Here’s a question, a cross-Canada, border-independent question, that might resonate with some: Have you ever pulled up to the pumps and put in ten dollars’ worth of gas? Or five? Or maybe you can recall a time when there was an unusually good payday or a tax return, and you decided to live a little, telling the gas jockey to fill it right up (in my historical instances, my eight-year-old Nissan bare-bones rust-bucket), right to the brim? That was feeling on top of the world; a full tank was like going on holiday, cruising around like a free bird, ignoring the fuel gauge for days on end. Maybe it was just me, but I don’t think so. Try hanging out at a gas station in a working-class neighbourhood and watch the action (I have some very weird hobbies). Or if you prefer a more robust data source, a recent survey indicates that more than half of Canadians live paycheque to paycheque.
Squeaking by on cupfuls of gas isn’t the only challenge of living with poverty; a run to the grocery store yields few steaks when the dollars are stretched thin. This phenomenon doesn’t just strike the ultra-poor though, the way of life we’ve become accustomed to is not particularly cheap. Yes, some things have gotten cheaper over time; junk manufactured in faraway lands means dirt-cheap TVs and t-shirts and disposable electronics, but the cost of everything else, from a park pass to dental work to taxes to utilities, continues to climb. Optional consumer crap has become cheaper, while life’s essentials seem to be heading the other way.
This may not be noticeable in good neighbourhoods of established well-paying occupations; if we’re long-immersed in those bubbles we don’t see the rest. But many live in bubbles that are far less comfortable.
All this is relevant context for what the federal government has in store for us soon, apparently. Ottawa is working on something called the Clean Fuel Standard, news of which may be out by the time you read this. It’s not as pleasant as the words “clean” and “fuel” sound; it’s another carbon tax on top of the existing one, the second half of a one-two punch designed to reduce Canada’s emissions. Fair enough; carbon taxes really do have the potential to reduce emissions. But, as with anything to do with energy, it’s not that simple.
Federal initiatives to reduce GHG emissions tends to send oil patch workers scuttling for the storm shelter, not because of the emissions component but because of the collateral damage. The hydrocarbon sector has been feeling singled out as the focal point for UN/Ottawa attack – Bills C-48 and C-69 are about all the proof you need of that (note how our own PM is musing aloud that the proposed A2A railway from Alberta to Alaska may never be built, long before the project has even gotten off the drawing board). That feeling of doom for the oil patch, which the federal government refuses to dispel, seemed to crystallize in the carbon tax, the very name of which implies guilt for the sector.
But while the carbon tax may seem aimed at the ultimate economics of hydrocarbon production, its main target is elsewhere, and we shouldn’t forget who will bear the brunt of it. And by brunt of it I don’t mean absolute dollars, I mean relative dollars, which are far more devastating, for a good chunk of the country’s population
A carbon tax is one of the few real tools the government has to reduce consumption, and it works. Drive the cost of anything up high enough and demand will fall.
That’s all well and good for stuff like the aforementioned brand-new-but-three-years-from-landfill TV sets, but that’s not where the government is gunning. No, it’s heading for your fuel supplies. The carbon tax was one thing and appears somewhat digestible; the next phase could be anything but.
In cold, dark, huge Canada, there is no way to get around the necessity to heat a home, or drive considerable distances in the course of life. Even poor people have to do that. In fact, often poor people have to do that, sometimes more so than the well off. Poor people have to live where their budget will allow, which may have little to do with where work appears. The well off choose where they will live to maximize convenience.
It’s a similar story with efficiencies. It’s all well and good to offer incentives to lower heating bills by changing all the windows in your house (as a carbon tax is designed to do, when applied to natural gas), but those incentives are meaningless to those that pull up to the pumps and ask for $7.80 worth of gas.
This emissions solution makes Ottawa feel good, however of course it is the sort of solution that earns kudos in university economics departments but is a kick in the groin to everyone else. The government’s solution is to offer a sum of money back at the end of the year, at tax time, as a means of equalizing the pain.
It takes a bunch of brats who’ve never been without anything to think this is somehow equivalent. Think of it this way: picture yourself paying rent, utilities, food, car expenses, and some basic necessities, and having almost nothing left for the rest of the month. That’s how a lot of people live. Squeezing them even harder every month is not compensated by a lump sum a year away. Over that year, the car will need new tires, the kids will need to go to the dentist, the washing machine will break, people will need new clothes…and that tax credit will be a tiny pork chop to throw at a pack of wolves to keep them at bay. Being held underwater for 11 months is not compensated for by getting a holiday in the twelfth.
The Clean Fuel Standard has some scary possibilities; speculation is that it could increase the cost of natural gas by 60 percent and gasoline costs by 11 cents per litre (the Montreal Economic Institute said “Canada would become the only country in the world to include natural gas and propane in such a policy, placing numerous Canadian businesses at a competitive disadvantage.”).
Now, a carbon tax is truly an effective way to reduce emissions. But by evaluating emissions the way the government has – on a pure carbon output scheme – it’s a recipe for disaster and will do little to help things.
What is essential to life? Leave that stuff alone. What is optional and frivolous? Go after that. Example (and this pains me because I love cars): when you go buy your new Toyota Camry (and many of you do, admit it), you will have a choice between a smaller less powerful engine and a bigger V6. The smaller engine makes plenty of power; the 0-60 time of the lesser engine is better than most sports cars of a decade or two ago. So why not go after the overconsumption of the bigger engine, in a meaningful way? Same goes for pickup trucks, of which Canadians are extremely fond. If 300 horsepower makes for a very capable truck, why not carbon-tax the extra power? (Ironically, same goes for Tesla, the company that brags how their car can out-accelerate anything else; why not tax them for choosing to do that instead of increasing range and/or longevity, as German manufacturers are doing?)
How hard is it to define items that are luxury? It’s almost ludicrous not to, if attacking fuel consumption. We live in a progressive income tax scheme; is it crazy to consider expanding progressivity to where it makes more sense? Taxing the income of the wealthy does little except cause them to earn less income (a fortunate option for the wealthy) which may mean less business investment. But would progressive taxes on luxury items have any similar negative effects? Does it make sense that a family of four making $40,000/year pays the same 5% GST on a dealer-purchased five-year-old Hyundai that a purchaser of a new Ferrari F8 Tributo does? One produces 150 hp and gets the family everywhere; the other produces 710 and goes for coffee 10 times a year on Saturday mornings? Sure, that one instance might not make much difference. But it’s not that hard to start thinking differently about what is essential, and what isn’t.
And it’s not even that hard to equalize for quality, when considering what is true luxury – back to the TV set analogy, maybe a $500 set is not more luxurious than a $200 one, if the more expensive one comes with a warranty that justifies its cost. No more crap for sale – want to sell a toaster at Walmart for $15? No problem, but it has to be fully warranted for 5 years. Or whatever. Governments could do smart things, they really could…
These thoughts aren’t “eat-the-rich” socialist nonsense, but they are humane. Taxing life-giving fuel generically is barbaric. The government regulates the price of milk because it’s considered an essential of life that everyone should have access to – yet they choose to pile taxes on fuel that allows people to get to work and keep from freezing to death.
It is sad that bureaucrats have no sense of how pinched much of the country lives (32 percent of Canadians aged 45-64 have no retirement savings (wonder how that national average would compare with Ottawa’s civil servant swarm?)). I suppose that ignorant view is natural considering the well-fed bubble they live in. The phrase “ivory tower” seems profoundly precise. This isn’t to say that the oil patch lives in poverty, but it should be clear to all by now that that oil patch is exposed to the possibility of poverty in ways Ottawa can’t imagine. Bureaucrats’ idea of poverty is formed by brief purposeful visits to a homeless shelter, but the average citizen in poverty is far less noticeable than that. And more carbon taxes that pound on the essentials of life are not going to help keep this teetering nation.
What does this have to do with the oil patch? Nothing in particular, just a reminder that while a carbon tax (or two of them) may pose hardships for the industry, it will create 30+ million brothers-and sisters-in arms that may well react the way Ontarians did to the last Liberal government that went too green too fast.
My almanac says it looks like a 6 month winter this year. Shorten it with good reading! Pick up “The End of Fossil Fuel Insanity” at Amazon.ca, Indigo.ca, or Amazon.com and find energy discussion sanity. Thanks for the support!
Read more insightful analysis from Terry Etam here, or email Terry here.
