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Carbon taxes: a neoliberal “solution” to the climate crisis

Eric Lescarbeau

February 5, 2017

The National Climate Strategy announced by Justin Trudeau in December absolves both the fossil fuel corporations and the Federal government of responsibility for reducing carbon emissions and places it squarely on the shoulders of working class consumers. By setting a national price on carbon Trudeau has set up an unjust transition that leaves it up to the market to solve the crisis without touching the profits of the major fossil fuel companies and without hindering for a second the expansion of the Tar Sands. Trudeau made this crystal clear in announcing approval of Kinder Morgan and Line 3 and in his enthusiastic support for the Keystone XL just resurrected by Donald Trump’s executive order.  “I’ve said many times that there isn’t a country in the world that would find billions of barrels of oil and leave it in the ground while there is a market for it.”

Although Trudeau has carefully avoided any mention of timelines, under his plan the transition away from fossil fuels has been pushed back decades later than the 2050 target broadly agreed upon by the world’s leading climate scientists. Environment and Climate Change Canada estimates that these pipelines alone will put an additional 23 to 28 megatonnes of carbon pollution into the atmosphere, the equivalent of adding 58 million cars to the road. The Climate Action Network estimates that by 2030, Canada will be 91 megatonnes over the target it must meet to be in line with the 2015 Paris agreements. This doesn’t include the impact of the Keystone XL, which Trump has resurrected with enthusiastic support from Trudeau’s cabinet.

Social democracy

Much to their shame, broad sections of the liberal left have embraced free market solutions to the climate crisis and abandoned any serious push for solutions that redistribute wealth to pay for a just transition. Trudeau has leaned heavily on Rachel Notley’s NDP government in Alberta and their Climate “Leadership” Plan to provide them with a left cover. While many had reservations with Notley’s plan, it was supported by many Environmental NGOs and sections of the Labour movement who stood alongside the most powerful oil companies on the stage with Notley when it was announced. This has allowed Trudeau and the Oil Lobby to narrow the limits of what is considered possible to debates over how high carbon taxes should be and how the revenues should be used.

The reality is that not only have carbon taxes proven to be ineffective in reducing emissions, they have also undermined the struggle for climate justice by convincing the victims of the climate crisis that solving it will cost them more than the going with the status quo. In Alberta, the Notley government has introduced carbon taxes this year after cutting royalties for the oil companies by $1 billion last year and giving them billions more in subsidies. Royalties are now lower than at any time during for decades of Conservative rule. Effectively this means working class families are being taxed, in the middle of a major unemployment crisis, so the oil companies can get bailed out. 

Not surprisingly, the Alberta NDP’s support has plummeted as they delay promised spending on healthcare and education in favor of helping the oil companies. This has opened the door to Trump-style politics and a growing right wing backlash. Conservatives have used the anti-tax sentiment to attack any effort to deal with the climate crisis and demand even more support for the oil industry. In December 1,000 laid off oil workers and small business owners joined a rally against the tax, organized by Ezra Levant’s Rebel Media in front of the Alberta legislature.  Former immigration minister Chris Alexander smiled during his speech as people chanted “lock her up,” an echo of similar misogynist chants against Hillary Clinton often heard at Trump rallies. 

BC’s carbon tax: a failed experiment

Many liberal policy wonks defend carbon taxes on the basis that they have supposedly been proven to work and that impacts on working class people can be minimized. For years BC’s carbon tax has been held up by “experts” left and right as proof that carbon taxes work.  However, a Food and Water Watch report, “The BC Carbon Tax: A failed experiment in Market-based Solutions to Climate Change,” released last October has thoroughly debunked this and shown that the tax was and continues to be ineffective.

It is certainly true that emissions did fall significantly in 2008, the year the tax was introduced, but this was also the year of the global financial crisis, which caused carbon emissions to fall in provinces across Canada and countries around the world regardless of whether they had a carbon tax. Emissions in BC have continued to rise since then in spite of annual increases to the tax. At the same time while emissions from taxed sources (about 70 per cent of all sources) rose, emissions from non-taxed sources actually fell. 

The theory of carbon taxes is that by factoring the downstream costs of climate change into the price of fossil fuels, consumers will seek out green alternatives, which will in turn send a “signal” to the market to begin producing these alternatives. Bill McKibben of exemplifies this in a widely read article, “Why we need a carbon tax and why it won’t be enough.”: “Since every actin of modern life involves using fossil fuels, the only way to get enough change is to send a price signal through the matrix, so that everyone from investors to car buyers to electric-toothbrush-users will find their behavior changing automatically.”

The problem with McKibben’s argument is that without pre-existing affordable green options, taxing consumption only ends up acting as a form of austerity forcing working class people to pay more for basic needs like transportation and heating and consume less in other areas of their lives. Since consumption taxes don’t target the profits of the oil companies there is no incentive for them to offer any kind of alternative. In the end, all taxing carbon does is raise the cost of living for working class people without reducing fossil fuel consumption. In BC, motor vehicle sales rose through the years of the carbon tax.

While some middle and upper class consumers can afford to buy a morally “superior” green lifestyle by paying for electric cars or upgrading their homes to solar power, for the majority, who are predominantly working class, these are not options. This shows why it is not surprising that carbon tax proponents had a hard time telling the difference between the impact of a global recession and the impact of carbon taxes.

To his credit McKibben, like many progressive supporters of a carbon tax, argues that regulatory measures to reduce emissions should also be demanded. However, it is telling that McKibben makes no mention of corporate taxation or income taxes on the 1%. Carbon taxes are flat consumption taxes that are based on the idea that everyone should pay an equal share according to what they consume, ignoring the fact that exploitation of the earth and exploitation of working people goes hand in hand. Most workers live paycheque to paycheque and barely have the means to consume their basic needs while the rich who live off their backs have endless means to consume. In practice to argue for a flat tax is to argue against progressive taxation that taxes the rich at a significantly higher rate and taxes profits derived from exploitation. This form of taxation redistributes wealth and reduces inequality, thereby reducing vulnerability to the impacts of climate change for the working class while increasing it for the 1%. The endless cuts to healthcare and education over the last four decades have been driven by a full-scale assault on progressive taxes and their replacement with user fees, tolls and sales taxes.

Revenue neutral is not the problem

McKibben also argues for rebates to working class people to offset the impact of carbon taxes but these often fail to reverse the impact and in many cases it is near impossible to ensure individual families get back what they paid. Inevitably there end up winners and losers in such a bureaucratic system. 

The report from Food and Water Watch shows that in BC while rebates were initially evenly distributed to working class families and to businesses, over time the rebates have shifted more and more in favor of business. “By the 2014/15 fiscal year, British Columbia awarded 70 percent more carbon tax rebates to businesses (US$1.14 billion) than to individuals (US$673 million).” Similarly in Alberta half of all carbon tax revenues go to the oil companies as an output subsidy, literally paying them for every barrel of oil produced. This is supposed to reward them for more production with lower emissions, but ignores the 85% of emissions at the point of consumption so that expanded production dwarfs any increase in emissions efficiency.

In BC’s case the carbon tax is revenue neutral, which basically means they give rebates to everyone who paid it. It obviously defeats the purpose of the tax and makes it entirely ineffective, but it also places “progressives” in the position of arguing to keep the rebates while neocons can claim to be supporting the working class by opposing carbon taxes, as pro-oil Saskatchewan Premier Brad Wall has. 

Many have also pointed out that even if carbon taxes could work they are far too low currently to have any real impact. In fact the level that carbon taxes would theoretically have to rise to in order to be effective is astronomical. As the Food and Water Watch report notes: “In a comment to the Houston Chronicle, ExxonMobil’s manager of environmental policy and planning said that, ‘Trimming carbon emissions to the point that average temperatures would rise roughly 1.6 degrees Celsius — enabling the planet to avoid dangerous symptoms of carbon pollution — would bring costs up to $2,000 a ton of CO2 . That translates to a $20 a gallon boost to pump prices by the end of this century….’ These price increases would represent an extraordinary and unmanageable burden for average Americans. By 2090, carbon taxes would add about US$23,177 (in 2016 dollars) to household energy costs.”

This reality is what has effectively disarmed left criticism of Trudeau’s plan and instead set him up as the urban liberal elite pushing an environmentally “responsible” carbon tax in the “national interest” against a right wing that uses anti-tax sentiment to foment working class climate change denial and support for the fossil fuel industry. In other words exactly the kind of politics that led to a Trump presidency.

Consumption is NOT a choice

Ultimately, consumers don’t control production through their consumption choices. The belief that they do is heavily promoted in the media as a mark of our “freedom” in a capitalist society.  In reality just four companies sell 90 per cent of the products in major grocery stores and the same corporate chain stores can be found on every corner. Choice is an illusion. The corporations that control production also control consumption and the fossil fuel economy is enormously profitable for them.

For most of us consumption is not a choice. We don’t get to choose how cities are designed, where we can find affordable housing, or what form of transportation we get to use to get to and from work, services, recreation or shopping. The history of the car economy is one of artificially creating a fossil fuel based economy with high levels of individual consumption.

One hundred years ago, before the dawn of the car economy, most major cities in North America had robust publicly owned streetcar systems and suburbs didn’t exist. Public transportation was efficient, cheap, convenient and widely used because there was no other option. Consequently, individual carbon footprints were much lower. It was only through a massive concerted and coordinated effort by the car and oil companies of lobbying, public relations manipulation, corruption and at times full scale state repression of working class resistance that these systems were destroyed to make way for the car economy and an extremely wasteful suburban lifestyle.  Today the only “choice” for many working class people is the automobile because affordable housing is deliberately placed far from where they work and public transit systems are either woefully inadequate or non-existent. This is a problem of a system based on forced consumption of fossil fuels, not individual consumer choices. 

Climate deception

The little known history of climate deception, well documented by the Centre for International Environmental Law on their website, shows that the responsibility for the climate crisis lies squarely on the shoulders of the 1% who have continued to profit from the fossil fuel economy for five decades despite knowing full well that the threat of climate change was real. In the 1940s as public outcry began to mount about urban air pollution, the major oil companies in the US came together to form the Smoke and Fumes Committee to study the problem and get control of the science in their own interests. Included in this effort was extensive research into the potential threat posed by rising CO2 emissions. 

By 1968 the threat of climate change was well established. In the Robbinson Report, a summary of two decades of major research prepared for the American Petroleum Institute, titled “Sources, Abundance and Fate of Gaseous Atmospheric Pollutants” scientists from the industry-funded Stanford Research Institute detailed the risks of rising levels of CO2 in the atmosphere and warned industry leaders of the potential catastrophic impacts of climate change: “If the earth’s temperature increases significantly, a number of events might be expected to occur, including the melting of the Antarctic ice cap, a rise in sea levels, warming of the oceans, and an increase in photo-synthesis.”  They also detailed threats to agriculture, forests and fisheries.

The report also predicts that “significant temperature changes are almost certain to occur by the year 2000 and these could bring about climactic change.” It also makes clear that burning of fossil fuels was the cause: “Although there are other possible sources for the additional CO2 now being observed in the atmosphere, none seems to fit the presently observed situation as well as the fossil fuel emanation theory.” While acknowledging that the science still had many uncertainties they also made clear “there seems to be no doubt that the potential damage to our environment could be severe.”

The report concluded by stating that the primary challenge remaining was finding technological solutions: “Past and present studies of CO2 are detailed and seem to explain adequately the present state of CO2 in the atmosphere.  What is lacking, however, is an application of these atmospheric CO2 data to air pollution technology and work toward systems in which CO2 emissions would be brought under control.”

The response of the oil companies and the 1% in general was to bury the science and use their control over it to lie, obscure and promote skepticism so they could continue to profit—as is well documented in Naomi Klein’s book, “This Changes Everything.”

Non-conventional oil resources

It is clear that the current climate crisis could have largely been avoided had the oil industry and our rulers acted on the best available science. Instead, in response to the oil crisis of 1972, Canada and the US invested billions in developing even dirtier non-conventional oil resources to ensure North American energy security and independence from Middle East oil. Threats to the oil economy were seen as threats to the existence of western capitalism. In Canada the federal government created Petro Canada and instituted the National Energy Policy in 1975. Over the next two decades Petro Canada led the way in developing non-conventional oil technologies for offshore oil drilling (Hibernia), hydraulic fracturing and Tar Sands extraction. In the 1990s and early 2000s Petro Canada was privatized, having fulfilled its mission, so that private oil companies could profit from technologies paid for by the public. 

All of this makes clear that a transition to a green economy is, and has been for decades, fully possible, even before most of us knew it was necessary. The main obstacles have never been the choices of working class consumers or a lack of resources to pay for it. Instead it is corporate control over investment and production and the competitive forces of the market which constantly push them to innovate ever greater means of exploitation and ignore the needs of human beings and the planet for the sake of profits.

A worker’s climate plan

The climate crisis is only a crisis because of the inequality created by capitalist exploitation.  If rich and poor felt the impacts of climate change equally the crisis would never have happened.  Oil companies have known about climate change for five decades and used their power and influence to hide the truth and prevent action. This means that any fight to stop climate change must be connected to a broader fight against inequality and can’t rely on “rational” actors in the ruling elite to take timely action. If the climate justice movement is to mobilize the oppressed and exploited to fight Trudeau’s plan it must reject neoliberal “solutions” that blame the victims and force them to pay for a crisis caused by the oil companies and the 1%. That begins with saying “NO” to carbon taxes.

If the climate justice movement is going to build a force powerful enough to beat the oil lobby it must raise demands for reforms that we as working class people are prepared to fight for: demands that redistribute the wealth of the fossil fuel economy to end inequality. While many left wing proponents of carbon taxes mean well, they make the mistake of focusing on policy solutions instead of and in opposition to organizing the collective power of ordinary working class people. In the process they have abandoned long standing arguments in favor of progressive taxation.

Instead of taxes on consumption we should be demanding that the profits of the fossil fuel companies and the income and wealth of the 1% be taxed heavily to pay for a green transition. Instead of relying on the market to lower emissions we should be demanding direct and strict regulation of fossil fuel companies and a hard cap on emissions at current levels coupled with a schedule of annual reductions that will keep us on target to reach near zero emissions by 2050.

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