Ottawa’s contradictory climate policy just wastes money
"Around the world, businesses, governments and experts agree that carbon pricing is the cheapest and most efficient way to cut carbon pollution," Catherine McKenna, Canada's environment and climate change minister, recently tweeted. If what she says is true, it means all other anti-carbon strategies — including regulations and subsidies — are unnecessarily expensive and inefficient.
Yet just a few months earlier, when McKenna announced $100 million in green subsidies to Ontario households and businesses, she said that the spending "pays for itself by saving money, reducing carbon pollution and making our homes and businesses more comfortable and affordable."
Has her position changed or does she still believe Ottawa's subsidy programs and corporate welfare remain an efficient use of tax dollars that will somehow pay for itself?
McKenna's $100 million supported the previous Ontario government's climate spending program. However, the evidence shows us that the billions the Ontario Liberals had slated for climate spending was a massive waste.
A recent essay by University of Calgary economist Trevor Tombe estimated that money spent to "improve energy efficiency in multi-tenant residential buildings" was 29 times more expensive, per tonne of emissions reduced, than cap and trade. And "support to household adoption of low-carbon technology" was about 15 times more expensive.
It turns out that just as the budget doesn't balance itself, the government's green spending doesn't pay for itself either. While Conservative Premier Doug Ford is sensibly axing Ontario's climate-spending fund in an effort to drag public finances back in the right direction, the federal Liberal government is forging ahead with handouts to rent-seekers.
In just the past few months, federal taxpayer dollars have been torched on everything from corporate welfare for farms in P.E.I., to enlarging the Alberta Indigenous Solar Program, to homeowners' windows in New Brunswick, to making Ontario's post-secondary campuses more energy efficient.
Why does the federal government continue to waste billions of dollars of your money this way when — by McKenna's admission — experts agree that a carbon tax is preferable? The answer lies in what Liberals view to be a problematic feature of a carbon tax as compared to a government command-and-control climate strategy.
Economists prefer taxation over subsidies and regulations because a carbon tax, for example pegged at $20 per tonne, gives people incentive to reduce emissions when, and only when, the cost of doing so is below $20 per tonne. This means the private market has the flexibility to find the cheapest ways to reduce emissions, rather than have the government decide.
But allowing more flexibility for the private sector isn't something Liberal politicians can go along with. If households and businesses are allowed to make decisions for themselves, the collective wisdom and brilliance of those politicians goes unused. That's why a heavy government spend-and-regulate regime is in place.
Just as importantly, billions of dollars in spending announcements allow politicians to hold press conferences to burnish their green credentials and repeat tired slogans about how government spending improves both the economy and the environment. Such slogans ignore that the fastest increases in prosperity and cleanliness in human history were supported by private industry, not corporate welfare and green subsidies.
The federal Liberals remain big supporters of the carbon tax, of course. But that has nothing to do with taxes being cheaper and more efficient than regulations and subsidies. They just like the carbon tax because it's a tax. And they will find ways to spend it even if the policy evidence says it's a costly mistake.