Is A Carbon Tax More Effective Than Cap And Trade?

Truthfully, I don't know the answer to that question, although some might say that any action is better than none on the climate-change file. In any event, a Star reader offers his thoughts on the matter:

Provinces can lead the way on global warming, April 7

The fact that the Ontario government’s decision to endorse cap and trade was leaked to Canada’s leading business newspaper confirms my worst fears. This decision is a victory of Bay Street over Main Street.

Clearly, we need a system of carbon pricing if we’re serious about making the polluters pay. Cap and trade offers many benefits for corporations, lawyers and consultants, but there is no evidence that it has been successful at reducing greenhouse gas emissions, whereas there is clear evidence that the carbon tax in B.C. has already resulted in a 10 per cent reduction in GHGs.

Cap and trade is an excuse for inaction that appeals only to those sectors of the corporate community that profit from pollution. It is losing its appeal to the insurance companies and enlightened business leaders who have to pay the price of inaction on climate change.

It has no appeal to the rising number of environmentally conscious Canadians who want to see our government regain respect in the world community.
Even those who invented the cap and trade system prefer a carbon tax for curbing greenhouse gas emissions.

Cap and trade works in theory but not in practice — the United Nations says it has worked badly or not at all. It is complex and difficult to co-ordinate across different jurisdictions; it requires constant tinkering, constant political will and a large bureaucracy. It creates synthetic, government-backed assets that are vulnerable to manipulation and speculation. In short, it is a highly indirect, economically inefficient and expensive way of curbing GHGs.

We need a carbon tax. It could be spun as a fee and dividend system in order to gain political support, if done with two caveats.

1) A portion of the revenues should be invested in a climate change fund that would finance mitigation and adaptation. For example, 40 per cent might be invested in renewable energy, rapid transit and energy efficient housing; and another 10 per cent devoted to disaster management — not only here in Ontario but in those countries where climate change will be most disastrous.

2) Rather than give each citizen an equal share of the revenues, with a half-share for children, we need to take special steps to lessen the impact of a carbon tax or fee on low-income households and on rural and remote communities. We can do this via tax credits or lump sum payments that are indexed to match increasing carbon levies.
Opting for cap and trade will clearly be putting Bay Street ahead of Main Street.

David Langille, Toronto