Like communism, free love and inserting cheese into pizza crusts, the notion of a revenue-neutral carbon dioxide emissions tax may seem sound in theory. It’s only reality that gets in the way.
Last month, for example, 27 Nobel Prize-winning economists penned an open letter extolling the virtues of a carbon tax-and-dividend scheme for the United States that looks identical to what Prime Minister Justin Trudeau is planning to impose on several provinces later this year.
“A carbon tax should increase every year until emissions reduction goals are met,” the economic luminaries propose. To ensure political palatability, the plan, crafted by the U.S. lobby group Climate Leadership Council, would send carbon dividend cheques of US$2,000 annually to American families. And this perpetually rising carbon tax “will replace the need for various carbon regulations that are less efficient.”
Despite theoretical arguments from academic economists, however, the real world has something to say in rebuttal. The political history of a carbon tax in both Canada and the U.S. shows experience and democracy differ from economic theory in several important ways.
Recall, for example, former federal Liberal leader Stéphane Dion’s disastrous 2008 election campaign. Dion’s defeat was properly blamed on his incomprehensible Green Shift platform that included a carbon tax plus a collection of tax cuts and new spending increases that Canadians didn’t understand and didn’t want.