Focus on keeping industry, not politicians, in Canada

Canadian politics began 2021 with an almost obsessive focus on some elected officials leaving the country over the holidays. For Canadian workers, a more serious concern is whether trade-exposed and energy-intensive industries might leave the country in response to the carbon tax increase announced just ahead of the holiday season. Shortly before both controversies, Ottawa’s 2020 fall economic statement suggested policies to retain such industries and support the provinces most reliant on them. The start of a new year is a time to act on resolutions. The federal government should implement border carbon adjustments and an improved Fiscal Stabilization Program. The federal carbon tax will jump from $30 to $170 per tonne by 2030. A legitimate concern is that this increase could prompt industry to relocate to other countries that do not price emissions. Shifting carbon-intensive production to the U.S. or offshore would shrink Canada’s economy and workforce while expanding global emissions. The fall economic statement featured a solution: “Border carbon adjustments are about levelling the playing field across jurisdictions on carbon pricing: they propose to establish a carbon fee on imports from countries that do not have carbon pricing so that those products face the same costs as those supplied by domestic producers who pay a price on carbon pollution.” In other words, imports would face a carbon tariff of $170 per tonne emitted in producing and shipping them. This approach would ensure that all companies selling to the Canadian market have the same incentive to reduce emissions, but no incentive to simply move emissions outside Canada. Of course, many goods produced in Canada are sold abroad. To provide a level playing field in foreign markets, a comprehensive border adjustment would also include a carbon tax rebate on Canadian-made exports, as I advocated throughout my term as MP for Regina-Lewvan, Sask. To actually reduce global emissions rather than just push industry and jobs abroad, we should welcome and act upon the fall economic statement’s commitment to “exploring the potential of border carbon adjustments.” A higher federal carbon tax and lower oil prices could further squeeze provincial revenues in oil-producing provinces. If so, Newfoundland and Labrador would likely receive partially offsetting federal equalization payments. Alberta and Saskatchewan are much further from qualifying for equalization, yet both provinces still struggle with fluctuating resource revenues. In 1967, the federal government established a fiscal stabilization program to help cushion provincial revenue decreases. Unfortunately, restrictions added over time have made federal support difficult to access. Alberta received $251-million from the program for each of the 2015-16 and 2016-17 fiscal years. Saskatchewan received $20-million for the 2016-17 fiscal year. For both provinces, these payments made up only about two per cent of the drop in annual revenues compared to 2014-15. One problem is that fiscal stabilization payments have been capped at $60 per person since 1987. Of course, $60 is no longer worth as much as three decades ago. I was proud to be the only member of the last Parliament to propose lifting the cap to enhance the fiscal stabilization program. Based on economic growth since 1987, this year’s fall economic statement lifted the cap from $60 to $170 (coincidentally the same level as the future carbon tax). It also proposed other fiscal stabilization enhancements to “make the program more generous,” which will most assist provinces with volatile revenues such as Alberta and Saskatchewan. The prospect of a $170-per-tonne carbon tax in a decade is more palatable when paired with a $170-per-tonne carbon tariff and export rebate concurrently, as well as $170-per-person stabilization payments available immediately. Before discouraging Canadians from crowding around for Christmas dinner, our federal government served up a menu of policy initiatives that complement a higher carbon levy. Even those who consider the carbon tax a turkey should welcome border adjustments to level the playing field for carbon-intensive industries and a stronger fiscal stabilization program to level out declines in provincial revenue. Erin Weir was the Member of Parliament for Regina-Lewvan from 2015 to 2019. Follow him on Twitter: @Erin_Weir. The Hill Times

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Focus on keeping industry, not politicians, in Canada

The start of a new year is a time to act on resolutions. The federal government should implement border carbon adjustments and an improved Fiscal Stabilization Program.

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