March 6, 2024 - Bank of Canada holds key rate steady at 5% | Page 4 | General financial discussion | Discussion forum

Bill said
Alexandre, I believe you would have to take into account the higher prices that couple pays whenever they spend a dollar (due to the passing on of embedded carbon tax costs by every private or public sector goods and services provider) in your analysis. I think it's a little more complex calculation than some political parties want you to believe.  

That is very true. Every purchase has some sort of carbon tax embedded in the final price that consumers pay, be it groceries or eat out, even tho some spend categories may not be obvious.

Alexandre said

savemoresaveoften said

Rebate means one spend something, then get something back.
The carbon tax rebate is set up to reward those who dont generate much carbon for whatever reason, but its certainly NOT a rebate.

also

Every purchase has some sort of carbon tax embedded in the final price that consumers pay, be it groceries or eat out, even tho some spend categories may not be obvious.

I am confused now: have I been rebated for spending on groceries, gasoline and natural gas heating with carbon tax embedded, or its certainly NOT a rebate?   

ok ok, call it a rebate but in much smaller font size than it appears to be 🙂

mordko said

Carbon tax is not “revenue neutral” for farms. I know it for a fact. The impact on consumers is complex and would require an economic study to evaluate. Farmers don’t have an alternative to carbon fuel. In some cases they can pass the costs on to consumers. In other cases the price is set (eg in Chicago) and the only option a farmer has is to cut production, switch to “eco-tourism”, etc. In this case Canadian produce gets replaced by imports.

In other words, government taking money from Bob and then giving the same amount to John has other pricing impacts, which are complex and not in any way or shape neutral to consumers. One thing is clear: they are inflationary.

Those are non-issues.

Carbon taxes have to impact consumer shelf prices to be effective. Therefore, carbon are inherently inflationary because consumer price indices are calculated on those prices with no adjustment for any carbon tax rebates consumers may receive later.

Bank of Canada has already the studied the issue. In one of his speeches, Govenor Macklem blunted a question about their impact on inflation. People were surprised he didn't dodge the politically-charged question. He replied that the bank estimated the impact then on CPI was about +0.4%. Not significant, especially when that is before any rebates.

Revenue neutrality on consumers and business would be nice but not worth the effort of having consumers and businesses file detailed rebate returns and keep receipts for possible auditing.

Really, carbon taxes will actually not work on people like me if the taxes were revenue neutral. Why would I change my behaviour then? Enjoy the time saved by driving my own car or taking my own Uber instead of public transit. Fly and arrive in hours instead of driving days by road in an EV. I have no problem fronting the carbon tax knowing that I would be receiving a big rebate later after filing some detailed carbon tax return.

Norman1 said

mordko said

Carbon tax is not “revenue neutral” for farms. I know it for a fact. The impact on consumers is complex and would require an economic study to evaluate. Farmers don’t have an alternative to carbon fuel. In some cases they can pass the costs on to consumers. In other cases the price is set (eg in Chicago) and the only option a farmer has is to cut production, switch to “eco-tourism”, etc. In this case Canadian produce gets replaced by imports.

In other words, government taking money from Bob and then giving the same amount to John has other pricing impacts, which are complex and not in any way or shape neutral to consumers. One thing is clear: they are inflationary.

Those are non-issues.

Carbon taxes have to impact consumer shelf prices to be effective. Therefore, carbon are inherently inflationary because consumer price indices are calculated on those prices with no adjustment for any carbon tax rebates consumers may receive later.

Bank of Canada has already the studied the issue. In one of his speeches, Govenor Macklem blunted a question about their impact on inflation. People were surprised he didn't dodge the politically-charged question. He replied that the bank estimated the impact then on CPI was about +0.4%. Not significant, especially when that is before any rebates.

Revenue neutrality on consumers and business would be nice but not worth the effort of having consumers and businesses file detailed rebate returns and keep receipts for possible auditing.

Really, carbon taxes will actually not work on people like me if the taxes were revenue neutral. Why would I change my behaviour then? Enjoy the time saved by driving my own car or taking my own Uber instead of public transit. Fly and arrive in hours instead of driving days by road in an EV. I have no problem fronting the carbon tax knowing that I would be receiving a big rebate later after filing some detailed carbon tax return.  

0.4% in price rises seems signifiant, pushing inflation from under 3% to over and impacting monetary policy by the bank. How is that a “non-issue”? Of course the actual number is highly uncertain; its an estimate and the effect is very hard to estimate. “Rebates” will increase inflation further.

I would question if these taxes will impact consumer behaviour. They will certainly impact farmers and several other industries but to really impact the majority of consumers the rises might be too small. We’ll see. For a farmer forced to switch out of food production to the heavily subsidized (and environmentally bad) ethanol corn production, its also an issue because input costs are important to balancing the books.

Bill: You are right on both counts. It's usually me who is correcting others on spelling "Poilievre," but I blew it that time.

And I was unclear in trying to point out that we get GST+Carbon Tax rebates, but the GST rebate doesn't affect the Carbon Tax calculation. (Because we get the same single cheque from the governments in most provinces, I felt the need to mention that.)

BlueSky:

Let's face it, a government is not in the business of losing money.

Actually, most governments are. 😀

Canada is not isolated by a wrapped bubble from the rest of world.

That's why unilateral climate control and emissions plans can't work, and why we have so many treaties and conferences about working together. Otherwise, there would indeed be a competitive advantage in not acting.

savemoresaveoften:

It's basically rewarding those who are wealthy enough to buy a EV, to save via $5000 govt rebate, save on electricity cost vs gasoline AND on top earn a carbon rebate. Since they are not really spending much that "pays a carbon tax", why are they receiving the same rebate ?! Just cant argee with it at all.

This is how it encourages carbon reduction. Everyone gets the same rebate, more or less, but how much you spend making emissions and how mush you use elsewhere us under your control. (Speaking as a motorcyclist...)

cgouimet:

I'm all for the carbon tax but the Liberals screwed it and themselves royally when they did the fuel oil side-step for a few Newfoundland votes.

I actually screamed out loud when I heard that announcement! It was a great present for the opposition. They really should have presented an increased rebate after focusing on how unfairly the heating oil prices were clobbering it users. Sort of "they're suffering a lot more, so we'll give them back a little more," instead of actually removing the tax, which is so emotionally sensitive.

Alexandre:

Apologies, but it is not clear for me how the government triggers inflation by taking $100 from Bob and giving that same $100 to John?

It's only the consumer-facing Carbon Tax that is rebated. All the tax on inputs that affect prices are NOT rebated.

Norman1 said

savemoresaveoften said

While we disagree on the CB and interest rate debate, I agree 100% with you while carbon tax impact to consumer is negative and real, it’s end benefit is ‘virtual’ at best.

@Norman1, an impact to CPI in the magnitude of 0.4% is massive, humongous, gigantic, not insignificant. Imagine CB expects CPI to grow at 2.4 and it prints 2.8%, that’s enough to prompt more rate hike !
Correct me if I am wrong, but I am quite sure Tiff was talking about absolute CPI change, not relative (as in % on a %). …

.

Carbon taxes do work. That's how we got rid of leaded gasoline. Once the price advantage of leaded gasoline was taxed away, people stopped buying unleaded gas because it cost the same and it was better for the environment.

  

Works differently, depending on how easy it is to replace a product and change behaviour.

Perhaps people will keep houses a little cooler in winter and warmer in summer. Maybe hockey will become too expensive and more families will shift to other sports.

However we will still use oil/plastics and we will still eat, regardless of carbon tax. In industries, such as farming, this tax will shift production of food (and CO2) abroad. And a higher percentage of revenue from fossil fuels will help to fund nasty regimes.

Alexandre said

For fossil fuels revenue, it is other way around. By giving people incentive to move from fossil fuel cars to EVs in US and Canada overall demand for fossil fuels could decline to the point when oil imports from nasty regimes will not be necessary.
That, in turn, will reduce funding of nasty regimes and their political influence on US.

You do not need to eliminate fossil fuels consumption for that, just reduce it by the current level of imports from "nasty regimes."  

Canada and US is an importer of fossil fuels ? I dont think so.

US is the biggest producer of crude oil (in fact since 2018 from shale production) and a net exporter. Canada's production of oil and natural gas is also more than Canadians can consume, and has been an exporter as well.