Unlikely Conservatives Join Fight for Ontario’s Carbon Tax

A small, conservative movement is growing in Ontario to “reset the conversation” around carbon pricing and bring the centre-right back to an originally-conservative position, one in support of a market-based approach to fighting climate change. But the movement faces an uphill battle.

“It’s very ironic — the idea of carbon pricing, came more from the right than the left originally,” Mark Cameron, executive director for Canadians for Clean Prosperity, and former policy director to Prime Minister Stephen Harper, told DeSmog Canada.

“There are well known conservative economists who endorsed carbon taxes for decades.”

“You don’t need to feel alone, there are a number of people coming into this tent,” said Chris Ragan, chair of the Ecofiscal Commission, associate professor at McGill University and research fellow at the C.D. Howe Institute.

Those hoping for a reset will soon see how the Ontario Progressive Conservative party engages on the topic when the governing Liberals introduce a cap-and-trade plan in the near future.

“It’s coming, it was campaigned on by the Liberals, “ said Progressive Conservative finance critic and Nipissing MPP Vic Fedeli.

Fedeli was the moderator of a recent discussion with Cameron and Ragan on market-based solutions to climate change. The event in downtown Toronto was organized by Blue Skies Ontario, an idea incubator for Ontario’s centre-right (interestingly managed by Jamie Ellerton, formerly of Ethical Oil), and Canadians for Clean Prosperity, a non-profit organization working to educate Canadians about the “benefits of the polluter pay system.”

If the Ontario right does reset the conversation and agree with the left-leaning parties and economists that carbon pricing is the right approach, the debate would become focused on the details: how is the carbon tax or cap-and-trade system set up and what happens to the money? Will the revenue collected go into general government coffers, get spent on developing clean technology, building infrastructure or get returned in tax cuts?

“Once we get to the debate how we should recycle revenue, I’m going home,” Ragan told the crowd during his opening presentation on carbon pricing.

“Once we have gotten to that point, apparently we have accepted the idea that carbon pricing is sensible.”

Ontario Tories at Cross Roads

With the election of Patrick Brown as the leader of the Ontario Progressive Conservatives in May 2015 and then to the legislature in early September, the Ontario Tories have the opportunity to redefine their party’s position on climate change. Brown has in the past come out against the idea of pricing carbon, but Fedeli says Brown is open to ideas if they work.

“He is very quick to suggest to all parties that a good idea can come from any party and he has agreed and vocalized whether if it is a Liberal idea, an NDP idea, or a PC idea, if it is a good idea, our party should be looking at supporting it,” Fedeli said.

The Liberals tried to portray Brown as an extreme social conservative during the by-election based on his voting record as an MP — a label Brown is quick to say is false. On the energy file, the Ontario Tories have for years hammered the Liberals for the mismanagement and cover-up of the cost of cancelling two gas plants. The former Ontario PC leader campaigned in the 2014 provincial election to cancel the Green Energy Act — an act that paid preferential rates to green energy producers — because it caused electricity prices to skyrocket.

Ontario shut down its coal-fired power plants, resulting in a big improvement in air quality, a major reduction in greenhouse gases and eliminated up to $4.4. billion in environmental and health costs. The plan to replace some capacity with green energy significantly underestimated the cost increase to electricity bills.

When Green Energy Act act was introduced in 2009, the Liberals projected a one per cent increase per year in electricity rates, but a 2010 forecast by the Ministry of Energy predicted a 7.9 per cent annual increase, with 56 per cent of the increase coming from renewable energy sources, reported a 2011 Ontario Auditor General report. Ontario electricity prices are now among the highest in the country and may force one in 20 Ontario businesses to close, a recent Ontario Chamber of Commerce report said.

Supporting a price on carbon and by extension a policy to further increase energy prices may prove difficult for the Ontario Tories after years spent hammering the Liberals on the energy file.

Right-wing Idea?

When finding a policy to reverse climate change, there are really only three options that economists say can work: regulation, a carbon tax or cap and trade. 

Regulation can achieve the goal of reducing greenhouse gases but is economically “inefficient” and “moral suasion and green subsidies are ineffective,” according to environmental economist Mark Jaccard and researcher Nic Rivers.

“One of the problems — age old problems — with regulation is that it becomes a source of potential corruption,” Ragan said.

Markets are remarkably flexible in responses to changes, they decentralize power away from a central authority and they drive innovation, but do a poor job of protecting the environment because “we don’t put a price on it,” Ragan said.

Cap and trade and a carbon tax are market mechanisms that leave the decision-making to industry to determine how to cut emissions and beat their competition.

Originally a cap-and-trade scheme was a right-wing idea, implemented by the first Bush administration to successfully reduce ozone-depleting chemicals. The plan, putting a hard cap on emissions and allowing polluters to buy or sell pollution credits to meet the target, gave industry the power to determine what was the best approach. The idea was disempowered the regulators used to overseeing command-and-control regulations and created an economic incentive to cut pollution. As a result, emissions fell by three million tonnes in the first year, well below targets.

A carbon tax sets a price per tonne of carbon emissions, requiring industry to either pay the tax or cut emissions. Granted a new tax, is not normally an idea a right-leaning politician would support to get re-elected, but if it used as a way to cut other taxes — taxes that hinder economic growth — then the argument shifts. Furthermore when compared to regulation or cap-and-trade, it is the most efficient policy tool to implement.

“In B.C., it took them six weeks to implement the carbon tax,” Cameron said.

A cap-and trade system is more administratively complex to set up and the complexity can open the system to exemption and backroom maneuvering, but that can happen with any system, says Ragan.

“We need to hold governments to account for doing what they said they would do,” Ragan said.

Follow the Money

Prime Minister Harper says a carbon tax is a tax grab dressed up as an environmental policy.  A carbon price could be designed in a way to funnel billions into government coffers, but as the British Columbia model demonstrates, all of the money collected is returned to consumers and businesses in the form of revenue neutral tax cuts with accountability baked into the legislation.

“The [B.C.] Auditor General has to certify that the carbon tax is being treated in a revenue-neutral manner,” Cameron said.

The B.C. model demonstrates the tax as an environmental policy can work. Since the tax was implemented, the B.C. GDP per capita grew faster than the Canadian average, the per-person consumption of fuels dropped over 16 per cent, while in the rest of Canada it grew by three per cent, reported the Economist in 2014. Denmark, Ireland, Sweden have all cut emissions using carbon taxes, while Norway’s emission have risen largely because of the boom in their oil production.

Canadian Opinion

78 per cent of the Canadian population believes the climate is changing. Of those who believe the climate is changing, 72 per cent think it is caused by human activity, according to a Forum Research poll. Those numbers drop for conservative voters to 63 and 50 per cent, respectively. The May 2015 poll is considered accurate +/- 3 percentage points, 19 times out of 20.

When the climate change debate hits the Ontario provincial floor, the Progressive Conservatives, under their new leader Patrick Brown, will have to weigh the fact that a large segment of their base sees no change in the climate or doesn’t believe humans are too blame.

So will the Progressive Conservatives debate the minutia around revenue neutrality, administrative complexity and industry exemptions or decry the whole exercise as a job killing tax on everything? Time will tell if the conversation gets reset.

When asked if Fideli believed that “climate change is happening and we need to do something about it?”

He said: “Carbon pricing will be presented to the legislature in the fall, we need to be ready to be part of the debate because Kathleen Wynne is going to pass something with or without our input.”

So was that a yes or a no?

Image: Blue Skies Ontario via Twitter