Carbon Tax FAQ

1. How would a carbon tax work?

• A carbon tax would be charged on things that emit carbon dioxide, like gasoline, natural gas and coal. Pricing these emissions creates an incentive to reduce them.
• The tax would be proportional to the amount of carbon dioxide emitted. Since the CO2 emissions from coal are much greater than from gasoline or natural gas, coal would face a much higher carbon tax.
• Virtually every good and service in Canada involves some emission of greenhouse gases, from the transportation of the item, to the electricity used to make it, to the natural gas used to heat the factory. Of course, fossil fuels themselves involve the greatest emissions, as does electricity produced by burning them.
• The effect of a carbon tax is to incorporate a price for greenhouse gas emissions in every good and service in Canada. So goods and services that cause very high emissions would become relatively more expensive. This would create an incentive for everyone to make economic choices that contribute less to global warming.
• The carbon tax would be offset by reductions in other taxes. The net impact would generally depend on your carbon emissions. There would also be tax breaks for low incomes.

2. Why a carbon tax?

• It’s important that we all pitch in to avert a climate catastrophe. A carbon tax permeates every nook and cranny of the economy. It’s the only way to create an incentive that affects every economic decision we make.
• Other programs, like a cap and trade system, are good, but they focus on at most 50% of Canada’s carbon emissions. A carbon tax targets all 100%.
• Unlike regulations, a carbon tax requires very few government resources to manage.
• A carbon tax is fair. It takes into account all the interconnections in our economy so that the tax you pay is proportional to the emissions caused.

3. Why a tax?

• We all know that there are costs to emitting CO2. If we don’t have to pay those costs then there’s little incentive for individuals and companies to reduce their emissions.
• If our carbon emissions cost money, then we all have an incentive to emit less carbon. We must all pitch in to avert a climate catastrophe, and a carbon tax provides an incentive to everyone in proportion to their contribution to global warming. What could be more fair?
• This incentive gets priced into every single good and service. So it doesn’t require the government to get involved in the millions of economic decisions that Canadians make every day.

4. Why don’t the other parties support a carbon tax?

• The Green Party is the only federal party willing to put a price on carbon dioxide emissions, which is necessary if we're going to meet Kyoto.
• Other parties simply aren't willing to do what it takes to meet Kyoto.
• They know there's resistance to a carbon tax and they're not willing to set aside politics to convince Canadians to support it.
• If the other political parties worked together, they could get a carbon tax implemented.

5. Why $50?

• $50 is the tax on something that produces one tonne of CO2 emissions.
• This price is in the range of what experts say is needed to reduce CO2 emissions by one tonne.
• It’s not an exact price, and it will be adjusted over time based on its impact and on market prices for CO2 emissions credits.
• 1 litre of gas produces 2.34kg of CO2, so $50 per tonne adds about 12 cents to the pump price per litre.

6. Isn’t this just a tax grab?

• No. The Green Party proposes tax shifting. The money raised by a carbon tax will be used to reduce other taxes, like income and payroll taxes.
• Taxes always provide a disincentive to doing something. Income taxes provide a disincentive to work. Sales taxes provide a disincentive to spend. Isn’t it better to provide a disincentive to contribute to global warming?

7. Won’t low income and rural people be hardest hit by a carbon tax?

• In the absence of tax shifting, a carbon tax would impose a higher cost on some people than on others, in particular those who cannot afford to upgrade their energy efficiency or who have no alternative to driving long distances.
• The Green Party would use tax shifting in a way that provides equivalent tax breaks to such people, so that they would not suffer economic hardship.
• We as a society cannot afford to dismiss the use of carbon taxes. It’s much better to use tax shifting to achieve fairness.

8. What about taxi drivers and truck drivers? 

• We know they're concerned that competition may force them to absorb the cost of any fuel price increase.
• To solve this problem, all trucking companies, taxis and other commercial transport operators will be required to charge a federally set fuel surcharge, updated regularly, that reflects the cost of fuel (including carbon taxes).

9. What do the experts say about a carbon tax? 

• Economists, policy experts and even politicians recognize the necessity of using a carbon tax to reduce greenhouse gas emissions:

"I fully understand that this [taxing the carbon content of fuels] is considered politically impossible, but part of our challenge is to expand the limits of what is possible."
Al Gore, former US Vice President, March 21, 2007
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/03/22/MNGDROPM7I1.DTL

"Pollution must have a price tag. Currently it is too cheap to pollute, and too expensive not to."
Don Drummond, Chief Economist, TD Bank, March 7, 2007
http://www.uofaweb.ualberta.ca/govrel/news.cfm?story=57676

“[The argument that taxes on oil or carbon emissions would ruin an economy is] fundamentally false. First of all, I don’t think it is going to have that much of an impact on the economy overall. Second of all, if you don’t do it, you can be sure that the economy will go down the drain in the next 30 years."
Paul Volcker, former Chairman, US Federal Reserve, February 6, 2007
http://www.iht.com/articles/ap/2007/02/06/news/FIN-GEN-Egypt-Volcker-Global-Warming.php

“Ideally, politicians would choose the more efficient carbon tax, which implies a relatively stable price that producer can building into their investment plans”
Editorial, The Economist, September 9, 2006
http://www.economist.com/opinion/displaystory.cfm?story_id=7884738

“Putting a price on carbon is less rousing than abolition of slavery or universal suffrage, but doing it will take no less courage.”
Toby A.A. Heaps, Editor-in-Chief, Corporate Knights, March 21, 2007
http://www.corporateknights.ca/content/page.asp?name=carbon_price_oped

“If your objective is to cut greenhouse gas emissions, a carbon tax is definitely one of the most effective ways of doing that.”
Doug Porter, Deputy Chief Economist, BMO
http://corporateknightsforum.com/index.php/CKtemplates/CKcomments/100/

“Two things are needed to stabilize greenhouse gas concentrations: you need a price on carbon, preferably through a carbon tax, to induce firms and individuals to cut back on their emissions; and you need an energy technology race.”
Chris Green, Professor of Economics, McGill University
http://corporateknightsforum.com/index.php/CKtemplates/CKcomments/100/

“A carbon tax is the best, cheapest and most efficient way to combat cataclysmic climate change.” 
Time to tax carbon, Los Angeles Times editorial, May 28, 2007

"What’s needed is a carbon tax — a tax on all fossil-based fuels that reflects their true social, political, and environmental costs.”
Robert Reich, Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley, former U.S. Secretary of Labor. (American Prospect Online Edition, Inherit the Windfall Feb. 7, 2007)