Address fuel costs, keep carbon tax

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Defenders of the federal government’s carbon tax will be happy to hear the Bank of Canada governor and a leading economist say the policy is not a major driver of inflation. The Trudeau Liberals, after all, have taken a drubbing on the issue this summer.

But that doesn’t make it any less important to mitigate soaring fuel prices, especially in Atlantic Canada – the region hit hardest by recent increases.

Central bank leader Tiff Macklem and economist Trevor Tombe have argued that, even including downstream effects, the carbon tax is a small contributor to inflation overall. A compelling argument is that the United States is also experiencing high inflation, but has no price on carbon.

We support Ottawa’s decision to hold true to its position on the carbon tax, even as it has become unpopular. The basis of the policy has always made sense: To shift a portion of other tax instruments to the carbon tax, so consumers and businesses who adjust their consumption habits and vehicle choices can pay less tax overall.

Forget a “revenue-neutral” carbon tax. This policy should have been sold – and implemented – as a revenue-negative carbon tax. In which governments actually take in less money as the carbon price signal does its work.

Unfortunately, the implementation has been all wrong. The whole concept is that the carbon tax should not be just one emissions-reductions device among many – but the only instrument. In other words, governments should remove all regulations and subsidy programs and allow the market to do its work, emissions now being appropriately priced.

That isn’t what’s happened. Instead of getting out of the way, Ottawa has heaped even more distorting rules upon the carbon tax – including the disastrous Clean Fuel Standard, which has the added disadvantage of affecting regions unequally.

In the Maritimes, where the Irving Oil Refinery exports most of its product, industry hasn’t been able to access the same credits used elsewhere in Canada. In turn, added costs have been passed on to consumers.

Even if it doesn’t count as baseline inflation, these increases are still felt in households throughout the region.

We urge Ottawa to go back and scrap this part of its emissions program, while keeping the carbon tax.