The Green Shift and Economist Jack Mintz: Not As Comfy as the Liberals Say
Remember when I said that the Liberal Party’s Green Shift could raise emissions by 7.15 Mt? Well, the Liberals state Economist Jack Mintz, of CD Howe fame is 100% behind the Green Shift since he wrote part of it. But really is he? I’ll show you that from what he actually says he sounds quite dubious, and honestly I doubt his true comprehension of the very complicated work being done in the area of the double dividend. That being said, I do respect him as a renowned economist.
(The Green Shift Raises Emissions by 7.15 Mt [Click Image to Enlarge])
However, the [carbon] tax approach may achieve little in the way of environmental objectives. The demand for such products as gasoline and heating fuel is less sensitive to price, since the tax also falls on necessary, almost essential, services such as heating and transportation. The carbon tax is also a highly inflexible tool since it cannot be easily adjusted for changing emission levels. Further, governments become reliant on the revenue and are less willing to adjust the tax rates downward when emissions decline. For these reasons, some experts have argued that regulations that limit emissions, including tradable permit regimes, can be more effective and more flexible.
And his words in the National Post 2008:
While the price for carbon is certain under the tax, the ability to achieve targets becomes uncertain as much depends on how households and businesses will respond to the tax. [I show you how households respond with my analysis here - langmann]
Personal tax reductions will provide some relief to all Canadians although the anti-poverty measures tend to support poorer provinces. The benefits of corporate reductions go primarily to Ontario (43%), followed by Alberta (22%) and Quebec (20%).
Where the Liberal proposal is weaker compared to the Conservative plan is that the latter is more directed at reducing carbon. The Liberals should have distributed more of the carbon tax proceeds to fund investment tax credits in new carbon-reducing technologies and less in anti-poverty measures. While it is appropriate to provide relief to low-income Canadians, the broadening of refundable income-tested tax credits could ultimately push up marginal tax rates on some low-income Canadians trying to get ahead. Thus, the Liberal plan is not as successful in improving competitiveness as it could be.
[comments in brackets and bold text is mine - langmann]
Jack Mintz does not sound as supportive of the Liberal Green Shift as the Liberals make him out to be. What I would like to note two things. In terms of the tax itself, Mintz does not seem to think the Green Shift would obtain the targets the Liberals need to obtain to meet the Kyoto Accord. Secondly Mintz seems to think that the Conservative plan is much more effective at the real goal of meeting the targets themselves.
Some criticisms of Mintz however. Number one is that he ignores the entire proposition of the double dividend (the idea that shifting taxes to dirty stuff and reducing taxes on income increases GNP and welfare). Instead he suggests funding industrial upgrades. The evidence from Europe behind the double dividend is not great and in my honest opinion inconclusive with some articles stating that the double dividend is real and others finding no effect. Mintz ignores the only evidence that suggests some benefit and throws the money at industrial upgrades of which no benefits are proven.
The other interesting aspect of the European carbon tax to note is that many industries are exempt from carbon the tax itself and hence still polluting as much as before, and secondly many of the Nordic countries have politically directed energy policies at alternative sources of energy production in the form of Nuclear Power and Hydro. I have not seen any great evidence yet that the carbon tax itself has reduced pollution in Europe, and I am still looking.
(When the Russians Came Only the Fool Was Worried as the Court, in Bliss, Danced)
Incredible. If it doesn’t reduce emissions why is the Green Shift an issue? Poor communication by the Cons or shoddy reporting by the MSM
Comment by dillon — October 5, 2008 @ 11:15 am
Both. The Cons need to get this stuff out there. Sometimes I wonder what they are doing.
Comment by langmann — October 5, 2008 @ 2:20 pm
I’m not particularly convinced of the Liberal’s Green Shift strategy either, but I do have a question with regards to Wall Street Journal article you referenced. Do your calculations take into account the possibility/likelihood that increased gas prices could push people towards buying more fuel-economic cars, rather than SUVs, for instance (thus potentially reducing some of the emissions). It seems as though the Northern European nations that were successful in reducing emissions were the ones that coupled carbon-taxing to incentives upon which people could spend the supposed extra dough they’d receive. Just a thought.
Comment by Carlo — October 6, 2008 @ 11:21 am
@ Carlo,
I think an increase in gasoline prices definitely would cause people to switch to more fuel economic cars. It has happened before in the US and Canada. However the price elasticity of demand for gasoline is very inelastic, which means that even with this switch not much less gasoline was consumed. What is more likely is that due to a recession in those same times the income effect reduced gasoline consumption more.
There is another problem with that analysis as well. One has to consider that with more people wanting fuel efficient cars, the price of fuel efficient cars rises. Ironically we saw that happen this year when gasoline took a dramatic rise. Which means as the price of those cars rises less are bought in proportion to more fuel inefficient cars than one would expect. LUCKILY and I think this is a BIG random chance, the Conservatives made fuel efficient cars much cheaper this year by providing a subsidy for them which may counter-act some of the increase in the prices of those cars. I think this was luck for them and not actual planning though who knows, they are horrible at getting their message across so if it was a success no one knows about it. It has been something I have been looking to study.
The problem is when you increase income in relation to the carbon tax it fights against all your gains from the tax, so it may have no effect or a worsening effect like I showed.
The thing aout the European countries is that not all of the Shift goes towards income tax reductions but rather labor costs transit funding etc., in fact income taxes are very high and that is causing its own problems, so the increase in fuel costs may have an effect on car prices there. The problem is that Sweden has actually increased its emissions over the years, not decreased. They recieved a bonus from the Kyoto agreement which overall puts them at an aggregate decrease but that was a one time bonus. In reality their emissions have been rising like everyone else, same with Finland. There is NO evidence that I can find that actually proves that they are using more fuel efficient cars, in fact I think I remember reading an article showing they were using less efficient cars in proportion…
Also many Nordic companies operate at much lower commercial taxes than even in the US which actually has very high corporate taxes. This is a big problem for the US. In terms of Kyoto so many Nordic countries are getting breaks in regards to the carbon tax that they may as well not have a tax at all.
What is helping Nordic countries is that they are more likely to use Nuclear and Hydro power than us which reduces emissions. Moreover unlike Canada they have a plan to reduce electricity reliance on fossil fuels. This plan isn’t working that well.
At the end of the day the planet is now cooling so this debate may be mute.
Comment by langmann — October 6, 2008 @ 12:18 pm
Are there any references to: a) the costs and benefits of Global Warming as they pertain to Canada; and b) the actual impact that the Green Shift plan would have on Global Warming, all else being equal?
It seems to me that economists who have come done on one side or the other must have done some of this basic, essential analysis. So where is it?
Comment by Jonathan Story — October 16, 2008 @ 3:33 am
@ Jonathan:
For part
a) Costs and Benefits pertaining to Canada: no one has done anything specific on the analysis of Global Warming itself. Dr. Ross McKitrick has looked at the costs of trying to achieve Kyoto I targets from a Canadian perspective. His analysis shows us clearly going into a deficit. Analysis Here
b) As far as I know I am the only one to look at the impact of the Green Shift plan on Global Warming. As I show, the plan is likely to increase CO2 output. Did you not read that? As for Canada’s impact on Global Warming we contribute less then 2% to CO2 output so either way it is insignificant. However remember the actual Kyoto agreement has an insignificant effect on Global Warming itself.
That is the problem with the Green Shift plan, Dion didn’t even know exactly how it would work, so there was no clear explanation or analysis done by anyone that has been peer reviewed.
Comment by langmann — October 16, 2008 @ 10:23 am