Last week I posted a discussion about the Carbon Tax, the “Axe the Tax” movement, and the idea that we’re not asking the right questions. I’ve also been sharing Carbon Tax supportive posts on social media and, as a result, I’ve had a few people ask some questions.
I love that, by the way. We really need to talk instead of relying on pithy slogans like “Axe the Tax”. We cannot simply assume that this is a well thought through strategy, despite being promoted by a career MP and former Cabinet Minister.
First, let me reiterate a few assumptions:
- The Climate Crisis is real. I won’t argue this point because we are well past denying it. The only relevant questions at this point are how fast, how bad, and what are we, locally, nationally, globally, going to do about it. If you are still in doubt, read some books: Saving Us by Katherine Hayhoe, A Good War: Mobilizing Canada for the Climate Emergency by Seth Klein, and Unfreeze Yourself by Christine Penner Polle come highly recommended. If you are on board, consider reading them if you haven’t because the planet needs allies.
- If I thought we could have a functional, happy society without paying taxes, I’d be against them. I believe taxes have value, both in funding collectively beneficial things, and in shaping change that we need. I believe our current get-rid-of-all-taxes culture, driven by the trickle-down economics movement, is broken and is creating vast inequities and risks.
- I understand the pressures people are facing with rising costs. My adult kids are struggling. My elderly parents are worried. It is not healthy for individuals, nor is it healthy for the country to have so many people facing daily anxiety.
So let’s ask some questions.
What is the Impact of the Carbon Tax on Canadian Grocery Costs?
Very little, apparently.
Taking a look around the world should shed some light on this. Canada’s Carbon Tax doesn’t affect food prices in other nations but we import from other countries. Food prices are rising across the globe. According to Trading Economics data, Canada’s food inflation rate of 3.3% in February 2024 is a little higher than the US (2.2%) and New Zealand (2.1%) but better than Australia (4.5%), Japan (4.8%), the UK (5%) and dozens of other countries that are 10% and up.
Consider that we get much of our seasonal produce from Mexico (5.07%) and South Africa (6.1%), and you’ll find canned goods from India (8.66%), The Philippines (5.6%), and Thailand (-0.57% – a rare exception to price increases) and other places in your pantry, at least some of our food price inflation is coming from our trading partners.
Here’s an idea: Buy local as much as possible. It helps removes the volatility from pricing, and reduces emissions in transportation. Support better product labelling. One problem I had writing this is that an awful lot of cans and jars say “processed in Canada” without showing country of origin.
What About Carbon Taxes on Agriculture and Shipping?
This is an important question.
Agricultural use of gasoline and diesel is exempt from the Carbon Tax. So running the big machinery isn’t impacted. That accounts for 97% of on-farm emissions. Carbon Tax is still paid on propane and natural gas, which is used for other activities like heating barns and running grain driers. An exemption on these fuels has been proposed and is slowly working its way through Parliament in the form of Bill C-234.
Scale is important. While farmers would certainly benefit from an exemption (and we need to support farmers!), the impact at the grocery unit (say, a box of cereal) is relatively small.
The same goes for shipping. When you can put thousands of units of a product on a large truck, the cost of the carbon tax, per shipping unit, is in fractions of cent.
Here’s an idea: write your MP to express support for Bill C-234.
What Else is Putting Pressure on Food Prices?
Lots.
Wars, conflict, supply chain issues, rising fuel prices (fossil fuels. ahem), and the climate crisis:
Food prices have soared by 18% over the past two years, adding to Canadians’ grocery bills at a time when higher rates are already tightening household budgets.
The supply chain snarls, geopolitical strife and higher input prices behind this rapid price increase have finally moderated
RBC Proof Point June, 2023
The headline in Today’s Winnipeg Free Press holds some answers: Climate change on farm means big bill for taxpayers. Extreme weather exacerbated by climate change is already having an impact on our food prices.
We are going to see more droughts, more pests, the yields won’t be as good,” said Guillaume Lhermie, director of the Simpson Centre for Food and Agricultural Policy at the University of Calgary.
“For me, the question is: who should pay for that? I do foresee that government will be solicited more and more.”
From the article
Governments generally cover a lot of the costs of agricultural loss:
In Saskatchewan’s case, last year’s drought conditions strained crop production, resulting in a year-over-year output decrease of nearly 11 per cent and forcing the provincial government to spend nearly $1.2 billion more than budgeted through its Ministry of Agriculture.
For the coming year, provincial Finance Minister Donna Harpauer said in her recent budget address as a result of the “challenging weather and soil conditions,” Saskatchewan is budgeting $431.7 million this year — a 5.8 per cent increase year-over-year — to ensure crop insurance and other farm risk-management programs are fully funded.
From the article.
But it isn’t always governments that have to pay:
In Alberta, the provincial Crown corporation known as the Agriculture Financial Services Corp. paid out $2.1 billion in 2021 and $552 million in the 2022 crop year, with drought as the leading cause of loss for the vast majority of those claims.
AFSC has warned Alberta farmers can expect to see higher crop insurance premiums for 2024, mainly due to the program’s financial losses in 2021 and 2022.
From the article
Clearly, when farmers have to pay more for insurance, that cost gets passed on to consumers. If crops yields are down, prices go up, and consumers pay more.
Here’s an idea: I have no little ideas here. Support carbon pricing. Support local farmers. Support local media too (the Freep article is pay-walled which is why I posted some of it here)
Isn’t the Carbon Tax Causing Inflation?
Inflation is a global problem. Other countries are having the same political finger-pointing debates we are:
An international comparison among OECD countries shows that rising inflation is a global phenomenon, not unique to the United States. This fact argues strongly that high inflation in the U.S. has not been driven by any unique American policy—not the American Rescue Plan and other generous fiscal relief during the pandemic recession and recovery nor anything else U.S.-centric.
Economic Policy Institute – Rising inflation is a global problem
Clearly, inflation is as much a concern in other countries (note that in that article’s data Canada’s inflation rate is lower than the US). It is a little dated, but this IMF article discusses the problem from a global perspective. In Canada, Policy Options, the magazine of the Institute for Research on Public Policy has this to say:
With the latest data, we find that the gradually increasing indirect taxes, including carbon taxes, have caused overall consumer prices to be only 0.6 per cent higher in October 2023 than they were in January 2015
This indicates that nearly all the overall price increases in 2021 through 2023 are due to other factors. Similarly, recent declines in inflation are primarily due to falling energy prices.
The effect of carbon pricing on rising food prices is even smaller, accounting for the indirect effects of carbon taxes.
Policy Options – Carbon pricing is not to blame for Canada’s affordability challenges
Politicians who are trying to make points with voters by blaming local conditions for a global problem are not leaders. Simplistic answers like “Axe the Tax” will not generate the desired results.
Isn’t the Carbon Tax Driving Up Housing Prices?
No. Honestly, I can’t even imagine a mechanism that would drive this.
But, again, looking around the world, housing prices are going up everywhere.
The WEF (yeah, I know, dirty word. Still. Data) What has caused the global housing crisis – and how can we fix it?
Bloomberg: The global housing market is broken, and it’s dividing entire countries
Unsustainable Magazine: The Global Housing Crisis: Facts, Figures, and Solutions
Canada’s housing increases are among the highest in the world, but it isn’t limited to us, which suggests to me that the Carbon Tax is not the central issue here and getting rid of it will not help.
So let’s ask Poilievre, Moe, Smith, and Kinew (who now appears to be part of the Axe the Tax club), how they’ll actually work to fix the housing crisis instead of just buying into their narrative that the Carbon Tax is the most important issue of the day.
Why Can’t We Just Make Polluters Pay?
It sounds like a great idea. It is complicated though.
First, we are all polluters. While Canada’s total emissions are a small fraction of the world’s total emissions, here are a few thoughts:
- 60 % of the world’s emissions are from countries that have similar or less emissions than Canada (Canada is the 7th highest emitter in the world). If all those countries just pointed fingers at China and decided to do nothing, we would still have a huge emissions problem.
- Canada’s per capita emissions are among the highest in the world at 18.72 tons per person. Twice that of a Chinese citizen (7.44) and nine times that of an Indian citizen (1.89). Asking someone in India to reduce their CO2 emissions so we can continue driving our large SUVs and trucks is ethically questionable.
- Canada’s wealth and prosperity has historically been developed on fossil fuel emissions. Those emissions, and those of western countries, far outpace the historical emissions of developing countries. We need to own our part of the carbon that we have put in the atmosphere to support our wealth.
Given that, let’s tax our biggest polluters, right?
Well, not that easy. To tax polluters you have to define who the polluters are, how much they are allowed, and how much to charge them. That’s a big administrative job, which means more government and more regulations and more taxes. If you are going to do a good job, you also need inspectors to find the polluters. And you’ll need lawyers to fight them in court when they don’t want to pay. More taxes again.
Second, we are all consumers. Which means the corporations that are polluting are doing it for our benefit. When we buy something produced in a high emission setting, we are the polluter. As the Carbon Tax goes up, producers who use high amounts of fossil fuels have to pass that cost on to consumers. We then get to make the choice of what we buy. Low emission producers will have a distinct advantage.
This is why the Carbon Fee and Dividend (aka the Carbon Tax) works. It is inexpensive to administer and puts money back in the hands of people who need it.