Politics should not impede sound economics

 

The Government got it right. We don’t hear those words often! But when it comes to the most cost-effective/efficient way to reduce Greenhouse Gas Emissions, a carbon tax is the way to go. And since industrial bioeconomy practitioners are trying to substitute hydrocarbons with carbohydrates, and since that type of substitution is exactly what a price on carbon will achieve, all of us, including all those venture capitalists and strategic investors who have put their lives and their money into advancing the bioeconomy, should be smiling.

 

As I said in this space in November, 2017, “If generating carbon is sufficiently financially painful, then taxed entities will innovate away from hydrocarbons toward low carbon chemicals and materials. Private sector board rooms around the world will be answering to shareholders whose return on investment will suffer if carbon is taxed. Those same shareholders will flee to entities that are innovating to avoid the tax. Innovation laggards will fail.”

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So to carbon tax naysayers I ask: “If not a carbon tax then what?”  The federal government has, after all, surprisingly few levers with which to achieve its GHG emission reduction objectives. It can regulate, spend, procure, and tax. But regulation is cumbersome for the market; spending Programs are often expensive relative to a tax and can lead to trying to pick winners; and procurement – well, once the carbon tax has motivated innovation and led to the creation of more bioproducts and biomaterials, then the government can procure said bio-products in much the same way the U.S.  Department of Agriculture’s Bio-Preferred Program already requires.

 

Selling this story to voters, however, is not going to be easy. Sadly, Canadians take their environment for granted. They are not really motivated to do anything – especially if that “anything” walks and talks like a tax.

 

Fortunately, Canadian business leaders such as Unilever Canada, Shell Canada, United Steelworkers, RBC, Ernst & Young Canada, Home Depot Canada, and McKinsey & Company have, together with environmental, indigenous and academic groups, come out in favour of the tax in a letter declaring: “We are pleased to see that Canada is putting a price on carbon emissions... Most of the world’s major economies are now pricing carbon because it is the most cost-effective way to reduce emissions and stimulate clean innovation.”

 

Bioeconomy folks need to join this group, and provide the government with successful steel-in-the-ground examples that have created jobs and generated economic wealth, while simultaneously helping to achieve our planetary GHG emission reduction targets. And as to the 4 cents/litre gasoline prices are forecast to increase because of this tax? Pump prices for gas fluctuate by more than 4 cents every weekend. So I’m not sure anyone is really going to notice. Thus, while $20/tonne is a good first step, it is a modest one. The sooner we get to $50/tonne and beyond, the better the innovation and carbon savings results will be.

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In the meantime, thank the Government of Canada for not pushing the fight against GHG emissions off to future generations. My five grandchildren will live safer, more prosperous, and healthier lives as a result.

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Jeff Passmore

Chair, Scaling Up

CEO, Passmore Group Inc.

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