Canada’s carbon tax is set to rise from its current CAD$30 per tonne (NZD$33) to $170 per tonne by 2030.
A credible price on carbon is the strongest commitment a country can make in reducing carbon emissions.
If you set the price of carbon correctly, then you almost don’t need any other policies. Governments like to announce lots of stuff that often does nothing or even makes thing worse. The price of carbon in the ETS is more powerful than anything else.
But few in New Zealand would believe it possible to more than quintuple prices in our Emissions Trading Scheme (ETS) without political costs high enough to break the system.
Big increases in petrol, in electricity etc are not popular.
Because of how Canada’s federal system works, the federal government simply imposing a tax on some provinces, but not others, would not work out very well.
The federal government solved the problem in a rather ingenious way. It takes all of the carbon tax revenue raised from a province, puts it into a pot, and then gives it back to people in that province.
Provinces that produce more carbon emissions will pay more in carbon taxes. Households in those provinces then get a higher rebate payment back from the federal government. In Ontario, the first adult in a household receives an annual payment of $224. The second adult receives $112, and each child receives $56. The amount of the payment varies from province to province and will increase as the carbon tax rises.
This is a brilliant idea. Don’t use the ETS to make money for the Government. Use it to soften the increased costs for households.
And it also makes higher carbon prices politically possible. Most households will wind up receiving more back in carbon rebates than they will pay in carbon taxes. By 2030, the average family of four in Alberta will be receiving a carbon rebate amounting to about $3200 per year.
It will reward you for moving to lower carbon usage.
Every year, the government sells emissions credits into the ETS. So far, there has been no serious discussion about what should be done with the revenues collected at those ETS auctions. Why not create a carbon dividend?
Every quarter, the government could tally up all the revenue it raised by selling credits into the emissions trading scheme. It could take the raised funds, divide them up, and send each of us a carbon dividend payment.
I suspect Labour could never bring themselves to actually giving money back to all households, but there is an opportunity for National here to adopt a policy that would be good for the environment and good for households.