Here, from energy economist Robert Lyman, a discussion of the recent announcement of a “cap and trade” arrangement for Ontario.
Various politicians and academics in Canada have recently called for the introduction of a carbon tax as a means of stimulating a reduction in greenhouses gas emissions. This is welcome news to provincial governments like that of Kathleen Wynne in Ontario that are desperate for new sources of funds. The central arguments for a carbon tax, in terms of economic theory, are that such a tax would create a price disincentive affecting the use of all fossil fuels sources of energy (i.e., oil products, coal, and natural gas) and that it would be more even-handed and economically efficient than the current complex system of subsidies, incentives, and regulatory mandates that are now used in almost every sector of the economy to discourage fossil fuel consumption and emissions.
British Columbia, it is claimed, has already found success with a carbon tax of about seven cents per liter on gasoline. Allegedly, this caused gasoline consumption in the province to drop from 2008 to 2012, even as British Columbia economic performance overall was one of the best in Canada.
Such arguments, in my view, are based on wishful thinking and poor understanding of the institutional context within which carbon taxes have been implemented. Here are ten reasons why imposition of a carbon tax in Ontario would be a very bad idea.
Read the full article here: THE TOP TEN REASONS WHY A CARBON TAX IS A BAD IDEA (long version)