The carbon tax proposed for Canada is a thinly disguised tax grab by the federal government. Any alternative, such as a cap and trade regime - one that also sets a carbon price - has been ignored. Any "carbon tax" is a measure that raises production costs that will either be passed on to consumers or will result in lower profits and investment and jobs. In either case, the upward shift in aggregate supply - a supply shock - will have to be compensated by increased aggregate demand, probably by government program spending. (Alternatively, corporate income taxes can be reduced parri passu with the imposition of the carbon tax, a move that would alter the composition of business taxes and be neutral in its overall effects on after-tax revenues while raising production costs.)



The carbon tax, in effect, shifts resources from the private to the public sectors. All well and good if the object is to hedge against the long-term effects of global warming, but a full evaluation of the causal chain, especially on short-run costs and distribution is needed. The costs will ultimately be born by the consumer, a fact that the article avoids by stating that the polluter will pay. As just about everything we consume is produced subject to some degree of carbon use, the article is misleading as to whom bears the real costs. The environmentalist/statist agenda is very weak on economic effects, especially those that will cause simultaneous inflation and unemployment.



On a further note, Project Syndicate should not use its space to further the political agenda of a specific government. Moreover, it should not be used to raise the political profile of a currently serving Cabinet Minister.