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Carbon Tax is Not Enough – the Rich Can (and Will) Keep Polluting

By: Lindsay Mewhiney

To fight climate change, the Canadian Liberal Government has imposed a carbon tax – a tax of $20 per tonne of carbon emitted, that is set to rise to $50 per tonne by 2022. But this measure is not an effective solution. The major polluters in Canada are big corporations – aka, the rich.

Why the carbon tax isn’t effective

If corporations have the financial resources to pay the carbon tax in order to continue polluting, they will. The carbon tax is intended to serve as a deterrent for producing carbon emissions, but the current carbon tax rate simply isn’t high enough to deter large corporations. United Nations economists have suggested that a carbon tax must be set to a rate of at least $135 per tonne to be a meaningful deterrent to corporation pollution.

Another major issue with the carbon tax program is that industries facing intense trade competition, such as steel and chemical industries, are exempt from the carbon tax program. These industries have been placed under an alternate plan known as the Output-Based Pricing System (OBPS). OBPS limits these big polluters to producing only 80-95% of their industry’s standard emissions level, but the only real consequence for exceeding this 80-95% threshold is a fine – a fine many polluters are content to pay rather than investing in the research and development to create more efficient technologies.

What is the better solution?

An alternative that Canada could employ to achieve more successful results in fighting climate change is the cap-and-trade method. Cap-and-trade establishes an overall maximum industry emissions level, and corporations are allocated a specific number of emissions permits. Corporations can sell their unused permits to other corporations looking to purchase them. This ability to sell unused permits is a vital aspect that makes cap-and-trade a superior solution, as it encourages the innovation of more efficient technologies by financial rewarding corporations for reducing their emissions levels to the point of having excess permits.

The technological innovation that cap-and-trade encourages will have continue to have an effect on reducing climate change once these innovative measures are implemented – even if the general public loses interest in the issue of climate change, these technological advances will still be in place and will continue to have a lesser impact on climate change than their predecessors.

Does cap-and-trade really work?

In theory, cap-and-trade sounds great. But in practice, will it really have any more of an impact than carbon tax? The answer is yes.

Australia enacted cap-and-trade in 2012 and saw an almost immediate decrease in carbon emissions across the country. However, after facing significant backlash from industry groups, cap-and-trade was repealed and replaced with a carbon tax program in 2013. This carbon tax program has been in place ever since, and as a result, Australia is now projected to miss its goals for cutting carbon emissions.

Within just one year of implementing cap-and-trade, Australia saw a considerable decrease in the country’s overall carbon emissions, and the evidence clearly shows that once cap-and-trade was revoked and a carbon tax program was reinstated, emissions skyrocketed to a level that is now expected to exceed the country’s emissions goal .

Cap-and-trade places a clearly defined limit on overall carbon emissions, whereas under carbon tax programs, there is virtually no limit on the level of emissions that polluters can produce so long as they are willing to pay the price. Carbon tax has not proven to be an effective measure to combat some of the most significant polluters, who also happen to be some of the richest polluters.

Cap-and-trade does not favour the wealthy in the way that carbon tax does. The regulations of cap-and-trade programs make it very clear that wealth will not serve as an exemption from complying with climate change measures, just as wealth will not provide exemption from the detrimental effects that climate change will have on the earth