Roots of carbon pricing
In Canada, carbon pricing is often perceived as a project of the political center-left. That’s why it may be surprising to learn that the roots of carbon pricing—and many of its proponents around the world—are conservative.
Conservatives as much as liberals recognize the crisis of anthropogenic climate change and the need for bold action to stabilize the world’s climate. The fundamental tenets of conservatism—limited government, free markets—are in no way inconsistent with climate action.
Influential conservative economist Milton Friedman argued in Capitalism and Freedom (1970) that environmental problems present a rare case where government intervention is justified. Free to Choose (1980), co-authored with his wife Rose Friedman, argued for a cost-benefit approach to balancing environmental harms and economic costs using “effluent charges”—what we now call carbon taxes.
Greenhouse gas pollution is an example of what economists call a “negative externality”—a cost arising from a transaction that is imposed on some other party than the buyer or the seller.
When a driver buys gasoline at a gas station, she enjoys the benefits of the fuel, and the station owner earns a profit. But society isn’t compensated for the harm that results from her car’s carbon emissions. Therein lies the externality.
Economic theory views externalities like this as sub-optimal. For conservatives, trying to resolve this sub-optimal situation with government regulation is inefficient. Far better to use a free-market mechanism to correct the imbalance: enter carbon pricing. In an ideal scenario, the cost of carbon would be calibrated to precisely compensate society for the harm caused by climate change.
Carbon taxes make sense to conservatives because they tax things we all want less of—carbon pollution—and not things we want more of, like income. Carbon taxes leverage market forces to reduce polluting activities while incentivizing the development and deployment of low-carbon alternatives.
Conservative support for carbon pricing
Around the world, a wide variety of conservative politicians and thinkers support carbon pricing as an efficient, market-based solution to the climate crisis.
In Canada, carbon pricing is gradually starting to achieve hard-won acceptance among conservatives.
The first carbon pricing system in Canada was implemented by a right-of-center politician, BC premier Gordon Campbell, in 2008. Since then, conservative premiers in Alberta, Ontario, and Saskatchewan have implemented industrial carbon pricing, even as they’ve resisted broad-based carbon pricing legislation passed by the federal government.
In 2021, Conservative Party of Canada leader Erin O’Toole became the first leader of a Canadian federal conservative party to endorse carbon pricing. In his climate plan he recognized “that the most efficient way to reduce our emissions is to use pricing mechanisms.”
The governing UK Conservative Party, including leader Boris Johnson, is committed to carbon pricing. While it was part of the European Union, the UK imposed an even more stringent carbon-price floor than the rest of the EU, which helped it achieve the highest rate of emissions reduction in the industrialized world. The government is now debating whether post-Brexit carbon pricing should take the form of a carbon tax or an ETS—but the idea of abandoning pricing isn’t on the agenda.
Perhaps the most significant conservative voice for carbon pricing in the US is the Climate Leadership Council (CLC), whose intellectual leaders are former Republican Secretaries of States James Baker and George Schultz. Members include former Federal Reserve Chairs Ben Bernanke and Janet Yellen, former Treasury Secretary Lawrence Summers, and a long list of Fortune 500 companies.
The CLC advocates strongly for a “carbon fee and dividend” program in the US, not unlike Canada’s carbon tax and rebate.
Politics of carbon pricing in Canada
Extensive polling by Clean Prosperity and Leger has consistently shown that committed and potential Conservative voters in Canada support carbon pricing.
This is especially true in the critically-important 905 swing ridings surrounding Toronto. A poll of the 905 conducted in fall 2020 found that:
- 67% of potential Conservative voters say they cannot vote for a party that doesn’t have a credible climate plan.
- 67% also say a carbon tax and rebate should be a priority in a credible plan.
- 28% of 905 voters say they’d be more likely to vote for the Conservatives if they adopted a carbon tax paired with reductions in personal income taxes.
The results are clear: the Conservative Party of Canada would have an easier time winning the 905 region if it reverses its opposition to carbon pricing.
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