Montreal, October 4, 2016 – While Ottawa goes ahead with carbon pricing as part of its plan to fight climate change, the MEI is inviting the government to give Canadians the facts before getting them involved in such an initiative.
“How much will this cost Canadian households? The poorest of them, as well as the middle class, are often among the ones most harmed by this kind of measure,” points out Youri Chassin, Research Director at the MEI.
According to polls, few Canadians are prepared to pay the extra cost of a carbon tax, even if it proved to be effective. A tax of $50 per tonne of CO2 equivalent emissions would add 11¢ to the price of a litre of gasoline.
Nor must we forget all of the gasoline taxes—between 20¢ and 30¢ per litre—that Canadians already pay, and that act like a carbon tax on transportation. Depending on the city, drivers already pay the equivalent of a carbon tax of between $83 and $128 per tonne of CO2.
The current government cannot ignore the gap between the level of carbon tax that would be needed to reach the reduction targets for GHG emissions and the cost that Canadians are prepared to pay. “In order for Canadians not to be penalized financially, the government should commit to fully balancing all carbon tax revenue with individual and corporate income tax reductions. Tax neutrality is the best way to avoid hurting the economy more than necessary.”
Taxing carbon also presupposes not putting in place other initiatives and letting economic actors identify the best ways of reducing GHG emissions. “As long as the government does not announce the abolition of all other measures, like biofuel subsidies, it is not applying the carbon tax recipe,” concludes Youri Chassin.
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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.
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