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‘The Green Shift’: Just the Facts (Part 1)

June 24, 2008

I had been putting off writing a post about the Liberals’ new ‘Green Shift’ / carbon tax plan until I could think of some way to discuss it in a way that wouldn’t be perceived as politically partisan. Then I realized that this shouldn’t be a partisan issue at all. We should be able to look at it, discuss it, and debate it’s merits and flaws without bringing politics into it at all.

Sadly, that isn’t what’s going on out there. Like every other issue, support or opposition to this proposal is falling out neatly along party lines. And that’s a shame, but I don’t think that should prevent us from trying to look at it objectively in this forum.

First, I would encourage everyone to actually download the document and read through it carefully. Next, I’d like to address some of the assumptions being made and misconceptions being propagated about what is and isn’t being proposed in this plan, as I understand it. Here are a few of the more common ones:

“A carbon tax will drive up the price of gasoline even further”

No. Gasoline is already subject to a 10 cent / litre tax that exceeds the top $40/tonne carbon tax being proposed. The new tax won’t be charged at the pumps, it won’t be charged to the distributors and it won’t be charged at the wellhead. The only part of the process on which it would be charged is on emissions from oil production, i.e. energy used for pumping, refining and transport. For conventional oil production these costs would not be significant compared to the huge profits being made.

In the case of the Alberta tar sands the tax would be significant, but there really isn’t any way that those added costs would be passed on at the pumps because a) most of that oil is exported and never makes it to our gas tanks, and b) the price of oil is set internationally, and the oil sands account for only a small percentage of world production. As for the fear that the added cost to producers would discourage investment in the tar sands, given how desperate world markets are for increased oil production right now I honestly can’t imagine anything that would discourage investment. Except possibly a large scale boycott of Alberta’s ‘dirty oil’.

Well, my 400 words are up. Tomorrow’s topic:

“Will the carbon tax will be used to fund Liberal social programs?”

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4 Comments leave one →
  1. June 27, 2008 3:37 pm

    JB –

    Well, let’s take a close look at exactly what the effect might be on a litre of gas. If you look at all the factors that go into the price at, say, a dollar a litre, you will see that:

    ~ 48 cents goes to crude costs, which are set by the international market. Carbon tax effect: 0

    ~ 32 cents goes to various taxes. Carbon tax effect: 0

    ~ 15 cents to the refiner. Refineries emit about 20kg of carbon per barrel of crude. At 159 litres/barrel and $40 per tonne, that’s… half a cent per litre. Carbon tax effect: not quite 0 but somewhat less than a camel sneezing in Saudi Arabia.

    ~ 5 cents for the retailer. Carbon tax effect: unknown, but I’d guess it would be less than a tenth of a cent.

    Other than gasoline, you’re right – the Liberals really need to do an honest examination of the likely cost increases for products and services due to increased transportation and other costs passed on from manufacturers and retailers. I’m still convinced that it won’t exceed the tax reductions and credits for low income earners, but I also think they’ve seriously low-balled it in their costing.

    With or without a carbon tax, I suspect we’re going to really start wishing we hadn’t virtually dismantled our rail system.

  2. June 26, 2008 12:47 pm

    “The only part of the process on which it would be charged is on emissions from oil production, i.e. energy used for pumping, refining and transport. For conventional oil production these costs would not be significant compared to the huge profits being made.”

    Whooee! I support a carbon tax. As a GPC backer, I support a much larger carbon tax than the LPC has proposed. I also think the tax should directly apply to gasoline.

    While you are correct that the added costs to get he fuel to the pumps may be small, businesses pass along their costs and saying that the carbon tax will have zero effect on gas prices is simply not true. No direct tax is not the same thing and it is a flimsy attempt to divert attention from the a hot potato aspect.

    Admit the costs, Liberals. You invite debunking otherwise.

    JB

  3. June 26, 2008 12:01 am

    An online Angus Reid poll suggests Canadians really are misinformed about the Liberals’ carbon tax plan. 66% believe it will increase gas prices:

    http://farnwide.blogspot.com/2008/06/new-green-shift-poll.html

  4. June 25, 2008 1:24 am

    Thanks Jenny for commenting in a non-partisan manner – basically doing what the Globe and Mail recommends the Prime Minister should do:

    http://www.theglobeandmail.com/servlet/story/LAC.20080624.ECARBON24/TPStory/Opinion/editorials

    You’re also providing a model here for how to do that – by clarifying the facts (I wish I had italics in the comments function here!) before coming to any conclusions about the policy.

    It would be great if other readers or bloggers could break down elements of the policy for us, and perhaps address further misconceptions that might be out there. A similar attempt to explain the main points of the cap-and-trade proposals would be great as well.

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