(Image Credit: Wellcome Images via Wikimedia Commons; the image is at this link. Used without modification under Creative Commons Licence)
Conventional economic wisdom says that in a time of economic stress, raising taxes is a bad idea. In that light, the recent increase in carbon tax & proposed increases in other taxes defy sense and can only be attributed to messianic zeal.
ROCK & A HARD PLACE
By now we are all familiar – through painful personal experience – with the cumulative impact of an assortment of factors on our cost of living. The inflation that Bank of Canada governor Tiff Macklem called ‘transitory but not short-lived’ back in November is causing immense stress for ordinary Canadians while it is ‘transiting’ out of our lives – and is likely to stick around for a lot longer than the soothsaying of that esteemed official. In a nutshell, Canadians are in immense economic stress.
Conventional economic wisdom tells us that increasing taxes in times of economic stress is a bad idea and should be avoided. And yet, on April 1st, the next scheduled increase in carbon tax was allowed to kick in. In a breathtaking display of tone-deafness / insensitivity, on that very same day our MP’s received a hefty pay raise. The average Joe’s / Jane’s pain at the checkout counter is increased by this knowledge. It is said that knowledge is power, but we are living through anomalous times; those who keep track of such things also know that at some time around the end of this year or early next year, another cost burden under the guise of ‘Clean Fuel Standard’ is going to make their lives even worse. This is sufficient to bring tears to their eyes at the checkout counter.
The innocuous sounding name ‘Clean Fuel Standard’ is, of course, a lexical sleight of hand; as Dan McTeague, former Liberal MP for 18 years and current head of Canadians For Affordable Energy wrote back in October 2020, it is just another tax that will place a significant burden on the shoulders of Canadians. Besides, the fuels that we use are pretty clean already, and any & all improvement in their cleanliness over the past few decades has happened without the helping hand of a tax (by whatever name called).
PLAYING WITH WORDS & PROMISES
This lexical sleight of hand isn’t new. What is colloquially known as ‘carbon tax’ has the official name of ‘carbon pricing’. It is irritating to see this latter term being repeated – especially by the commentariat and punditocracy – uncritically. My view is that calling carbon dioxide (CO2) as ‘carbon’ is ignorant; it is akin to calling water (H2O) as ‘oxygen’. If a patient needs to be given oxygen, we don’t pump water up their nostrils. Similarly, what is being charged is not a ‘price’ in the economic (or indeed everyday) sense of the term, because there is no market mechanism at play in arriving at the amount. Even in a monopoly, consumers have a choice of refraining from buying the (overpriced) product. But within the geographical and weather realities of Canada, the option not to buy the products which this ‘price’ is tacked on doesn’t exist. If done by a private entity, this would be called ‘extortion’ or ‘gouging’. However, since the State has a monopoly on the use of force within its boundaries, the more accepted and polite term is ‘tax’. Calling it a ‘price’ is dishonest.
Even more dishonest is that government’s action of increasing this carbon tax beyond 2022, in defiance of their own promise when they initially brought the tax in; now the increases will ‘stop’ only in 2030. One is excused for doubting the sincerity of this new promise in light of earlier experience. And lastly, letting another scheduled increase in the tax go ahead despite full knowledge of the economic hardships that people have endured in the last two years while the MP’s receive yet another pay raise shows, in a nutshell, how much disconnected our political class has become from the ordinary person’s life & circumstances.
CAUSE AND NO EFFECT
The question is whether more carbon tax would help us achieve the stated goals that form the rationale for the tax. An associated question is whether moving towards those goals would only be possible with the tax. Let’s take the latter question first.
As this World Bank chart for Canada’s per capita CO2 emissions shows, they went down from 17.371 tons in 2007 to 15.497 tons in 2018. This decrease of 10.79% was achieved before there was any carbon tax. (Link: https://data.worldbank.org/indicator/EN.ATM.CO2E.PC?locations=CA)
LESS FOR MORE
But this pace of improvement is not enough for the purists. They want it to happen a LOT faster – but even they aren’t in agreement among themselves as to how fast is fast enough. So, it was not surprising that while the latest Emissions Reduction Plan of the government of Canada chalks out a timeline till 2030 (see this link), the latest report by the Intergovernmental Panel on Climate Change (IPCC) – issued mere days after the Canadian government issued its Plan – says that we have only until 2025 (a fleeting 3 years from now) to make meaningful ‘adjustments’ to our lives if we are not to go to hell in a handbasket (see this link).
Curiously, our government’s plan always misses one component in its plans for emissions reduction: population growth. Unlike other countries, Canada is in the unusual position (and perhaps even a unique one) in that we get to decide how much our population should increase by, via immigration. As has been often remarked emphatically on the ‘anti-carbon tax’ side – and ignored with dogged stubbornness on the other side – each new immigrant to Canada increases the global CO2 emissions simply by moving from a low-emissions country to a high-emissions one. Equally curiously, the ‘pro-carbon tax’ side doesn’t tire of harping on the claim that Canada has the highest per capita emissions in the whole world. In that light, their avoidance of the matter of increase in global emissions via immigration can only be understood as ideological blindness.
When pressed on the matter, the most they will concede is that ‘Canada needs immigration’. I believe that this is a case of cognitive dissonance: If, as claimed, Canada does indeed need immigration (even if it leads to higher global emissions of CO2), then in similar vein, individuals also need to engage in activities and behaviours that lead to higher CO2 emissions on a personal level. The entity that we call ‘Canada’ does not possess any divine qualities to be exempted from the logic that applies to individuals.
This is not an ‘anti-immigrant’ rant. As the government’s own data shows (see this link of StatsCan), in 2018 households accounted for 24.3% of the total CO2 emissions in Canada, which was an increase of 0.4 percentage points from 2017 (i.e. from 23.9%). It is clear that if we can arrest or slow down the growth in the households segment, which accounts for almost a quarter (and rising) share of our total emissions, it would go at least some of the way to help us achieve our goals for overall reduction of CO2 emissions. But the bald fact is that speaking against immigration – or indeed saying anything other than that our annual quotas for immigration should be increased – would amount to committing career suicide for any politician, so they stay clear of this part of the equation in the way that cockroaches avoid clean and brightly lit areas.
VOWS OF RENUNCIATION
The irony is that moving to a less CO2 intensive model of energy-mix (which I consider to be both desirable and inevitable) can be made possible by the more CO2 intensive forms of energy, of which Canada has in abundance. It is baffling to see such animosity towards something that is both a provider of present prosperity and a better future. For and example of the former, see this report by Bloomberg on April 05 stating that Canada’s solid trade surplus in February 2022 was underpinned by high oil prices. As for the latter, consider this report by Saudi Aramco company about how they are using their natural gas to produce blue hydrogen; this isn’t something relating to the future – they shipped 40 tons of blue hydrogen to Japan, as per the same report.
In a nutshell, by demonizing our oil & gas industry, we are shooting ourselves in both the feet; we are sacrificing current prosperity and putting ourselves out of contention on fronts that will bring the next wave of global competitiveness and thus prosperity in the future.
Another thing that I have struggled – and failed – to understand is if, as the ‘pro-carbon tax’ side says, oil & gas have only a limited number of years left as a viable product before they get sent to their technological oblivion, why we should have to pay more for it now. Ceteris paribus, a product that is on the verge of becoming obsolete begins to be priced lower and lower as the ‘event horizon’ of its final obsolescence gets nearer. In Canada, in relation to oil & gas, it’s the other way around. These sources are going to become (as they claim) things of the past by 2030 or thereabouts, and yet, as that ‘event horizon’ approaches, we are supposed to pay higher & higher prices for them.
WELCOME TO THE BACKWATERS
In May last year, as the debate around Bill C-10 was swirling, I wrote an article about it (Bill C-10: A Fatwa On Knowledge), expressing my opinion that in an increasingly knowledge-based world, it would have the same effect on Canada as the ill-advised Fatwa against the printing press had on the Islamic world centuries ago – it made a whole swathe of countries into backwaters. More crucially, for centuries preceding this Fatwa, the Islamic world had been at the forefront of knowledge and innovation. We owe a lot of our scientific and other knowledge to that part and phase of the world, such as algebra (the name itself is derived from the Arabic ‘al jibr’).
The Bill was in relation to the government exercising control over the internet in terms of what content Canadians can produce and consume online. While the Bill ‘died on the floor’ because the parliament was suddenly dissolved, Minister Hussen stated that it would be reintroduced in the current parliament, so the danger that I pointed to in that article are alive and well.
I believe that increased taxes – including but not limited to ever-increasing carbon tax – would compound our predicament. As history shows throughout, an impoverished population cannot remain competitive on any front. The struggle for survival always occupies the space where we can have time and resources for progress and higher pursuits. The saddening part is that a large section of the Canadian population is in favor of such a scenario.
Among the policies being considered for this year’s budget (due to be presented tomorrow) is a surtax on ‘excess profits’ of ‘big banks’. From public appearances, it looks like this push is coming from the NDP leader Jagmeet Singh (although he may just be providing a fig leaf to the Liberals to hide their own intentions behind).
Beyond the obvious observation that what constitutes ‘excess’ is a matter of individual opinion, the more practical part here is that the banks would simply increase their charges to their customers in order to shift the cost burden away from their bottom lines. As a result, their profits would still be ‘excess’ by the same amount (and perhaps higher). The burden of the surtax would fall on the ordinary Canadians. This should be obvious to all adults (and quite a few minors as well), but our politics has degenerated to a point that having juvenile thinking is a qualification. And such barbs aside, this brings me to an important realization:
The most basic unit – the sub-atomic particle, if you will – of an economy is the individual, whether as a producer of value or as a consumer of goods and services. What we call ‘tax’ for the sake of convenience is just one component of the cost of living of the individual. We can fiddle around with the different components of the aggregate cost of living all we want, but if their sum total exceeds a threshold where the individual’s reward for their productive value isn’t enough to provide for their current and future needs, the individual will be gradually weakened to (ultimately) the point of being crushed. At that point (or maybe much earlier than that) many of them may decide that they would be better off living elsewhere. After all ‘flight’ has always been one of the options for survival, for as long as life has existed on this planet.
Previously, I have written about how Canada is becoming an increasingly undesirable country for many people to live in (see my articles ‘Taking Flight’, ‘Canada’s Double Refugees’, ‘Doomed Partnership’ and ‘Return If Possible’). In addition to all the negative factors that I have discussed in those articles, a skyrocketing tax burden may prove to be the last straw that breaks Canada’s back. The messianic zeal to protect the whole world from climate change – that too by a tiny population (less than 0.5% of the global population) which does not contribute in any significant measure to CO2 emissions and may in fact be mitigating CO2 emissions by other countries via the existence of vast forests – may be satisfying to those ordering the 21st century version of the ‘Charge of The Light Brigade’, but for the troops, the outcome will be very similar to that of the soldiers in that sad event in history.