Mark Jaccard and Jack Mintz on carbon taxes and emissions trading

A week ago I reviewed an op-ed by the CEO of the C.D. Howe Institute, Jack Mintz, arguing against carbon taxes. Today I came across a longer article in Alternatives magazine where Marc Jaccard of Simon Fraser debated the issue with Mintz. I recommend reading the article because its a brief (2 page) summary of the principle arguments and counter-arguments around a carbon tax, by two particularly respected experts (note that Mintz is a tax expert, not an environmental economist). Its particularly interesting because by the end of the debate Mintz seems to have changed his position to support carbon taxes.

Here's a brief summary:

Mintz against carbon taxes

1. Carbon taxes don't reduce GHG emissions effectively because demand for energy isn't very price sensitive.
2. Carbon tax revenues are unlikely to be used to reduce other taxes (income, etc.) because governments love to appropriate new revenue streams.
3. Carbon taxes impose a disproportionate burden on low-income earners because energy costs are generally higher as a percentage of their income than higher-income earners. Compensation for low earners would significantly reduce the effectiveness of the tax.
   

Jaccard's rebuttal

1. Carbon taxes have been shown to affect energy use and emissions - demand doesn't go down necessarily, but consumers switch to lower-emissions energy sources.
2. This point isn't an argument against carbon taxes, simply a critique of government in general.
3. Compensation to low-income earners will reduce the effectiveness of a tax very little.
4. No applied economists looking at carbon taxes as a policy tool agree with Mintz's arguments.

Mintz's reponse

1. Regulation with emissions trading is more effective than a carbon tax because it sets a specific target for emissions reductions, whereas its very difficult to predict the reductions that a tax would achieve.
2. Governments will be reluctant to reduce a carbon tax even once emissions reductions are achieved, because of the revenue generated. Alcohol and cigarette taxes demonstrate this dynamic.
3. Yes, carbon taxes and other ecofiscal approaches (taxing "bads" rather than "goods") can be useful tools but can't achieve all reductions on their own.

Jaccard's summary/rebuttal

1. Both positions are actually fairly similar.
1. Carbon taxes on their own may not achieve all of our reductions targets.
1. However, carbon taxes and emissions trading can be used simultaneously and very effectively.
2. Leading climate change policy economists agree that carbon taxes are one of the most, if not the most, effective tools.
3. Carbon taxes should be seriously considered as a policy tool for Canada.
   

Link to Alternatives article

My comments
Glad to see this article come out, since Mintz's initial article in the Financial Post essentially claimed that carbon taxes are a terrible option that should not be considered. By the end of this debate, Mintz has essentially changed tack and said that in fact ecofiscal taxes and carbon taxes *are* a useful tool, but one that needs to be complemented with other policies. Wish that had been included in the FP article.