Monday, May 19, 2008

Another Piece To The Puzzle

I wonder if the Liberals have given consideration to the recent report from CIBC economist Jeff Rubin, who argues that carbon tariffs are the next phase, once a country claims the high ground, with their own domestic plan. If Dion wants another tool to sell his tax shifting plan, then any action must entertain what to do about competitiveness. Adding cost to our domestic production, while certain importers operate without the same standards, creates an uneven playing field. There is a way for Dion to shield the Liberal plan from attacks that it will hurt Canadian industry, in fact what Rubin proposes creates a scenario where action allows for a climate that not only stops outsourcing, but bring manufacturing jobs back home.

I think it's a great concept, hopefully the Liberals will put this out as part of the package:
With some advanced countries enacting carbon taxes, carbon trading systems and other measures to lower emissions, CIBC believes the growing pollution from developing countries will provoke penalties against their exports.

That would benefit the environment, and will also bring certain jobs back to North America, since carbon emission taxes and high oil prices would offset the benefit of cheap labour, Rubin says.

"Chinese goods will have to pay for the carbon that they emitted and they'll pay for that when they enter our market place by paying that tariff," Rubin said in an interview.

"Once we impose the tariff on Chinese goods, some of those industries will be coming home, because . . . energy and carbon efficiency is going to matter more than labour costs."

The political optics of a carbon tariff are a no-brainer. The idea also tells Canadians that if we do actually do "lead", then we have the leverage to demand the same of others, or they will face penalties:
But Rubin sees a shift in sentiment.

"What I'm suggesting is that the minute that we start putting a price on our own domestic emissions, then our tolerance of those who do not is going to fade very quickly," he said.

"What we're going to say is that if you don't play by the same carbon rules, that's an unfair trade subsidy that we're gong to countervail against."

The beauty of endorsing a carbon tariff, once we implement our own plan, is it silences the Baird logic, that Canada can't act "unilaterally", equating such action as economic suicide. It lays out a clear path, it shows Canadians that if we choose a "tough" plan, then others fall in line, which negates any disadvantage, or Canada takes action to ensure our industry remains competitive. On top of that, as Rubin suggests, you have the prospect of returning industry, something that would surely find appeal in vote rich central Canada.

At the very least, I hope the Liberal plan speaks to a carbon tariff, because it will help to ease some concerns, it will demonstrate that leadership doesn't handicap, it allows Canadians to see that our approach will help force other nations to follow. I don't see a downside in endorsing the idea.


Jennifer Smith said...

Interesting idea. That would effectively remove a goodly chunk of the externalities from the system. Nice!

Steve V said...

I caught this comment on another blog, and it seems representative of the type of criticism this policy could blunt:

"Meanwhile other countries like India and China will continue to pollute the environment at a monumental pace rendering anything Canada does moot so taxing carbon is a mugs game."

Anonymous said...

Umm Steve,

Does a carbon tariff force Dion to take an economic nationalist stance, which will lead to a renegotiation of NAFTA and opposing any free trade agreements with Colombia, Venezuela, Chile, and Brazil etc.?

How does this square with the free traders in the Grit caucus?

What is the difference between this carbon tariff and Dion going on to Lou Dobbs blaming marine shipping for damaging the environment? Do you know how much carbon emission freighters and oil tankers cause to our environment?

It's one slippery slope leading to another. Stephane Dion, meet John Turner, Maude Barlow, Buzz Hargrove, Herb Gray, and Walter Gordon.

Jennifer Smith said...

I'll tell you how they can sell it: point out that apart from the environmental impact of fossil fuels, we need to start weaning ourselves off of this shit NOW because in ten or fifteen years demand will have so far outstripped supply that no one but the very wealthy will be able to afford gasoline anyway. Assuming they can even still get it.

Cheap, plentiful oil is over. We need to start developing a whole new (old) way of living, and the quicker we realize the urgency the less painful it will be. The market prices are helping, but they're still swinging widely enough that people can continue to live in denial. So tax it, tariff it, put it out of reach and use the money to develop or simply provide alternatives (a windmill powered car in every driveway!).

And hey, if China and India are foolish enough to follow us down this road now that it's coming to a dead end... well, you can hardly blame them for buying the hideous lifestyle we've been selling them all these years, but they're going to look pretty stupid when they have a billion cars in their driveways and nothing to put in their tanks.


Steve V said...

"How does this square with the free traders in the Grit caucus?

I don't see this as any different from arguing for labor standards.

Why would anyone endorse a free trade policy, wherein we put a price on carbon and the other country pollutes with impunity? As far as NAFTA goes, this idea was developed, under the assumption that the next American President would do something about carbon, it's one of the premises.

Anonymous said...

"And hey, if China and India are foolish enough to follow us down this road now that it's coming to a dead end..."

Brazil developed an ethanol industry out of sugar cane in the 1970s oil crisis. Both China and India can do well on biofuels. We can't because of the inability of corn to develop ethanol properly without large government subsidies to Archers Daniels Midland.

Speaking of corn, why did the Grits agree to vote with the Cons on Bill C-333 with regards to biofuels?

"Why would anyone endorse a free trade policy, wherein we put a price on carbon and the other country pollutes with impunity?"

Steve, I sent you a link through facebook. You are now advancing the similar argument made by Baird. The globalist argument (which is different from the neo-liberal argument) is that a carbon tax needs to be taxed at source and that the whole cap and trade exercise is a sham. Furthermore, you are dealing with two main developing countries (China and India)while ignoring many others which the Kyoto framework is dealing with (particularly states in sub-Saharan Africa).

You can take the argument of David Suzuki that action on climate change may be derailed by a combination of neo-Conservative free marketeers and left wingers who are clamouring for social economic justice ahead of environmental values. The key is to create a link between social economic justice benefits from action on climate change. It means bringing aspects of the far left on board, not attacking their arguments.

Steve V said...

"You are now advancing the similar argument made by Baird."

Absolutely not. Baird is shirking our responsibility, by arguing that Canada can't act "unilaterally", what I am saying is we do act first, there is a mechanism to protect us from the economic devastation that Baird argues.

MarkCh said...

A carbon tariff is indeed the logical corollary of a carbon tax. Of course, a unilateral Canadian carbon tariff wouldn't provide all that much pressure on China and India (we are just not that big a market), while increasing prices of consumer goods for Canadians. So, we end up with the traditional free trade debate.

By the way, how would the WTO view a carbon tariff?

Steve V said...

"Of course, a unilateral Canadian carbon tariff wouldn't provide all that much pressure on China and India (we are just not that big a market)"

Mark, true enough. But, the idea is being considered elsewhere, namely the EU.