Should Canada have a carbon tax?

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If you have been following the Canadian election (most likely you haven’t), you may know that the NDP have surpassed the Liberals in the polls and are now second place. This means that if the Conservatives don’t win a majority and no other party will work with them (which they have all indicated they won’t), then you could see Jack Layton as the next Prime Minister. The NDP platform is similar to the Liberal platform on several issues, only a little more left leaning. One issue where they stand alone is the carbon tax. If in power, they want Canada to have a carbon tax on businesses which would apply to any company that produces over a certain amount of carbon emissions each year. So is this type of plan good for Canada?

It is a plan that the U.S. has contemplated, but has not adopted (at least not yet). It is also an idea that has been adopted in Europe and depending who you ask is either a success or a big failure. This type of plan will likely be good for the environment as companies will certainly work hard to avoid passing the threshold and be forced to pay an extra tax. On the down side, a new tax is generally a bad thing and when targeted at businesses it can run the risk of less economic investment. Large companies that are thinking about where to open new facilities would always prefer a place with no carbon tax versus a jurisdiction that has one.

Since the U.S. does not currently have a carbon tax in place, it would be a terrible idea for Canada to adopt one. Companies would likely leave the country and head south where they can operate as they are used to and not have to pay some new tax because of it. Now if the U.S. and the rest of the advanced world had this carbon tax then Canada can do it too and not feel a setback, but being the first to do it is a big mistake. Only the U.S. can get away with being the first to do it and have be a clear success. They’re economy is so big and dynamic that companies wouldn’t leave it, regardless. Canada is only 1/10 the size of the U.S. and this means that they need to play the role of follower and not leader on this issue. If Layton becomes Prime Minister, this may be a big problem for Canada’s future.