Dion may champion carbon tax

OTTAWA, ONTARIO - The idea was rejected 10 years ago by former prime minister Jean Chretien in the midst of his three consecutive majority governments, but Liberal leader Stephane Dion now appears to be banking on a carbon tax to help win the next election.

"It really goes back a long time ago," said Jack Mintz, a world-renowned fiscal and tax policy specialist. "Ten years ago for (former finance minister) Paul Martin, I chaired the technical committee on business taxation, and we had a whole chapter in there on environmental taxation and we suggested at that time as a commission to turn the federal fuel excise tax (on gasoline) into a broad-based environmental tax."

But Mr. Mintz, who now heads the University of Calgary's School of Policy Studies, said Mr. Chretien was never keen on accepting the environmental tax.

"At the time we couldn't use the word carbon," Mr. Mintz said with a chuckle. "Because the prime minister officially said there would be no carbon taxation in Canada."

Ten years later, Mr. Dion is publicly musing about introducing a carbon tax as a key plank of his platform to address both environmental and economic issues at the same time.

Stealing pages from the B. C. government and the federal Green party, Mr. Dion's Liberals have indicated that they are considering the new tax to discourage consumers and businesses from engaging in activities that produce emissions that can contribute to global warming and harm the environment. Those activities could include the burning of fossil fuels such as heating oil or coal to generate electricity or heat households in the winter.

In theory, the tax would raise billions of dollars that would be offset entirely by the lowering of other taxes such as those on income. The Liberals have not yet explained details about how they plan to ensure that individuals do not wind up paying more taxes at the end of the year because of the new proposed measures.

But in order to be successful at the ballot box, Mr. Dion would have to fend off federal Conservatives who are already circling with criticism that the Liberals merely want to gouge Canadian taxpayers for more money, without any concrete benefits.

"People have got to ask themselves - can they trust Stephane Dion to spend any money he'd collect on the gas tax on the environment?" Environment Minister John Baird told reporters. "This is why nothing happened on greenhouse gases for so long.... The Liberal party of Stephane Dion constantly, whenever they opened up the paper, they said: 'Oh, here's a new idea. We'll change our mind and go down this path.'"

Some political analysts believe Mr. Dion cannot go into an election campaign and expect to win unless he comes up with a major new environmental policy.

"He has no choice," said pollster John Wright, senior vice-president at Ipsos Reid. "As a former environment minister, as a leadership candidate, and as a leader of the opposition who has staked so much on the environment, any backing away on his convictions is going to be seen as something which tests his own credibility."

Mr. Mintz said there is more openness to the idea today than there was a decade ago, particularly for businesses that are looking for a simple solution that will make it easy for them to calculate costs of operating in an economy that places restrictions on the burning of fossil fuels such as oil, natural gas and coal that produce greenhouse gas emissions that trap heat in the atmosphere.

According to a research paper published this spring by Mr. Mintz and Nancy Olewiler, an economics professor at Simon Fraser University, households that use natural gas or heating oil could pay a total of $1.6-billion more to heat their homes in the winter if a carbon tax was introduced. Mr. Mintz also estimates that the tax would result in $4-billion in revenues from households that are using electricity produced from coal-fired power plants.

However, the price of gasoline at the pumps would not be affected under his proposal to replace an existing federal tax with the carbon tax. Mr. Mintz added that the increasing costs of fossil fuels would also increase inflation and automatically improve tax credits, federal rebates and social benefits for lower-income Canadians.

Mr. Wright said that in today's context, people are increasingly concerned about global warming and other environmental issues, but he warned that the Liberals must be careful about framing the issue as a piece of an overall environmental platform as opposed to a punitive measure that would target their wallets while oil companies generate record profits.

Using terms such as "revenue neutral" to explain that the plan would not raise taxes would likely confuse people who don't follow incremental political developments in Ottawa, Mr. Wright added.

"I think it's hard any time, to sell a tax. Jean Chretien was one smart politician who didn't take risks when he didn't need to," Mr. Wright said.