Pricing carbon pollution will strengthen the economy

Humans are complicated, but not all human behaviour is hard to figure out. Often there are gaps between how we say we want to live and how we actually behave. Usually these gaps can be explained by looking at convenience or cost. The best intentions are often undone if living up to them means finding time in our crowded daily lives or adding costs to our stretched household budgets. 

When it comes to environmentalism, we see these gaps all the time. We talk a pretty good game, but many of us still consume more energy and water than we probably need to, and send more waste to landfills than we want to admit. But this isn’t all that surprising when we realize that only 14 percent of Canadians call themselves “ardent environmentalists.” About the same proportion say they don’t care much about the environment. That leaves a large majority who do care, but hesitate to describe themselves as ardent. They have other priorities, including getting through everyday challenges of feeding their families and saving money.

When some people hear the term carbon tax, it sparks anxiety. Is it true that everything will cost more? Won’t carbon taxes damage Canadian companies, weaken the economy, cause job losses?

For years, carbon taxes have been something of a political football – characterized by opponents as devil-sent and by supporters as crucial to saving the planet and its living beings. But if we strip away the politics and focus on what carbon pricing (or carbon taxation) really is meant to do, we can have a better conversation about why it makes sense and how to do it effectively.

Putting a price on carbon pollution is not really an experiment in the sense that no one knows how it will work. For centuries, public policy has been used to make it less expensive to choose behaviours that are good for society. Such policy has caused people to recycle more, use mass transit, fill fewer bags with garbage, smoke less tobacco, and save more of their money for education or retirement.  There are countless other examples where it made sense to add a cost to a behaviour we wanted to change and thereby reward the shift to the behaviour we wanted to encourage.

Pricing carbon pollution is about making it more expensive for companies to burn fossil fuels so they will find it more attractive to choose cleaner forms of energy or find ways to use less energy. In addition to pricing carbon pollution, phasing out the more than $3 billion in annual subsidies for fossil fuel production is a step governments should take to make sure our policies reward cleaner-energy innovation.

Some who oppose carbon pricing say it won’t change behaviour, but all the evidence says that it does. Prices affect what we choose to do every day. Others oppose carbon pricing because they say it will hurt the economy. It’s normal to worry that a change might cause harm, even if the harm is unintended. But British Columbia has had a carbon tax for years, and its economy is the strongest in Canada. A recent study by Smart Prosperity concluded that the policy works well as designed.

There are several ways of using pricing to reward a shift away from more polluting forms of energy. Some provinces focus on the industries that are the biggest producers of greenhouse gases; others ensure the price signals reach consumers directly through the price of fossil fuels. 

However the provinces choose to reward cleaner growth, doing so will strengthen not weaken Canadians’ job prospects for the future. Around the world, a clean-growth shift is well underway, and it’s only a matter of time before the greener economies eclipse the browner ones. Once that tipping point is reached, Canada will want to be leading, not trying to catch up. 

China has become the world’s leading investor in clean technology, and it will soon become the biggest economy in the world. In 2016, for the first time, more of the energy capacity added in the world was renewable rather than nonrenewable. The cost of solar energy has plummeted from $100 per watt in 1975 to 60 cents per watt today. This has sparked a huge increase in demand for solar. More than 90 percent of automotive executives polled by KPMG say that electric or hybrid vehicles will dominate the automotive sector within about a decade. 

By pricing carbon pollution and rewarding a shift in how we live and work, Canada is making a choice to be among the economies of the world that will perform best in the future. To choose otherwise would be penny wise and pound foolish. 

Canada’s economy became one of the world’s most successful economies through the knowledge that some costs are investments in the future we want to build and by valuing long-term success over short-term returns.