Carbon tax, Trans Mountain called inevitable

A national newspaper columnist says the carbon tax needs to be higher to effectively change consumers’ behaviour

A carbon tax is the appropriate tool to address climate change but it is not high enough, the Trans Mountain pipeline will get built, Canada remains a beacon of international trade, and India — more so than China — should be the focus of future trade initiatives.

Globe and Mail columnist Andrew Coyne offered those observations during a keynote speech at CropShere in Saskatoon earlier this month.

A graduate of the London School of Economics and one of Canada’s leading political columnists, Coyne said the Liberal government “bet the farm on the strategy of getting the provinces to do their dirty work” by urging the provinces to impose carbon taxes, but that met with limited success.

Instead of a patchwork of approaches, one federal tax would be better, but the price needs to be higher, he said. The carbon tax was introduced at $20 per tonne last year, rising each year to $50 per tonne by 2022. Farm fuels are exempt, but the extra cost of transportation, fertilizer and grain drying are strongly condemned by producers.

Yet the government set the price too low, Coyne said.

“The conventional wisdom … is you have to do these things very gradually. But I think the reaction of a lot of Canadians was that’s too low a price to actually change behaviour that much and it looks like just a tax grab.”

And while the carbon tax revenue is being returned in the form of rebates, they are too low for people to notice, he said.

“I think they would have been better off to set a higher initial price on carbon (and) make really big, noticeable, unavoidable tax cuts of a kind that people could not fail to comprehend.”

And while the carbon tax’s future is not a “fait accompli” — pending a Supreme Court decision — Coyne says the tax is “now in place and it is going to stay.”

He advised the Conservative party to see this as an opportunity to say, “we fought the good fight on this but we’re moving on.”

A carbon tax is “by far the cheapest and best and least intrusive and least cumbersome and least complex way” to address climate change, Coyne said.

“I do believe we have to do our part in the international campaign against climate change, but I also think the world’s going to continue to burn fossil fuels for several more decades, and if they’re going to burn them, they might as well burn ours.”

In that respect, building the Trans Mountain pipeline makes sense, said Coyne, noting that introducing a carbon tax while building the pipeline is an appropriate “balanced approach.”

“I do think the Trans Mountain pipeline is going to get built.… I don’t think that having bought the TMX pipeline that they secretly want to bury it. I don’t think that’s a fair accusation. I think it’s the court and the activists groups and not the government itself that have been the primary obstacles to the construction of the project.”

The climate change issue and how governments of all stripes deal with energy and climate change will be a determining factor in their success for many years, said Coyne.

“How we make the transition that the world is making in the longer term away from fossil fuels is going to continue to bedevil our politics for decades to come. I think the long run success for any political party is going to be how they continue to handle that question.”

Addressing the Canada-China trade dispute, Coyne said China continues to hold Michael Kovrig and Michael Spavor — two Canadians held in detention since December 2018 — as “hostages and is continuing to hold the canola industry as hostage.”

“There’s no easy way out of this, I’m afraid. An anyone who tells you there is, I think, is lying to you.”

Still, Canada did the right thing in detaining Huawei executive Meng Wanzhou at the request of the United States for extradition on accusations of fraud in circumventing American sanctions against Iran, Coyne said.

“This is not some idea of (U.S. President ) Donald Trump’s. He isn’t prosecuting her. It’s the department of justice.… There are serious charges and serious evidence behind them.

“We’re not caught in the middle between two superpowers. We’re on the side of a democracy and the rule of law against a society that does not believe in either.”

Allowing Meng to leave “would have rewarded Chinese bullying on the one hand and alienated our closest ally and trading partner and neighbour and friend on the other and I don’t think any government, in conscience, could do that.”

China saw Canada as the “weakest link in the chain in terms of dealing with the Americans on the Huawei file” because the Liberal government telegraphed its “amateur (geopolitical) enthusiasm” in the belief that “China is the rising power and America is the fading power and that Canada had to get on-side with China,” said Coyne.

But he said China faces serious demographic issues with an aging population that may well stall its economic growth.

Instead, Coyne advised that Canada should intensify dealings with India.

Global Affairs Canada notes that Canada has 14 trade deals in place and 31 in various stages of negotiation. Recognizing that these trade deals are vital to Canada’s economic success as a trading nation, Coyne said India, whose economy is the fastest growing in the world, is a “genuinely rising power” that is an English-speaking democracy, so it “has that connection to the Anglosphere.”

“It is a real contender in the long run as a leading power and it’s essential … that we have better relations with them than we do now,” Coyne said.

Noting that Canada has largely avoided the right-wing populism and the accompanying suspicion of international trade that is rising in Europe and the United States, he said the Canadian economy has prospered through trade, especially with the U.S.

“We are a country that is based on trade; that is the foundation stone of our prosperity that’s remained in place in Canada, even as the rest of the world … seems to be moving away from it.”

“We are the only G7 country with guaranteed access to all the other G7 countries. We’re one of the few countries on Earth that has guaranteed access to both Europe and the United States. That puts us at the crossroads in international trade.… If you locate a plant in Canada you can serve all those markets simultaneously, tariff free.”

That’s a tremendous incentive to invest in Canada, he said.

In that respect, Canada’s success in renegotiation of the North American Free Trade Agreement with the U.S. was successful because “we were trying to keep what we have, and by and large, we did.”

Negotiating with a U.S. administration packed with “genuine protectionists” who “don’t understand the principles of comparative advantage” and is wrongly obsessed with trade balance meant Canada’s negotiators “held it together … gritted your teeth while they brought up crazy proposals” and averted a disaster, Coyne said.

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