Trying to solve a problem with the wrong solution will inevitably lead to failure
With polls showing the Liberals in a tight contest with the Conservatives, the Trudeau government needed to find a defining issue that will carry them to victory in next October’s election.
From the beginning of his mandate, this Prime Minister has made lowering carbon emissions a centerpiece of his government’s raison d’etre. Trudeau promised an approach wherein “fighting climate change and growing the economy go hand-in-hand”. Most of the provinces bought into his “putting a price on carbon” agenda , including Alberta in exchange for federal support for getting its landlocked oil to tidewater.
Now that harmony has fallen apart. Following his decisive election victory, Ontario Premier Doug Ford joined Saskatchewan Premier Scott Moe’s anti-carbon tax mission. Manitoba Premier Brian Pallister then announced his province would also refuse to levy a carbon tax. Alberta polls indicate Jason Kenny’s anti-carbon tax United Conservative Party headed for victory next spring.
That would leave the great swath of the country between B.C. and Quebec firmly opposed to Trudeau’s carbon pricing agenda. And east of Quebec, Newfoundland and Prince Edward Island may soon join New Brunswick in opposing the tax.
So how could such a divisive situation possibly translate into that election-winning “defining issue” for the Trudeau Liberals. The answer came last week with Trudeau’s announcement that Ottawa intends to impose a carbon tax in dissenting provinces, and then return the proceeds, in the form of annual direct rebates, to individuals. The Liberals claim those rebates will amount to more than people are paying in carbon tax. That means the scheme is yet another layer of taxation upon an already overtaxed businesses, all in a cynical attempt to buy votes.
We need only look across our southern border to see the profound damage wrought by a deliberately divisive election strategy. The Trudeau national carbon tax plan would pit provinces against our national government and Canadians against Canadians. Those against would be labelled climate change deniers, reviled apostates against Trudeau’s sacred carbon pricing religion. But would this profoundly damaging Liberal plan help the environment?
The answer to that question is a resounding no. Here’s why. The carbon tax plan would start at $10 a tonne rising to $50 a tonne in 2022. That corresponds to gasoline and diesel price increases of two cents rising to 11 cents per litre. But federal, provincial and municipal taxes already make up 44 cents of the Canadian average pump price of $1.34/litre. The reality is that the average Canadian driver already pays the equivalent of a carbon tax of $200 a tonne, costing more than $28 for a 64-litre fill-up and generating government revenues of $24 billion in 2018.
Both carbon tax proponents and opponents agree that carbon taxes would need to be rise by much more than $50 a tonne to make a perceptible different in demand. A leaked federal government briefing document obtained by the Canadian Taxpayer’s Association states that another$300/tonne, equivalent to 68 cents per litre, would need to be added to reach Canada’s greenhouse gas emission targets.
Inverse elasticity of price and demand is a fundamental economic premise. So why doesn’t it apply for fossil fuels? Because we can’t do without them, so raising the price just forces people to allocate a larger portion of their income to getting it.
Trying to solve a problem with the wrong solution will inevitably lead to failure. That’s’ why even those most concerned about global warming should oppose carbon taxes. There is already a solution that’ll not only reduce Canada’s carbon emissions, but also help our economy. Two words: natural gas. Converting gasoline or diesel fuelled vehicles to natural gas reduces carbon dioxide emissions by roughly a third. And there’s another benefit: anyone following a natural gas-powered city bus knows that it produces none of those toxic black particulates or foul nitrogen oxide (NOx) compounds.
Canada is endowed with a virtually limitless supply of low-cost, clean-burning natural gas. Yet we have a minuscule 15,000 natural gas fueled (NGV) vehicles. The top 10 NGV countries may surprise you: China 5.3 million, Iran 4.0 million, India 3.1 million, Argentina 2.3 million, Brazil 1.8 million, Italy 1.0 million, Columbia, 600,000, Thailand 475,000 and – get this – Uzbekistan 450,000.
Conversion of gasoline-powered vehicles to natural gas isn’t much more complicated than adding a compressed natural gas (CNG) tank. And it certainly isn’t new technology. When my former company started its first natural gas production in 1976, we had our field service trucks converted so that drivers could change back and forth from natural gas to gasoline at the flick of a switch.
Converting diesel engines to burn natural gas, while more complex, is now mainstream technology. Vancouver-based Westport Systems is a world leader in the heavy truck industry. Daimler, Kenworth and Volvo all offer NGV-fuelled trucks. BC Ferries is progressively converting its fleet to natural gas. CN and CP are testing converted natural gas-powered locomotives.
Canadian government data shows that transportation produces 28 per cent of total carbon emissions. Coal fired power produces another six per cent. My engineering calculations show that converting half the vehicle fleet and the remaining coal fired power to natural gas would reduce Canada’s carbon emissions by eight per cent, compared with virtually nil under the divisive Liberal carbon tax plan. Moreover, thousands of high-skill jobs would be created as Canada seizes the opportunity to become the North American leader in NGV technology.
So how can governments encourage this to happen? The answer is the reverse of more taxes. The pre-tax cost of natural gas is already well below diesel or gasoline. Simply exempting natural gas from those high-fuel taxes would create a compelling incentive. In other words, all governments need to do is to keep their tax-hungry hands off and let it happen.
The choice is clear: a negative, divisive national battle with no net environmental benefits, or harnessing our country’s natural resource endowment and strong technological know-how to make Canada North America’s NGV leader.
Which alternative would you vote for?
Photo Credit: Conservation Institute
Gwyn Morgan is a retired Canadian business leader who has been a director of five global corporations.
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