Jaccard: Carbon Taxes are ‘Good Policy, Bad Politics’ When Regulations Do Most of the Work

One of Canada’s leading climate economists and modelers is out with a Globe and Mail opinion piece that questions the decades-old narrative that positions carbon pricing as the cornerstone for effective climate policy.

In an acknowledgement of the political and electoral risks carbon taxation has produced for its proponents, Simon Fraser University’s Mark Jaccard puts the onus on his entire profession to acknowledge the limitations of pricing in delivering rapid decarbonization, compared to flexible regulations that are already getting the job done in many jurisdictions.

“Carbon pricing is not essential to stop burning coal and gasoline,” he writes. “Economists only say it is because we prefer it.” But “as long as we economists tell politicians they must price carbon, instead of admitting that flex-regs and other mechanisms can do it all, humanity will continue to flounder in the face of the decarbonization challenge.”

Instead, he says advisors should help decision-makers understand that regulations are already delivering the bulk of the carbon reductions that are taking place, can actually get the whole job done—and need not cost much more than a pricing mechanism, if they’re flexible enough to “allow companies and individuals to determine their cheapest way to decarbonize.” For example, a government can phase out coal plants, then let market competition determine the most cost-effective mix of low-emission replacements. Or phase out gasoline engines, then leave it to manufacturers and consumers to decide the resulting balance between electric, biofuel, and hydrogen vehicles.

“We economists should also explain that while carbon pricing gets all the media attention, flex-regs quietly do the heavy lifting,” Jaccard adds. In British Columbia, a single flexible regulation was three times more effective than the province’s groundbreaking carbon tax, and produced no opposition. Carbon pricing accounts for only 15% of the emission reductions achieved in California, and only 5% in Alberta.

“The heavy lifting is from [Premier Rachel Notley’s] coal plant phaseout, methane regulations, a pre-existing flex-reg on large industries, and a cap on oil sands emissions,” he writes. “I’ll bet she wishes an economist had told her she didn’t need the tax, and that it does almost nothing anyway.”

The reason for all the attention to carbon taxes is political, not economic, Jaccard contends.

“Surveys have long shown that taxes are a toxic issue for some voters,” he writes, and “a politician proposing carbon pricing presents an irresistible target, especially if political opponents only need to swing 5% of voters in key suburban ridings for electoral success.” Even if voters receive tax cuts or rebates, “a carbon tax puts a bull’s-eye on a politician’s back, making it easier for opponents to promise to axe the tax and replace it with ineffective policies they untruthfully claim will cause decarbonization. They might even hint at regulations, without giving a timeline.”

That’s what happened in 2008, Jaccard says, after then-federal Liberal leader Stéphane Dion disregarded advice that his carbon tax plan was good policy, but bad politics. “Stephen Harper focused his campaign on ‘job-killing carbon taxes,’” and “Mr. Harper’s victory ensured a lost decade of faking-it climate policies.”

Last year, Jaccard was one of a group of academics who tried unsuccessfully to make the same case to French President Emmanuel Macron’s advisors. “Unfortunately, their warning went unheeded, and now the violent gilets jaune protests in Paris have forced Mr. Macron to backpedal on the plan.”