Save the planet through innovation not taxation

Nazim Cicek might save the planet. He’s researching cellulosic biofuel production that could turn corn stalks and cattails into clean energy. A breakthrough could have a global impact.

We all want to protect the environment – the question is how? Technologies such as cellulosic biofuels show promise. Meanwhile carbon taxes are expensive and ineffective.

Carbon taxes are supposed to reduce emissions by making them expensive. For example, higher gas prices might prompt people to buy electric cars. Dr. Cicek personally provided a case study when he explained why he doesn’t drive an electric car to the cottage.

“I cannot drive out there with an electric vehicle,” Dr. Cicek told a Senate committee in 2011. Electric cars didn’t have the required range. “People will not transition into an electric vehicle until that range anxiety is resolved.”

There can be no doubt about Dr. Cicek’s commitment to the environment, but a carbon tax won’t make him choose an electric car if it can’t do the job.

A punitive carbon tax has limited potential when people don’t have options. Families in Manitoba turn on the furnace because it’s the only way to keep their homes warm in the winter. Farmers transport their crops on trains and ships because that’s the only way to get them to grocery stores around the world. For many, a carbon tax would be pointlessly punitive.

British Columbia’s carbon tax experiment is demonstrating the point.

“The current increase in [British Columbia’s] emissions suggests either that the tax rate is not high enough to drive further reductions, or that other policy instruments are necessary to drive change in behavior,” wrote Jacinthe Clavet-Gaumont and David Huard in a report entitled Synergies: Interactions Between Climate Change Adaptation and Mitigation in Canada’s Energy Supply System (Dr. Cicek is listed as a collaborator on the report).

New numbers provide an interesting update. From 2014 to 2015, BC reduced its emissions by 0.5 per cent, meanwhile Manitoba reduced its emission by 2 per cent without a carbon tax.

Here’s the thing: BC’s carbon tax is ineffective, but it’s expensive. Even though BC’s carbon tax is supposed to be offset by other tax cuts, the Fraser Institute found it was increasing the tax burden by $865 million over five years.

Of course, it’s theoretically possible to push a carbon tax to a punishing level that forces people to take drastic measures, but even in that scenario, there are mathematical limits. Canada produces 1.6 per cent of global emissions. Manitoba produces 2.9 per cent of Canada’s emissions. Even a devastating carbon tax would be a blip in the global context.

Carbon tax proponents recognize this reality when they argue the impact of a carbon tax extends beyond individual behaviour because higher costs motivate innovators. But there’s often a disconnect between the message sent by policy makers and the signal received by the marketplace. And that can have harmful unintended consequences.

Consider the fertilizer plant in Brandon. It’s Manitoba’s largest single emitter with 3.1 per cent of the province’s total emissions. Rather than encouraging efficiency, a carbon tax risks sending the market a signal to produce fertilizer elsewhere. And there are plenty of options.

China isn’t implementing a carbon tax. Australia has tried and repealed a carbon tax. The United States isn’t implementing a carbon tax and it’s not just because of President Donald Trump – Washington State rejected a carbon tax in a referendum despite supporting Hilary Clinton in the general election and Bernie Sanders in the primaries.

If products are produced in China or Australia or the United States rather than Manitoba, there’s a risk of hardship here without an environmental benefit. Even worse, a less competitive economy will leave fewer resources to support research such as Dr. Cicek’s work at the University of Manitoba.

“The rate required to significantly reduce emissions might be outside what is politically realistic to achieve,” wrote Ms. Clavet-Gaumont and Mr. Huard. “This is especially true as long as there is no common commitment across neighboring provinces and states and there are risks that economic activity leaks from carbon taxing legislations to non-taxing legislations.”

Happily, innovation offers opportunity where punitive taxation fails. Progress may come through Microsoft’s plan to test battery technology at a billion-dollar data centre. It may come from farms where new wheat production practices reduce the amount of greenhouse gas in the atmosphere. Or the breakthrough might be Dr. Cicek’s cellulosic biofuel production research. We need to focus on promising innovations to protect the environment rather than failed punitive taxes.