June 19, 2008

Carrot or Stick for Carbon

"Vote for me and I'll make it more expensive to heat your home!"

That could be the campaign slogan for Gordon Campbell and Stephane Dion. Campbell already has made it more expensive to heat your home, and if re-elected he'll jack it up more for two more years. Dion wants to do more of the same, if given the chance.

"Vote for me and I'll get you a deal on a more efficient heating system for your home."

That could be the campaign slogan for Carole James. Which is better, the Liberal's big stick or James' carrot?

Campbell and Dion defend beating people with tax sticks by claiming that their approach is "revenue-neutral". They mean that for government in the aggregate, not necessarily for individuals. For government, estimated increases in carbon-fuel tax revenues will be offset by estimated increases in transfers and cuts in personal and corporate taxes. The budget which announced the carbon-fuel tax included examples of how the Campbell government thinks it will impact various families. We can get an idea whether those examples are in the ballpark by dividing estimated annual revenue from the new taxes by total BC population to get the average cost impact per person. That gives $76 for 2008, $143 for 2009 and $200 by 2010; a family of four would have average impacts four times those amounts.

Of course it can be argued that the consumption of fossil fuels varies by family size and income levels. The US Energy Information Administration reported that in 1994 gas consumed for transportation varied from 631 gallons for families with incomes between $5,000 and $10,000 to 1,372 gallons for families with incomes over $50,000. Incomes, types of vehicles and distances driven have changed in the last fourteen years, but the point is clear that gasoline consumption varies with income. The same is probably true of energy consumption for home heating since those with more money tend to have larger homes.

In the examples provided with Finance Minister Taylor's budget, in 2009, additional costs due to the carbon-fuel tax are assumed to be $95 for a senior couple with $30,000 income, $149 for a family of two with a $90,000 income, and $231 for a family of two with a $120,000 income and a boat. Compare those assumptions to the $286 cost per average family of two from the figures shown above - 2 times $143, and you can see that it looks like the cost impact of Campbell's carbon-fuel tax is under-estimated.

Most people aren't going to accept the examples offered in the Campbell government's propaganda. The sticker shock of gas at over $1.50/L and an extra line showing more tax on the bill from Terasen will be obvious, and more persuasive than a government ad. British Columbians know that a vote for Gordon Campbell is a vote to make it more expensive to heat their homes.