Similar to the debate playing out in Canadian courts, there’s a distinction to be made between a tariff, designed to raise revenue, and a border carbon adjustment whose aim is to curtail emissions. He said border carbon adjustments are not truly tariffs. Tillotson, professor emeritus at Dalhousie University.įor carbon costs imposed at the border, Canada’s treaty commitments under the General Agreement on Tariffs and Trade will pose significant problems, said Aaron Cosbey, senior associate at the International Institute for Sustainable Development. “Both of those are political moves,” said Dr. The Conservative response, which might seem familiar to the current federal cabinet: It’s not a tax at all. ![]() In the late 1800s, the Liberal opponents of the Conservative government’s protective tariff (which imposed levies on imported goods to give a cost advantage to domestic manufacturers) criticized the measure an unfair tax grab. Tax historian Shirley Tillotson said there is a long tradition of governments and their opponents sparring over what is and is not a tax. “Using the T-word can be tough,” he said. He noted that the word “tax” in climate-change policy has proven politically unpalatable to successive Alberta administrations The previous NDP government used the term “carbon levy” and the current United Conservative Party government has shied away from calling the costs it imposes on heavy industry a tax. Tombe, an associate professor of economics at the University of Calgary. ![]() “It’s a carbon tax and it is a carbon price,” said Dr. In his view, carbon pricing is a broader strategy that includes carbon taxation as well as measures such as cap-and-trade programs for industries. It’s a legal strategy, one that is still playing out in the Supreme Court, which has yet to issue its decision on the provincial legal challenges after holding hearings in September.įor economist Trevor Tombe, however, the fine points of that legal debate do not square with the simple reality that Ottawa has moved to incorporate the costs of carbon emissions into energy use. In that sense, the Liberals’ insistence on calling their plan “carbon pricing” is not just semantics. Why the difference? The majority found that the primary purpose of the government’s greenhouse gas legislation is to curtail emissions and that it is a “complete and detailed code of regulation.” The dissenting judges said the fuel levy’s “main thrust or dominant characteristic is that of taxation.” The minority dissent, however, found that the government had introduced a tax on carbon, and that as a result, the act was not constitutional. The Saskatchewan Court of Appeal rejected that argument in its 3-2 decision upholding the constitutionality of the federal act. The Saskatchewan government argued, as part of its challenge, that Ottawa had imposed a tax on carbon, and in doing so did not properly delegate to the federal cabinet the taxing authority of Parliament. The question of whether the levy placed on greenhouse emissions is a tax, or a regulatory measure, has featured prominently in the legal challenges launched by Ontario, Alberta and Saskatchewan to the federal Greenhouse Gas Pollution Pricing Act (note the absence of the word tax in that title). But there are domestic and international legal imperatives driving that language. It might seem like the Liberals are engaging in little more than politically driven word play. “That’s why it’s called a border carbon adjustment, not a tariff,” he said. He noted that the European Union, which uses the term border carbon adjustment, is furthest advanced in figuring out how to create such a levy that doesn’t violate international trade rules. “I think it is explicitly a choice of words,” Mr. ![]() But the government didn’t describe that measure as a tariff. Similarly, Ottawa said last week when releasing its updated plan for meeting 2030 greenhouse gas emissions targets that it is contemplating a “border carbon adjustment” mechanism, which would increase the costs of imported goods from jurisdictions without carbon pricing.
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