Friday, June 20, 2008

Sifting through the Shift

The Liberals have unveiled the details of their proposed carbon tax. To Dion's credit it appears he has noted the lesson from Kim Campbell, John Tory and others that elections are not the time to discuss major shifts in public policy. He has the summer to educate Canadians on his Green Shift program.

It will take time to review the policy outside of the standard headlines. There is one aspect of the revenue neutral claim that needs further examination. The carbon tax will start at $10/megaton and over 4 years rise to $40/megaton. The Liberals are boasting that as the price of carbon increases the more Canadian families save through tax cuts.

Last summer in Ontario, Hydro launched a number of inititives to decrease electricity consumption. They were successful. As a result the Hydro is experiencing a revenue shortfall and has applied for a rate increase.

The purpose of the carbon tax is to reduce carbon emittions. What happens when the cost of carbon is maxed out and pollution continues to decrease? The overall revenue of the carbon fund will begin to fall. Will families have to give back their tax cuts or will the government continue to increase the cost of carbon in order to keep the tax cuts in place? Either way if this plan is successful Canadians will once again be in a position where reducing energy consumption will have a negative effect on their disposable income.

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