot continue with the lifestyle we have become accustomed to. We need to individually change our lifestyle, and we need government policy that will encourage this. A significant carbon tax is a powerful step in the right direction.