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Live by the Parliamentary Budget Officer, die by the Parliamentary Budget Officer. When it comes to the carbon tax and rebate, that’s a lesson the Liberal government is learning right now. It’s a lesson it personally invited, too. After using the PBO’s previous analysis, which said eight out of 10 Canadians get more back in rebates than they paid in taxes, to defend the policy from conservative attacks, it's now being force-fed those words in the wake of an updated analysis that shows the average Canadian households doesn’t actually come out ahead economically.
As Environment Minister Steven Guilbeault tried to explain to CTV’s Vassy Kapelos, that’s not exactly what the PBO’s new report says. Averages can be a funny thing, after all, and while it’s true that the wealthiest Canadians will pay far more than they get in rebates, the bottom 40 per cent of income earners still come out ahead. But expecting Canadians to parse the difference between a mathematical median and a mean is asking an awful lot, especially when they have conservative pundits and politicians screaming in their ears about the inequity of it all.
There’s also the fact that the PBO’s new report doesn’t actually dispute previous government talking points about the carbon tax and rebate. As the new report says, “Considering only the fiscal impact, we estimate most households will see a net gain, receiving more in rebates from Climate Action Incentive payments.” By 2030-31, that net gain ranges from an average of $776 in Alberta to $202 in Ontario. It’s only when the modelled economic impacts of the carbon tax are included that the math swings in the other direction.
And that modelling, for what it’s worth, has some obvious flaws. It makes no accounting for costs associated with doing nothing on climate change, ones that are already in the tens of billions of dollars every year. As the C.D. Howe Institute’s Don Drummond and the Canadian Climate Institute’s Sarah Miller noted in an op-ed last November, “Canada can expect $25 billion in losses by 2025 from the warming experienced since 2015, relative to a stable-climate scenario — an amount equal to half of projected GDP growth in 2025. By 2050, losses could rise to $100 billion and wipe out half a million jobs.”
The PBO’s analysis also fails to account for the economic upside associated with the carbon tax and other climate-friendly policies. That upside should be abundantly clear by now, given the massive investments in clean energy that are being made in the United States, Europe, and China. There are millions of jobs and trillions of dollars in capital at stake, and Canada’s carbon tax is a key part of its value proposition to companies that want to invest here — like Volkswagen, which just announced that it will build a “gigafactory” for its electric vehicles in St. Thomas, Ont. A new report from Clean Energy Canada (backed by modelling from Navius Research) shows a net gain of 700,000 energy jobs if Canada reaches net zero by 2050 — and 100,000 fewer energy jobs if it backslides on policies like the carbon tax.
As Drummond and Miller noted in their op-ed, this one-dimensional view of carbon pricing “obscures the very real costs of climate change to the Canadian economy and means that the economic benefits of reducing emissions and improving resilience are not captured; instead, only the costs of these policies are seen. The result? We underestimate the economic benefits of proactive climate policy and debate the costs of action rather than the costs of inaction.”
But these nuances are only going to be understood by people willing to hear them — and who have at least some familiarity with economics and statistical methods. And with politicians like Pierre Poilievre and Danielle Smith sensing Liberal blood in the water, and the editorial apparatus of the Postmedia chain at their disposal, we’re not going to get anything close to a nuanced discussion about this issue. Efforts to clarify or contextualize the PBO’s report, however well-meaning or fact-based they might be, will be about as successful as someone trying to piss into a gale-force wind.
To some extent, this is a trap the Liberals set for themselves. By talking up the fact that most people get more back in rebates than they pay in carbon taxes — which, again, remains true, according to the PBO — they opened the door to getting clubbed over the head with analysis to the contrary.
They probably should have told Canadians that, yes, there would be a cost upfront associated with tackling climate change, one that will fall disproportionately on the wealthiest Canadians. And rather than pretending there would be no financial pain, they should have talked far more about the various forms of gain: new programs to reduce emissions, new opportunities for jobs and economic growth, and new hope for their kids and grandkids.
Instead, they took the easy way out, and are currently paying the price. Time will tell whether Canadians ultimately reject the carbon tax and rebate at the ballot box, and whether Poilievre’s inevitable promise of a bag of magic beans (a.k.a. “technology”) will be enough to get voters in the GTA and Greater Vancouver Area to trust him on climate. But if they do, it’ll be because the Liberals paired an ambitious policy with some of the worst communications strategy in political history.
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Comments
Carbon pricing is supposed to deter people from using carbon and incentivize using alternatives. I thought the rebate defeated that purpose.
Want to come out ahead: don't use fossil fuels.
Rebates do not defeat the purpose.
The goal of carbon pricing is to change consumer and producer behavior without impoverishing households: discourage production and consumption of fossil fuels and encourage more sustainable alternatives.
The less fossil fuel energy you use and waste, the more $$$ left in your pocket. With rebates, many households come out ahead, particularly if they change their energy habits, and make smarter investment and career choices.
Rebates buffer modest-income households while still providing an incentive to use less fossil fuels. Rather than dictate outcomes, the carbon levy and rebate allows consumers and producers to make their own decisions.
As Mr. Pounder says, rebates do not defeat the purpose. The tax is based on how much carbon you use, whereas the rebate is independent of that. So if you use zero carbon, the rebate is pure profit, whereas if you run a gas guzzler vehicle, have an inefficient home heated by fossil fuels etc. etc., you could well lose money overall. The rebates have no effect on the incentives created by the tax.
There are limitations on carbon taxes, however. Take for instance the recent bill, voted for even by the Green party, to drop the carbon tax on agricultural use of fossil fuels to dry grain. The problem is that it doesn't matter how much the fossil fuel approach costs if there is no zero carbon alternative available--a tax cannot drive a shift to untaxed alternatives if there are no alternatives to shift to. Take also renters in inefficient homes; landlords pass the tax on to the renter and have little incentive to upgrade. There is also the problem that many kinds of switching, even if they actually save money in the long run, are difficult or impossible for anyone who can't muster the up front capital costs involved.
Governments must do much more than carbon taxes. Beyond incentives, there should be regulations and direct actions--creating the alternatives where they do not exist, changing new building standards to outlaw fossil fuel heating, mandating home upgrades and helping with up front costs, building renewable power and storage and enhancing the energy grid, not to mention building lots of transit . . .
Indeed.
I have always seen a CT as low hanging fruit, a first step. Trudeau seems to see it as the biggest step and it took an entire four year mandate to enact what is essentially one of the easiest, least painfull initiatives. He also bought a pipeline to appease Alberta and plunked the cost on the national debt.
Climate initiatives need to climb higher into the carbon absorbing tree. The canopy above the lowest CT fruit is where the real action is, namely direct funding. A national smart grid, better grants for domestic heat pumps and EVs, a national urban efficacy plan focusing on transit, poly-zoning and energy efficiency, genuine federally sponsored renewal energy projects and direct partnerships with industry and First Nations and so on are the most effective steps to ensuring a future better equipped to meet the climate challenge.
Of course, part of the package should be the elimination of fossil fuel subsidies. Put half the billions on the national debt and the other half into the above initiatives.
I think our progress in attempting to address climate change is doomed until more Canadians appreciate, for the most part, the luxurious lifestyle that we have in this country when compared to most others. Until we lose the mindset that all taxes must be avoided or abolished… For some reason there seems to be a disconnected between taxation and support for social, education and health services. How many Canadians believe that most of their tax dollars are squandered. How many would put the blame on politicians versus bureaucrats.
Social media is full of Canadians who spout truly Liberterian ideas, people who just want to be left alone, untaxed, unfettered sorting out their needs by themselves.
We’ve fallen into a deadly trap of failing to understand the cost and the value of essential services and while climate change should be on the forefront of our thoughts, too many are dismissing it with a “someone will do something” mentality, doomed to the Tsunami of anti-intellectualism that has been on the horizon for quite some time.
Populism abounds while a tired but not quite defeated government struggles to keep itself in line long enough for the electorate to forgive their last debacle.
It doesn’t have to be this way…stop expecting others to solve our problems, stop believing in magical solutions, stop believing that we can get something of value for nothing.
If the Liberals really wanted change, they would create a climate emergency information agency as Seth Klein wrote. Being captured by fossil fuel companies has led to weak and late policies and may also result in a right-wing backlash. We need proportional representation and a stronger climate movement.
Totally agree. Passing legislation without follow up communication procedures is an incomplete process.
Communication is a valid and necessary part of the process. Climate initiatives need to be strongly and confidently defended. Part of a good communication strategy would be to acknowledge the critics who rightfully point out where improvements can be made, and to immediately dismantle lies and out of context "facts" twisted to misconstrue the original intent of a policy.
Too often communication strategy is seen as PR flackery and spin doctoring in government and corporate entities, but identical strategies by environmental organizations is perceived as necessary or is easily forgiven.
Scientifically literate communication initiatives and responses should be the order of the day in meaningful climate policy. Desmog Blog didn't become an internationally respected organization with an amazing data base on carbon funded PR outfits and individuals by lying, dishing blustering rhetoric, practicing wilful ignorance or having non (or inadequate) responses to key policies.
Undeniably, the Liberals have badly botched the sales pitch on carbon pricing — and it may cost them dearly. Instead, they handed the Conservatives a hammer to bludgeon the Liberals with. No surprise. Taken as a package, the Liberals' climate response is hopelessly incoherent. (TMX, anybody?)
That said, the Conservatives and right-wing pundits have had a field day misrepresenting the PBO's reports. Even the "progressive" media has a hard time getting the story right.
Fawcett: "… in the wake of an updated analysis that shows the average Canadian households doesn’t actually come out ahead economically."
The PBO's finding that most households will come out behind on the federal carbon levy (not a tax) is not new. The previous PBO report (March 24, 2022) made the same finding.
Fawcett: "Averages can be a funny thing, after all, and while it’s true that the wealthiest Canadians will pay far more than they get in rebates, the bottom 40 per cent of income earners still come out ahead."
Fawcett clarifies this point later on, but as it stands, it's incorrect. The wealthiest Canadians do not pay "far more" in carbon taxes (fiscal side) than they get in rebates. On the "fiscal" side (rebates minus carbon costs, PBO Table 1), average households in the bottom four quintiles (80%) come out ahead. Average households in the 5th quintile (top 20%) will be marginally in the red, losing (not "paying") in the range of 0.0% – 0.5% of disposable income. A pittance, in other words.
The bottom 40% of income earners still come out even or ahead when "economic" (income) impacts are considered: losses in employment and investment income due to exposure to a declining fossil fuel industry.
These findings represent only the "average" household in the model. Anomalous households will see anomalous impacts.
A lower-income, energy-intensive family in Alberta invested or employed in the oilpatch may well see a loss. A wealthy "green" Ontario family not invested or employed in the oilpatch may well come out ahead.
Any household can reduce its losses and even realize a net gain with rebate if it reduces its exposure to the fossil fuel industry. Exactly the purpose of carbon pricing.
Fawcett: "And that modelling, for what it’s worth, has some obvious flaws. It makes no accounting for costs associated with doing nothing on climate change, ones that are already in the tens of billions of dollars every year.
Reality check: Climate action by Canada will be effective only in concert with other nations. Collective problems require collective action — and it is only in collective action that Canada's efforts will make a difference. When it comes to GHGs, all but three nations contribute a small fraction of the whole. We all need to act together, even though the actions of any one nation alone may be insignificant.
Fawcett: "By 2030-31, that net gain ranges from an average of $776 in Alberta to $202 in Ontario.
Actually, the bottom end on the fiscal side is Nova Scotia at $33.
Postmedia pundits (Lorrie Goldstein, Lorne Gunter, Rex Murphy, Toronto Sun editorial board, etc.), bless their tiny hearts, do not bother to report the facts accurately. They insist that most Canadian families will pay more in carbon taxes than they get back in rebates — and that's not correct. If they clarify the difference between "fiscal" and "economic" (income) impacts at all, these distinctions are buried at the bottom of their columns.
The Toronto Sun's Lorrie Goldstein has been getting it wrong for ages, so I suspect he is deliberately misleading his readers, to fan the flames of discontent.
Seems to be working.
Final note: The PBO's figures are based on models, whose inner workings and assumptions no one knows but the PBO. The PBO does not publish its methodology, so its calculations remain a secret — beyond review or challenge.
While Conservatives, right-wingers, and climate change deniers loudly reject models when it comes to climate science, they love models whose results they can use (and twist) in their favor.
Environment Minister Guilbeault himself seems not to understand how the rebates work. Someone in the department needs to brief him properly.
Recent CBC article (now revised, after an alert reader notified the editor): "Guilbeault said higher-income households won't get back as much. 'People like me who are better off … we will be paying more and that's how the system is designed'."
Guilbeault said higher-income households won't get back as much.
Guilbeault's statement is incorrect.
In fact, households in identical circumstances (household size and composition) within a given province receive the same universal standard rebate.
For example,
CRA: "The Alberta program provides an annual credit of:
●$772 for an individual
●$386 for a spouse or common-law partner
●$193 per child under 19
●$386 for the first child in a single-parent family"
CRA: "How much you can expect to receive
"The amount you receive depends on your family situation and the province you reside in. The payment for the CAIP will be universal and therefore not subject to a benefit reduction based on adjusted family net income."
Higher-income households receive the same rebate as a lower-income households in identical circumstances do. The rebate is standard within each province.
But because higher-income households typically use more (fossil fuel) energy, they incur higher carbon costs. They pay more, but receive the same rebate. So their net carbon costs are higher.
An anomalous low-income household that uses more energy than an otherwise identical high-income household will incur higher net costs, because they pay higher carbon costs but receive the same rebate.
*
Toronto Sun: "'Environment Minister Steven Guilbeault told CTV’s Question Period host Vassy Kapelos in an interview airing Sunday that while the ‘average household will pay more’ because of the carbon price increase, even after the rebates, he says the system is designed to be proportional, meaning wealthier Canadians will still foot larger bills.'
"'If you do the average, yeah, it’s true, it’s going to cost more money to people, but the people who are paying are the richest among us, which is exactly how the system was designed,' Guilbeault said."
Guilbeault means "progressive", not proportional. And this refers only to the average household. There is no inevitability when it comes to carbon levy gains or losses. Again, anomalous households will see anomalous impacts.
Any household can reduce its losses and even realize a net gain with rebate if it reduces its exposure to the fossil fuel industry.
Good corrections there but as usual everyone flocks to the weeds rather than the big picture. Steven did that when he pointed out what it will cost to NOT do anything, giving an example in only ONE jurisdiction but Vassy fell back on the childish whine of the right, "but you PROMISED us" this or that, browbeating the Liberals relentlessly and without exception no matter WHAT they do in definitively Republican obstructionist style, undermining them bit by bit (not even considering how they have inevitably but only occasionally undermined them SELVES in these years) as untrustworthy liars who are corrupt to boot, and this while they field LEADERSHIP candidates like PP and Smith for gawd's sake!
And this entire discussion presumes a basic premise to start with that doesn't exist. THAT should be the story, every time, that premise, because it flat-out disqualifies the conservatives as it bloody well should.
Easy to talk about an effective "communications strategy" in the before times, not so now. "Communication" also requires a basic premise that no longer exists.
So there's no point in even ENGAGING with the braying orcs in this context; just outnumber them quietly with an NDP agreement. Good thinking. Now get your heads out of your asses and formalize it.
https://thetyee.ca/Opinion/2023/04/04/Albertans-Demand-Politicians/?utm…
The reason the Liberals are losing on this is that they are locked into the capitalist endless growth paradigm. It says we all want to get rich and have more stuff than our neighbors. The carbon tax penalizes the super-rich and acts as a tax on their over-consumption, but not a particularly effective one. We need policies for degrowth of over-consuming rich Canadians - such as a wealth tax. This would address both our social justice and environmental problems. One might think the NDP would seize the initiative on this, but even they seem cowed by the immense power of the elites to frame the discussion to their advantabe.
The reason the Liberals are losing on this is that they are locked into the capitalist endless growth paradigm. It says we all want to get rich and have more stuff than our neighbors. The carbon tax penalizes the super-rich and acts as a tax on their over-consumption, but not a particularly effective one. We need policies for degrowth of over-consuming rich Canadians - such as a wealth tax. This would address both our social justice and environmental problems. One might think the NDP would seize the initiative on this, but even they seem cowed by the immense power of the elites to frame the discussion to their advantage.
Well said!
The fact is that we are completely under corporate rule at this point with no end in sight. The NDP is not up to the task, and the fact is that Canadian voters have been swallowing the non-stop neoliberal slop for decades and our too apathetic to fight back or search out alternatives.
How? What policies, exactly? Abolishing capitalism? Put that out in a political campaign and you'll be relegated to the tinfoil hat brigade.
We should never trust mainstream economic modeling. Those models, as Mr. Fawcett to his credit points out, incorporate assumptions which are often quite simply wrong. Well, not completely simply--they are often wrong for ideological reasons; these models are generally concocted by economists who buy into efficient-free-market ideas which are seriously untrue, and only influential because they are useful to wealthy people who want to avoid taxes and pretend inequality is "good" for "the economy". The economists in turn got hired because they took that useful stance, not because their economic ideas had much in common with how economies genuinely work.
If the models followed professional standards and best practices, their methodology would be published and open to testing and scrutiny. Not unlike genuine climate science. That puts the onus on critics to disprove them, and publish their own analytical methodology.
It's worth mentioning that Mark Jaccard of Simon Fraser U. also thinks the carbon tax isn't working and he might just have a point....
https://www.thestar.com/opinion/star-columnists/2019/12/02/why-a-carbon…
Jaccard sees a parallel collection of regulations as more effective, and rightfully so. I would suggest the CT, a well thought out set of regulations and direct funding of climate projects and infrastructure as probably the most powerful triumvirate possible in any climate package.