Carbon pricing, a user-pay system for our environment

Published Tuesday, March 14, 2017 in the New Brunswick Telegraph Journal and the Fredericton Daily Gleaner.

I’ve always been a fan of user-pay systems to help guide – but not dictate – human behaviours.  

That’s why I’m a big fan of carbon pricing: a user-pay system that gives all of us an incentive to pollute less, and ensures those who pollute the most pay for the consequences of their actions.  

User-pay works

The words ‘user-pay’ cause many of us to scrunch up our noses in aversion.  But user-pay is already the reality of much of our present world.

For example, my power bill is based on the amount of electricity I use.  It’s my choice if I want to crank up the heat – but I’ll pay in the form of a higher power bill.

My grocery bill reflects the amount and type of food I buy.  It’s my choice if I want to buy sirloin instead of bologna – but I’ll pay extra.  

Water bills, vehicle repairs, mortgages, home maintenance and more – all are user-pay.  And with good reason; most of us wouldn’t want to be subsidizing the purchases, choices or excesses of even the best neighbour. 

Compare that to conventional trash collection systems, where the lack of a user-pay approach means people who recycle essentially subsidize those who couldn’t be bothered to recycle.  (In economic terms, the latter are kindly referred to as ‘free riders’ – getting more service than they pay for.)  Communities that dare to adopt user-pay garbage collection typically experience immediate reductions in trash and significant increases in recycling.  Imagine that.

Moral compass, money compass

There’s no denying that oil, coal and natural gas have brought us much comfort and prosperity.  However, it’s now equally evident that emissions from burning those carbon-based fossil fuels are driving climate change, and that we need to convert to renewable forms of energy as quickly as possible.  

It would be nice to believe that the moral imperative of climate change would be enough to spur that changeover – but not everyone is compelled by an inner moral compass that differentiates right from wrong.

Yet everyone is strongly guided by an inner money compass, differentiating cheap from not cheap – and that reality is crucial to successfully fighting climate change.

From free rider to user-pay

Traditionally, we humans have allowed ourselves to pollute for free – believing, I suppose, that we’d never get to a point where we could actually jeopardize the very environment we depend upon.  You could say we’ve all enjoyed a nice free ride, courtesy of the planet.

But today’s climate reality demonstrates that the free ride can’t continue without consequence.  

So how best to make change happen?  The simplest strategy agreed upon by most economists is to put a price on carbon, making each of us accountable for the emissions we generate.  It’s essentially a user-pay system for the environment that doesn’t dictate, but leverages the power of our money compass.  Those who wish to keep doing what they are doing can, if they choose to pay.  Those who take the initiative to lower their emissions are rewarded.

Last month, a group of senior US Republicans, including former US Secretaries of State George Shultz and James Baker, joined the growing ranks of conservative-minded people publicly endorsing carbon pricing as the best way to reduce emissions.  “A damn good insurance policy,” Baker called it.

Imperfections 

True, putting a price on carbon isn’t a perfect solution, and it must be carefully planned.

  • A carbon price must start small and then increase gradually to minimize economic impacts and allow time for adjustment.
  • Special consideration needs to be given to most impacted sectors of our economy (IE energy intense) and population (IE low income).
  • Interprovincial and international differences need to be reconciled so we don’t put ourselves at an economic disadvantage.
  • All revenues must be returned to taxpayers via tax reductions, efficiency programs or other incentive, or else it will be perceived as a cash grab.

Pricing carbon is a hard sell in a world where we’ve grown very comfortable with using our environment for free.  But the time for free rides is clearly over.  No matter our political leanings: if we profess to be of reasonable minds, we need to support a price on carbon, a polluter-pay system for our environment.