A carbon tax is not a 'price'

Laval University economics professor Stephen Gordon had a recent op-ed in the National Post where he castigates small “c” and big “C” conservatives for their opposition to a carbon tax. I found two things interesting about his piece: (1) he mistakenly refers to a tax as a price, and (2) he implicitly assumes a completely unrealistic world in which the carbon tax would replace intrusive government regulation.

Gordon writes:

A party with a minimal understanding of market economics would have long ago abandoned its campaign against the idea of putting a price on carbon. By continuing and amplifying its campaign against using market-based policies to control greenhouse gas (GHG) emissions, the Conservatives are dismantling their credibility in economics.

But carbon already has a price, or, more exactly, multiple prices. Natural gas has a price; oil has a price; coal has a price. And their prices are related to the valuable carbon component of those fuels because it’s carbon that makes those fuels valuable. Just as there’s no such thing as a free lunch, carbon is not free.

So why does Professor Gordon claim that taxing carbon means “putting a price on carbon?”

I can only speculate because I don’t know him, but here’s what I’m willing to bet dollars to doughnuts on: he calls a tax a price in order to lull the reader into thinking that it’s not a tax. Later in the piece he admits that it’s a tax but in his first mention, which sets the stage, he doesn’t.

Gordon does make one good point about carbon taxes, writing, “As the Conservatives should really know by now, market-based approaches to reducing GHG emissions are more efficient than regulations.” So even if one dislikes taxes, as I do, it’s not hard to show that for a given reduction in carbon usage, taxes are better than intrusive regulation. That’s Gordon’s point.

But here’s the problem.

If a carbon tax is implemented, it will likely be on top of the extensive regulation Canadians now contend with. Who’s offering to end regulation on carbon usage? Who’s offering to legalize certain kinds of incandescent light bulbs? Who’s offering to end the government’s mandates on energy efficiency in cars, trucks, washers, driers, refrigerators, air conditioners and other appliances? Who’s offering to get rid of expensive, market-distorting subsidies to solar and wind power? Anyone? Anyone? Bueller?