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Political Will and Effective Policy….The BC “Tax won’t be adjusted”

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When a government commits to a policy, any policy, one can usually expect some deviation from the initial stance as the constituent’s line up with their grievances. That is after all how public policy is implemented. Which is why there are some surprising words coming from the BC Finance Minister on how the BC carbon tax will be implemented and why BC may get cost-effective carbon policy (see here):

“There are so many sectors, not just geographic, that have been asking for some sort of special treatment or exemption that … if you go down the road of starting to make exceptions and exemptions then you would have to, at some point, just give up on the idea of pricing carbon,” Ms. Taylor said in an interview yesterday.

Excluding some from the carbon policy is expensive as it transfers the burden of reductions to some and not others. These policy “carve-outs” can ultimately increase costs since low cost options are not sought from all, which is also inequitable. Randy Wigle a professor at the University of Wilfred Laurier has a nice paper from some years ago on why exclusions are expensive for a given abatement target (see a short summary here). He states,

If any carbon restrictions are focused narrowly, the resulting plans can be extremely costly when all abatement occurs within Canada. The narrower the focus of implementation plans, the higher the cost to Canada…In the case where the most energy-intensive sectors alone are targeted, the welfare cost roughly doubles, but this result relies on the availability of a backstop technology which could provide added abatement at constant cost.

Twice as expensive you say? Hmmm…now where have we seen a plan that targets large emitters alone and relies on a backstop technology such as CCS?

And then there are these additional comments from the BC Finance Minister to further indicate that the BC policy may just be implemented with style:

“From our point of view, putting in a broad-based tax so it is equal for all users of carbon-emitting fuels, and doing it at a very low level so people have lots of time to think about whether or not they want to make any adjustments, is the right policy and we will stay with that policy.”

A broad-based application is central to cost-effective reductions. Plus ramping up the policy allows folks to plan capital upgrades to more closely align with normal capital stock turn-over. So, some strikingly clear words from a government facing pressure over a new policy.

Politicians are not known for weathering a barrage of grievances, and so if BC’s deeds echo their words, climate policy in Canada may just have that gold carbon standard from which other policies are compared. While it is early days for the BC policy, they seem to keep getting it right.

Written by Dave Sawyer

April 7th, 2008 at 1:12 pm