In 2008, The liberal party suggested a carbon tax be put in place in Canada. They wanted to impose a $10 a tonne carbon tax on all green house gas emissions. I recently came across an article written by David Murrell who teaches economics at UNB. His article titled "Eight Arguments Against a Carbon Tax", describe the economic effects of charging businesses for their amount of green house gas emissions. This got me to wondering, can a country with such a small population like Canada have an effect on total global pollution?
The article argues that it is somewhat redundant for Canada to impose a tax on emissions because other countries such as China and India who have no intent to stop this pollution will make up for our lack of pollution. We are therefore slowing our economic growth while allowing other countries to become even more dominant in certain industries. How are we to decide if it is worth us to stop pollution, which will have a minimum impact on global pollution, and by doing so slowing our internal economy? Perhaps a better question is: Is it worth slowing economic growth to do something which bigger countries have no interest in? In compassion, in game theory, would you put a lot of effort in a paper, if your partner was not going to put in half as much? You would most likely realize that you would benefit by putting in a similar amount of effort into the paper as your partner would opposed to putting in the extra amount. So why are we worrying about pollution if no other bigger countries are?
Another point made throughout the paper is that the end consumer will end up paying for this carbon tax. The companies who are imposed with these taxes, will end up increasing their prices. By doing so, we are making our economy more challenging then it must be. This could encourage Canadians to leave to more economically friendly countries. This is in no way going to punish the companies. We know that good such as oil are income inelastic, meaning that even if the price increases, consumer will still purchase it. Therefore, we are just hurting end consumers, not the companies.
There are other points throughout the paper, but what I am questioning to you, Canadians, is how are you to choose between moral, and economic choices. Would it be worth possibly damaging our economy to make a minimal amount on the world pollution levels? Is Canada able be economically sustainable with such options? or are we just a follower, opposed to a leader in the industry?
Cheers,
Dustin Caissie
http://www.policystudies.ca/documents/Eight_Arguments_against_a_Carbon_Tax.pdf
I don’t believe that the question we should be asking ourselves is how to choose between economic and environmental priorities, but rather how can we be sustainable in our business practices. Sustainability is concerned with long-term prosperity of the economy, society, and the environment. These are integrated concepts, and in the long run I do not believe that these are necessarily competing interests.
ReplyDeleteThe underlying problem is that many external costs of production such as those caused by pollution are not internalized into the price of a product; therefore there is a misallocation of resources -- environmental taxes are one way of internalizing these costs. It is not about punishing companies; it is about providing incentives for innovation and sustainable business practices. Also, a tax strategy such as this can be successful if it is revenue-neutral; such as is the case in B.C., where the increase in carbon tax is offset by a reduction in taxes in other areas such as income taxes.
As for encouraging investment and business in Canada, I do not think that worrying about pollution will be damaging to our economy. It is true that some big economies such as India and China have not committed to pollution reduction, and that we are small in terms of population, but we are some of the worst polluters per capita amongst other leading economies. In fact, we ranked last in the G8 (even behind the US who is one of our major trading partners) on climate change in 2009. We should not just be concerned with losing potential business with (unregulated) Chinese corporations, but also with how tarnishing our global image on environmental issues could hurt business with other important economies. So if Canada wants to stay competitive with other leading economies, emissions reductions and environmental regulations should be a part of our economic strategy.
- Rebecca Hebb
There are many ways that a carbon tax can be implemented that would not dramatically affect growth. First of all, I agree with Rebecca as to internalizing costs. Emissions are a negative externality of production, but has no costs associated with it. Economically, externalities should have a price assigned to them so that the costs are factored in when making a business decision. Other countries and supranational organizations (EU) are going to begin implementing these and Canada has an opportunity to be a leader or a left-behind. It can easily be implemented in a revenue -neutral manner, and if you look at the Liberal Party's 2008 Green Shift you will notice it is designed in that way with offsetting income-tax reductions. Which makes sense because taxing consumption is often more economically valuable than taxing income.
ReplyDeleteSeth
I agree with Rebecca, I don’t think us Canadians should have to choose between moral and economic choices; however I do believe we should continue to be a leader within the environmental world and not be a follower. If Canada becomes more environmentally friendly and tries to make a difference in the world even though it is hard when larger countries have less concern over this issue. If we try and make a slight difference then maybe this will influence other countries to do the same. If you think about it, if everyone (every country) put a little bit of effort in decreasing the pollution then it could potentially make a huge difference in the world.
ReplyDeleteI feel that if Canada creates a more environmentally friendly economy then this would give our country a positive reputation and would not get unnoticed that we are trying to obtain globalization. If other countries saw how Canada was trying to reduce pollution, I believe these other countries would want to do business with us. I don’t think it would matter if we charged carbon tax because I think these other counties will do business with us knowing that Canada has a good reputation.
Ashlyn Somers
Like we saw with Pigou's theory in this weeks reading this idea 'Pigovian tax' being put on businesses to count for their negative externalities was definitely an interesting idea. After all it doesn't make sense that companies shouldn't have to include these GHG's, destroying of ecosystems and sometimes even communities, in their income statements or balance sheets.
ReplyDeleteIn my opinion, it wouldn't make sense for consumers to pay the burden that oil corporations (among deforestation and coal mining etc) are responsible for. Of course it wouldn't be fair to pin it all on them as policy makers are enforcing next to no environmental sustainability regulations. Consumers demand is also skyrocketing for these products as our populations and economies continue to grow. So there is this issue of a growing demand that corporations are trying to keep up with and in the process they are essentially losing any moral obligations to the environment as they are not being enforced to do so by any government law. Who should take responsibility?
I agree with you Dustin, that we're all in this together, but Canada shouldn't slack off just because other countries are making zero effort. If you ask me we have the most potential to strive in the area of environmental sustainability as we our population isn't shooting through the roof like that of India or China and we have a well developed economy. We saw our failure with the Kyoto Protocol and there's no excuse really.
In conclusion I don't believe that consumers should bare the burden, it's more complicated than that as so many different parties must recognize and act on the issue at hand.
On the other hand, who knows maybe if tax were imposed on consumers for oil we would turn to the many substitutes out there. Maybe it will encourage us to drive electric cars, heat our houses using wind power, and use solar power to generate our electricity. After all this need for oil isn't so inelastic as it once was.
Hannah Sears
The article points out some of the main economic downfalls for allowing a environmental tax. By implementing the environmental tax, we know that we are going to have a negative economic effect. Therefore, we have to find an equilibrium point to determine how much of an effect we want on both factors.
ReplyDeleteI believe that it is naive to believe that we don't have to choose. It has been proven that their will be a negative effect on our economy through environmental implementations. I believe there is a critical point that will benefit both sides of the argument.
I think it is alot more complicated than you have it laid out here. It really comes down to the consumers. You are right that we would have to pay a little bit higher prices and perhaps make more of a commitment to buy more canadian made goods so as to support these companies that are paying extra taxes. However, the point of the tax is to encourage more eco friendly production processes and by levying this tax on these companies it could influence them to change their production techniques to produce less carbon, thus helping the environment, and bringing prices back down to normal levels since they wont have to worry about the tax if they are not producing green house gas emmisions at a high level. Their are clearly pros and cons and it would require Canadians buying into the idea but i believe it would be interesting to see the effects after a couple of years
ReplyDeleteMike Byrne
I thought you brought up a really good point Hannah how Canada is in a strategically advantageous position to improve our environmental sustainability given our demographic and geographic character. Also, we were relatively unaffected by the global financial crisis, so we do not have a very good argument in favour of focusing policy initiatives solely on economic recovery. Furthermore, by not having to choose between the economy and the environment as a priority, what I meant was that they do not have to be tradeoffs; improving environmental sustainability can also improve our economy. Environmental regulations provide the conditions that allow for eco-friendly business to thrive and provide incentives for innovation. Also, in the long run it will bring down health care costs, and other costs associated with environmental damage. I also agree with Mike that in the medium to long run prices will level off, as businesses see the cost advantages of reduced carbon emissions in their production processes, a notion that Canadians must buy into.
ReplyDelete- Rebecca Hebb
I think that our country which relies on non-sustainable resources has done a fairly poor job in the past of being environmental friendly. Just by looking at the lumber industry and the oil sands it would appear that Canadian companies are more interested in profits then global environmental health. With that being said we are seeing more and more companies making efforts to remediate their environmental impacts. This can be seen through reforestation and site remediation which remove toxins from soil. I think for a long time our economy was based on raw material export and this many would argue is still the case. But in order to become more environmentally friendly and remain economic stability many firms are realizing that it is not just about exploiting resources for a quick payout and are focusing on adding value to products and finding solutions to become less dependent on foreign exports. I think our companies need to at some point come to the conclusion that what they are doing is destroying the planet and unless they alter their offering and become more environmentally friendly they wont have enough demand to generate profits because they are doing more damage then they are good. The bottom line is that all corporations regardless of whether they are based in Canada or anywhere else who seek profits at the cost of the environment will sooner or later understand that they cant sustain their current practices. Because in the end they are jeopardizing the health of future generations for a few dollars.
ReplyDelete-stu