Carbon Taxation's Effects on GHGs Negligable but Economic Downturn Works Consistantly

Baseline emissions from the EIA carbon tax/consumption model (in blue) are expected to decline by a fairly impressive 25 percent between 2015 and 2040, presumably because of some combination of less driving and more efficient vehicles (driven in part by tough new fuel economy standards). But the extra impact from adding in a carbon tax (in purple) is essentially zero.

If there’s one thing that economists agree on about carbon taxes it’s that there’s not much effect on consumption of transportation fuels. The explanation is that demand is very inelastic - driving is something that people 'have to do'. So price changes don’t have much impact on how much driving people do. For example, the NEMS model used by the Energy Information Administration predicts the impact on gasoline consumption of a carbon tax that starts at $25 per ton CO2 in 2015 and rises at 5 percent per year through 2040 should reduce consumption by something like 0.034 percent, a negligible amount.

At first glance this negligible effect seems to contradict the fact that greenhouse gas emissions [GHGs] from British Columbia had fallen 4.5% between 2007 and 2010 following imposition of its carbon tax. However, it is estimated by experts and the BC govt. that most of this decrease is, in fact, attributable to the economic recession. Rob Fleming, the B.C. NDP environment critic, said Mr. Lake’s confession was a bit odd. “The minister was candid, but basically admitting global, economic recessionary forces had more to do with B.C’s slight emissions drop than the sum total of the B.C. Liberal climate policy.”

Considering that transportation accounts for about 1/4 of national greenhouse gas emissions and about 1/8 of global greenhouse gas emissions. The global climate challenge is mostly about coal and electricity generation, not about petroleum or transportation fuels. Yet BC's carbon tax [CT] is regressive in both sectors because a carbon tax applied to industrial producers is simply added to the cost side of the ledger and passed on in the price, so the tax ends up being paid by the end of the line consumer in all cases. And though it may be paid equally [relative to consumption] the pain isn't equal, the rich wouldn't even notice, but the poor would have to adjust their other spending to accommodate the increase.

As The Mud Report detailed a few days ago, the regressive nature of a carbon tax can be reversed depending on how the revenues from it are recycled back into the economy. BC brags that revenues from it's CT are 'neutral' but as the image above shows most of  $5 billion in extra carbon tax revenues go to reducing corporate taxes and doesn't fund public transit at all, nor does it provide financial incentives to buy more fuel-efficient vehicles, make your home more energy efficient or fund other environmental projects. BC's CT, though loudly praised, simply takes money from the poor people who cause the least carbon pollution due to the lowest consumption and transfers it to the corporations and shareholders who not only need it the least but also create the largest per capita portion of the GHG problem.

To add insult to injury, Christy Clark's Liberals have declared natural gas to be clean energy source [despite the fugitive methane it refuses to acknowledge, let alone measure] and if Clark’s ambitions of five LNG export terminals come on stream in that province, the oil and gas sector will rise to 52 per cent of Canada’s emissions by 2030 meaning the rest of the Canada's economy will have to reduce emissions by 54 per cent.

To summarize, carbon taxes create negligible GHG savings, they are paid mostly by the poor, the revenue from the tax goes mostly to the rich and, as the graph above shows they are meaningless. But as all the graphs, economists and even the BC govt agrees an economic downturn does have a positive effect on GHG emissions.

Though our leaders and media constantly drum GROWTH, GROWTH, GROWTH, the fact is that when human consumption slows, planet Earth can heal. Only when our obsession with consumption wanes, only when our economy - based on endless growth - is seen as the destroyer of life and real wealth that it is, will our planet be able to heal. Two interesting points in the graph below: 1.) The reduction in 2015's emissions may be partly due to better efficiency, renewable energy, and the like. But, mainly, it is the result of the global economic slowdown. 2.) Every time global emissions drop it's a result of an economic slowdown.

To conclude, CTs are designed to make politicians look good not cut GHG emissions by any meaningful amount. CTs can be progressive, but can also be regressive, as is BC's version. But there is an effective mechanism for reducing GHG emissions - degrowth.