Carbon pricing: research raises questions about feasibility

It was supposed to do the heavy lifting to achieve Canada’s greenhouse gas emissions targets.

And it was supposed to remain an important part of Prime Minister Justin Trudeau’s legacy, both at home and abroad, part of an urgent global push to fight climate change.

But instead of fulfilling those liberal hopes, the carbon price has become a major political liability.

Conservative Leader Pierre Poilievre’s crusade against the consumer price of carbon and his promise to “reduce the tax” if he wins the next election has resonated with many Canadians amid an affordability crisis.

The Conservative leader has blamed climate policy for raising the cost of food and fuel, while dismissing or ignoring its supposed benefits, including consumer rebates.

The government has struggled to respond to attacks from conservatives, even though carbon pricing enjoys broad support among economists.

Did the liberals drop the ball?

Or was politics always destined to fail?

Research suggests the Liberals may be fighting a losing battle, and some experts are urging policymakers to look at alternative policies to reduce emissions, warning that the threat of climate change is too serious to delay action.

“It’s very difficult to find places with high carbon prices across the economy that haven’t generated a significant political backlash,” said Matto Mildenberger, an assistant professor of political science at the University of California, Santa Barbara.

“That leads political scientists like me to have real reservations about how viable carbon pricing is as a short-term strategy to address the climate crisis.”

Consumers pay the cost of the carbon price up front in a very visible way, Mildenberger said. Its benefits are only enjoyed in the long term.

The federal government’s Canada Carbon Rebate is designed to compensate voters for the financial burden. According to the parliamentary budget officer, eight in 10 families receive more rebates than they pay in carbon taxes.

But Mildenberger’s research suggests that the rebate is not as effective in shoring up public support as liberals would hope.

A study looking at public support for carbon pricing in Canada and Switzerland found that people don’t know about the rebates they are receiving and tend to underestimate their value.

Another looked at the effect of rebates on public support for a carbon tax in the United States and Switzerland and found that there was ultimately little impact.

“Our results indicate that, in the absence of political messaging, rebates increase public support for carbon taxes in both countries by generating support among lower-income groups,” the 2022 paper said.

“However, politics is always politicized, and when respondents are exposed to political messages about carbon pricing, the effects associated with rebates are dampened or eliminated.”

Mildenberger said it’s safe to conclude that the refunds haven’t changed people’s perceptions.

“People’s partisan ideological preferences dominate their perceptions of carbon pricing, much more than the objective costs or benefits derived from the policy.”

Advocates often blame the Liberal government for failing to effectively communicate the policy and rebates to Canadians.

Mildenberger agreed that the Liberals didn’t do a good job of sales.

For example, they didn’t heed their advocates’ advice to send refunds in checks, he said, something that would have connected the money to the policy in a “tangible” way.

But Katya Rhodes, assistant professor of public administration at the University of Victoria, said blaming communication alone is an oversimplification of the challenge.

Rhodes said some of her studies show that the more information people are given about complex climate policies, the more confused they become.

“It’s really difficult to be political when you introduce a carbon tax. Is this the ideal approach? I wouldn’t do it if I were political.”

Rhodes added that trust in government plays a big role in the success or failure of the carbon tax, as seen in countries like Finland and Norway.

Economists say pricing carbon is the cheapest and most effective way to address climate change.

By putting a price on pollution, the government is not dictating how emissions should be reduced. Rather, they say it provides an incentive for polluters to invest in emissions-reducing technologies.

It also encourages consumers to opt for goods and services that emit fewer greenhouse gases.

More than 300 economists signed an open letter in March supporting consumer carbon pricing and seeking to dispel misconceptions about the policy.

“I think there are a lot of Canadians who say they care about climate change… but somehow they think we can reduce emissions without changing behavior,” said Christopher Ragan, director of the Max Bell School of Public Policy at McGill University. and one of the organizers behind the letter.

Mildenberger and Rhodes said they recognize that the carbon tax is, theoretically speaking, the best option to fight climate change.

But both advocate that governments find other ways to reduce emissions because of how politically challenging it is.

Experts say carbon pricing that uses a cap-and-trade system like Quebec and British Columbia could be more acceptable because people don’t see its direct cost.

Such systems set an upper limit on the amount of greenhouse gases an organization can emit, but allow them to purchase unused credits from other groups or companies that have not used their entire allocation.

However, this way of setting a carbon price is not politically infallible either.

Ontario Premier Doug Ford canceled plans for a cap-and-trade system in 2018, arguing the policy would hurt businesses and raise costs.

Mildenberger is a supporter of US President Joe Biden’s approach, which relies heavily on government investments and subsidies in the green economy.

He said this puts the focus on the economic benefits of fighting climate change “while avoiding tax policy.”

But while Canada has tried to keep up with the United States by implementing a suite of investment tax credits, Rhodes said Canada can’t compete with America’s deep pockets.

Instead, he said Canada could reduce emissions through flexible regulations, such as clean fuel standards.

In a statement, Environment Minister Steven Guilbeault defended the carbon tax as the most “cost-effective and efficient” way to reduce emissions. He cited departmental work suggesting that replacing consumer and industrial carbon pricing with subsidies would cost taxpayers billions more.

“Pierre Poilievre has absolutely no plan to address climate change in Canada and would rather exploit people’s real anxieties for his own political gain than admit that eight in 10 Canadians get more than they pay for through the Carbon Rebate.” Canada,” Guilbeault said.

A change in approach would be a political blow for a Liberal government that has sought to bring Canada to the forefront of the global fight against climate change.

In 2021, Canada launched an international challenge to encourage other countries to adopt a carbon price, with the goal of having 60 per cent of global emissions covered by such a system.

But while the Conservatives maintain a double-digit lead in public opinion polls, the future of the carbon price is in serious doubt.

“Canadians feel the pain of Justin Trudeau’s punishing carbon tax every day when they buy groceries, pump gas and heat their homes and they don’t need the opinions of pointed ‘experts’ and radical liberal politicians to know they are much worse off.”, Poilievre spokesman Sebastian Skamski said in a statement.

Conservatives would end carbon pricing, reduce the cost of zero-emission energy and approve green projects, Skamski said.

Poilievre has said little more about what he would do, although he has promised to prioritize “technology, not taxes.”

“I think it’s unfortunate that what is fundamentally good policy is going to be lost,” Ragan said.

“My big fear, actually, is that they won’t put anything in its place.”

This report by The Canadian Press was first published June 1, 2024.

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