Investor's Business Daily, October 2nd, 2007
Energy: Canada's first carbon tax took effect Monday in Quebec. The stated goal is to reduce greenhouse emissions that supposedly cause global warming. The reality will turn out to be quite a bit different.
Energy companies are now paying 0.8 cents (Canadian) on every liter of gasoline sold in Quebec -- about 0.30 cents per gallon -- alongside 0.9 cents on each liter of diesel fuel, 0.96 cents per liter of light heating oil, 1 cent per liter on heavy heating oil, 0.5 cents on each liter of propane and $8 for a ton of coal.
Quebec officials believe the tax will raise about $200 million -- paid mainly by consumers who will get the passed-down costs -- which will be used to cut back on the province's carbon dioxide emissions. That's an iffy proposition, at best. The money will be used, but it's unlikely that it will have an effect on global climate.
What is certain, though, is that the tax will spread beyond the targeted energy industry.
Already companies that don't provide energy are getting anxious because they import more than 25 million liters of petroleum or carbon products a year for use. Under the law, they're defined as distributors. Cement and mining operations are two kinds that will feel the pinch -- and will be among the first businesses to leave the province because of the needlessly added taxes and regulation -- unless changes are made in the law.
The best change would be to scrap it. But it's another revenue stream for lawmakers, and they'll be reluctant to get rid of a law that provides them with easy money no matter how ineffective it proves to be.
There's been a swell of agitation in the U.S. for a carbon tax in recent years, some of it from those we would least expect to be supporters. (Greg Mankiw, a Harvard economics professor who has advised President Bush and is now advising Mitt Romney, is the foremost of these.) So here's their chance. Quebec lawmakers are willing to let their province serve as a laboratory.
Eventually, the mad science of carbon taxation will put a drag on Quebec's economy. Because the energy sources being taxed are inputs across the economy, the prices of consumer goods are bound to rise. Higher prices reduce wages and slow commerce. Does that sound like the foundation of a healthy economy?
Quebecers ultimately will wish that their provincial lawmakers had the wisdom of Canadian Prime Minister Stephen Harper. But it will be too late when they recognize, as Harper does, that the fight against global warming is just another way government can separate people from their money.
