You can color me unimpressed by the big news today in the Globe and Mail: Quebec just became the first Canadian province to pass a carbon tax. For one thing, the tax is tiny, just 0.8 cents per liter of gasoline, and at comparably low levels on natural gas and diesel. (For non-metricized Americans, that’s 3 cents per gallon.) So that makes Quebec’s new approach not quite as aggressive as — to pick just one example at random — Idaho’s 5 cent per gallon increase circa 1996.
Now in fairness to Quebec, the new carbon tax revenue, which weighs in at about $200 million, will be spent on seeking greenhouse gas reductions. That’s a big improvement over previous gas taxes in the States, where the money normally gets shoveled back into roads.
Strangely, however, Quebec’s government seems intent on preventing the tax from actually influencing consumer behavior. To wit:
Natural Resources Minister Claude BÃ©chard called on the oil companies to be good corporate citizens and do their share to protect the environment by absorbing the cost of the new tax. “We call on their good faith and social responsibility.”
If by some bizarre turn of events the energy companies actually did absorb the full cost, that would mean consumers would receive no price signal whatsoever from the carbon tax, thereby nixing one of the principal reasons why carbon taxes can fight climate change. Presumably, energy demand would stay constant and so would greenhouse gas emissions. (Though I suppose the tax revenue can be put to work.)
I’m going to give the last word to an economic analyst who gets it right:
“Because of the lack of production in the province, refineries will pass the costs on distributors, who will pass them on to consumers,” said Andrew Neff, a Washington-based analyst at consultancy Global Insight. “To attempt to address climate change, the costs have to be passed on to the consumer at some point.”
Two final notes. First, lest readers think I’m Canada-bashing, allow me to officially register my guffaws over the US agreement at the G-8 to "seriously consider" a European proposal to reduce greenhouse gases. Hoo boy, that sure sounds serious.
And last, for the title of this post I apologize to RenÃ© Magritte and French speakers everywhere.