Carbon taxes in Canada: Was Stephane Dion Right?

Former Liberal Party Leader Stephane Dion was an inept politician, but a better policymaker.

Former Liberal Party Leader Stephane Dion was an inept politician, but a better policymaker.

Global climate change is a complicated study for scientists. Modern climate models evaluate enormous amounts of physical data and their forecasts require some of the world’s best supercomputers. The complexity of the issue certainly leads to imprecision, and climate scientists are unafraid to admit that. But like most complicated issues, climate change is a phenomenon that is scientifically approachable, despite the gaps in our collective understanding. Even allowing large margins of error, scientists agree that human industry has had the effect of warming up the world by changing the composition of the atmosphere. Their predictions over the last few decades have been borne out. Even at the lower bounds of estimation by scientists and evaluations by economists, the future is one where climate change will be noticeable and costly.

The famous 2006 Stern Review estimated that GDP in 2200 would be around 14% lower as a result of climate change, representing something like a 0.1 percentage point decrease in GDP growth per year over that time. This is trillions of dollars over the decades, lost to more frequent natural disasters, physical displacement from coastal areas and ultimately reduced crop yields resulting from scorching.

There is a minority of economists who would argue that, when discounted, the costs of global warming are not large, especially as a proportion of economic activity as a whole. However, the cost of mitigation is almost certainly less, as Nobel winner Kenneth Arrow argued in 2007, even at extremely high rates of future discounting. There is broad agreement in the developed world, at least academically, that the future costs of climate change justify enacting policies now to mitigate them.

As is the case with many technically complicated public policy concerns, a general consensus among scientists, economists and technocrats has not resulted in the accumulation of enough political capital to make meaningful changes, at least in Canada. Canada is a geographically huge, relatively cold place, and energy use per capita is very high. Our energy sector is highly developed and productive. It isn’t really our fault that we aren’t as inclined as Europeans to voluntarily raise the cost of energy, whether through carbon taxes or emissions trading. And not many of our elected leaders want to play the role of climate villain, asking us to make the sacrifices that would seem to weigh on our economy.

There was one politician who tried. It was really a courageous thing for Stéphane Dion (former federal leader of the Liberal Party) to begin talking about carbon taxes in June of 2008, while the North American economy slowed to a crawl and we feared job losses in the US would spill over the border. His naïve faith in the distracted public to support his scheme proved what most Canadians knew: he was an awful politician, even if he would make a good bureaucrat.

But Dion’s Green Shift, to his credit, was an entirely sensible plan from the standpoint of climate science or economics. It involved a phased-in tax on carbon dioxide emissions, rising from $10/tonne to $40/tonne over the course of a few years. Gasoline itself would have been exempt, already having its own tax. Other energy-related costs would have gone up slightly. An average household might have expected to spend an extra $500 or so on energy each year as a result. To compensate this, Dion’s plan would have reduced marginal tax rates on the bottom three income brackets. By most estimates these tax cuts would have more than compensated for any extra energy expenditures; a family of four with an income of $60,000 would have saved $1,300. The net costs of the law would have been borne mostly by producers.

While the plan was lambasted, there was really nothing radical about it. The NDP at the time had proposed a European-style cap-and-trade system (probably because it would allow them a greater feeling of the control they craved than would a broad tax-based approach). Nobody was proposing anything as unproductive as blocking the construction of oil pipelines, as has become an issue in the United States.

The Liberals were practically reading their policy from an economics textbook. The most efficient taxes are those that correct for market failures. Anthropogenic climate change is perhaps the most profound market failure of which we’re aware. A Pigouvian tax on carbon would have the effect of partially building the costs of the long-term effects of carbon emissions into market prices. And while Dion might have coopted the corrective tax as a new revenue stream, he instead advocated broad-based tax rate reductions that most economists would support.

A carbon tax in Canada would not go very far to change the global path of climate change over the next century. It might be nearly as valuable as a moral signal to the world as it would be an emissions reduction tool. While I am always skeptical of government as a solution to the world’s big problems (hunger, disease and poverty have been better addressed by markets), I recognize the value of corrections to our tax code in the face of genuinely vague, but certainly real and looming shocks to our economy that will come as a result of climate change. It would be unwise for conservatives like myself not to embrace a reasonable federal policy of emission reductions along with compensating reductions in income tax rates—even if it was the Liberals’ idea.

This article first appeared in the Prince Arthur Herald on August 20, 2013.

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The New Effort to Modernize Porn Laws

British Prime Minister David Cameron announced an opt-in porn policy for the UK recently.

British Prime Minister David Cameron announced an opt-in porn policy for the UK recently.

Two weeks ago British Prime Minister David Cameron made an unexpected announcement. Beginning shortly, he said, online pornography in the United Kingdom would be an opt-in service. Internet providers would be instructed to block lewd content by default. While Cameron’s rationale that the filtering would slow down child pornography is probably mistaken (offenders could simply opt in), he is correct in noting that internet porn is something unique in its destructive power. Compared to older sorts of smut, it is infinitely accessible and endlessly novel. It was almost impossible to be a porn addict a hundred years ago. Now there are millions of families affected by porn use. This is a radical shift in social habits, and it only makes sense that public policy should be re-examined in its light.

Cameron’s proposed policy on its face is not earth-shaking—it will still be legal to access pornography. But there has been an outcry among porn users who want it to be more than legal. On social news site Reddit, amidst the cries of tyranny, there was a chillingly common sentiment by commenters: “does this mean my wife (or parents, or family) will have to know if I want to opt in?” Cameron became the internet’s new villain. The swift, hostile reaction to the policy across the new media reveals the real implication of the policy for British indulgers: porn use will no longer be in secret.

There is a point to be made about the moral nature of the pornographic vice, which I will come to shortly. The more direct question for Britain at the moment is regarding the freedom of porn users and creators. It is true that Cameron’s policy is a form of censorship, and that it restricts in some degree the liberty of the individual. To the civil libertarian, this sort of mandate is anathema—to the fundamentalist, there is scarcely a good reason to make decisions on behalf of the individual. But while liberty is essential to a healthy society, there are other virtues worth considering.

Pornography, while a private indulgence, is not limited in its effects only to the user. In economics, when the negative effects of an activity spill over to uninvolved third parties, the cost they bear is called an externality. Think of the neighbor of a polluting plant. The problem with externalities is that the third party never agreed to the cost, and has no means of forcing the polluter to pay up. The result is over-pollution. The responsible approach of a modern society to an externality, when the parties do not resolve the issue themselves, is to accept a collective regulation. This is why governments restrict pollution and tax tobacco use, correcting externalities in ways that the voluntary market cannot ordinarily do. In a manner very similar to that of economic externalities, porn use tends to create moral externalities—social costs that fall on others, never automatically priced into the market of individual behavior, so to speak. The effect is exaggerated because the family members of the porn user are often not aware of the behavior.

What does porn do to families? There has been little quantitative study on the question. Of the research that has been done, including metastudies, there is a balance of evidence suggesting that porn use among males leads to increased aggression, less aversion to rape and a disconnection of sex from affection. In addition, there is stunning anecdotal data from divorce lawyers that internet pornography is a factor in around half of divorces. In the absence of a clear scientific consensus, however, it might be as useful to ask as a matter of imagination whether the spouses of porn users are normally aware of their partner’s porn use. If they are not aware, would they like to be aware? Does the fact of the secrecy imply that they would not approve of their partner’s porn use? Why would they not approve? What would it mean to a woman to know her husband spent most nights indulging in pornography?

I am admittedly unable to give definitive answers to any of these questions. However, I can offer my best guesses, and the honest reader will admit their plausibility. Porn is largely a secret vice, indulged in with infrequent exception for only selfish reasons. It is hidden because it would be emotionally scarring to loved ones if it were revealed. Despite its secrecy its effects on the user bleed into regular life. Porn use is often addictive, and the inability of men (and most of the hours spent watching porn are spent by men) to stop weakens sexual and emotional relationships, including marriage. So the question of how to approach porn laws must consider the family as well as the individual.

It is probably the case that Cameron is in over his head when it comes to the technical methods that will be needed to enforce his law. The internet is notoriously difficult to control. It may turn out that, in the effort to avoid blocking clean content, the filters will miss some of the offensive material on the internet. However, this is a small problem. The success of the system will not be that it prevents people from watching the stuff, as they can always opt in. The success of the system will be that in order to watch porn freely without going to the trouble of bypassing filters, users will have to admit to the other members of their household that they want to watch it. This is a check on behavior far healthier than a government ban. It will enable parents and spouses to be aware of what is going on in their own house. It is a modern response to a modern problem. This is no grave threat to liberty. It is in fact a victory—for familial transparency, honesty, and certainly decency.

This article first appeared in the Prince Arthur Herald on August 6, 2013.