For reasons I'm going to explain shortly, the Conservatives and the NDP are unlikely allies in the debate on climate change policy. I'll be ripping into the idiocy of their positions pretty hard, so in order to balance what follows, I'm going to make a separate point as a sort of disclaimer. For more than a decade, the Liberal position was one of rank hypocrisy: sign the Kyoto Accord, scold people who questioned the wisdom of signing the Kyoto Accord, do absolutely nothing the meet the terms of the Kyoto Accord, and - after the 2006 election - harshly criticise the Conservative government for not being able to defuse the noxious stink-bomb that the Kyoto Accord had become. Right now, the Liberals have the most sensible climate change policy of the three major parties, but their record on this file up until the past few months is nothing at all to be proud of.
There are several levels at which this debate plays out:
- The first-order question about the relative merits of a carbon tax and a cap-and-trade model isn't really much of a debate at all: as I've explained in the Econ 101 version of the problem, the two approaches are basically equivalent. In both systems, there will be higher prices for activities that generate greenhouse gases, and in both systems, quantities will be reduced.
- The next issue is how to handle the redistributive effects of these higher prices. It's pretty clear that low-income households will be hit (relatively) harder by the increase in the prices of such basic goods as gasoline, natural gas, heating oil and electricity. The more concerned you are with income inequality, the harder you will argue the case for using the revenues generated - either from the carbon tax or the sale of emission permits - to offset the hardships that climate change policy will impose on low-income households.
- Adding uncertainty to the Econ 101 model provides another source of genuine debate. If we don't know for certain just how sensitive demand is to changes in prices, then a case can be made for preferring one policy over the other. If you're less concerned about the effects on prices, then a cap-and-trade system will provide an assurance that the target for quantities will be met. If you're more concerned about the economic disruption associated with uncertainties about prices, then a carbon tax would provide more certainty on that front.
If the debate on climate change policy revolved around those last two points - that is, around differences of opinion on the importance of inequality and on whether or not we wanted to live with uncertainty about prices or about levels of emissions - then I would be proud to be living in a country where grown-ups discussed important issues in a sensible manner.
But I don't. And the reason why I don't is that significant elements in the electoral bases of both the Conservatives and the NDP have certain knee-jerk reactions that make it almost impossible to conduct a sensible dialogue:
- Those who have a visceral hatred of taxes will reject the carbon tax model, simply because the word 'tax' appears in it.
- Those who have a visceral hatred of corporations will jump at the chance of imposing caps as a way of 'Sticking It to The Man'.
Now, everyone has their irrational biases and blind spots: Liberal supporters have a tendency to be unable to recognise hypocrisy. But the problem here is that the Conservatives and the NDP are not even able to get to the point where they understand point 1) above, let alone engage in a serious discussion of points 2) and 3). The Conservatives and the NDP both attack the Liberals for making certain essential goods more expensive. They don't mention - either because they are idiots, hypocrites (or maybe they are hypocritical idiots) - the fact that their own cap-and-trade policies will also increase prices.
It's important to understand just how goofy the Conservative and NDP positions are. Both of them seem to think that their preferred variation of the cap-and-trade model will not inconvenience consumers, for really no better reason than the fact that they cannot - or will not - understand the basic economics of climate change policy.