In the aftermath of their surprise and potentially momentous by-election win in Toronto this week the Conservatives were sticking with the same stale sloganeering – “axe the tax” remains their rallying cry and “a carbon tax election” their destination. 

It may have been Brian Mulroney who swore that in politics you must “dance with the one that brung you.” Perhaps the Poilievre party has solid evidence that it is their campaign against carbon pricing that has brought them to the top of the slag heap dominating the current political landscape.  However, last week as the House of Commons was wrapping up for the summer, more evidence emerged to show just how dubious are the underpinnings of the Conservatives’ anti-tax campaign.

The latest developments centred around Yves Giroux, the Parliamentary Budget Officer. As discussed here Giroux’s assessment of the impact of carbon pricing has complicated the discussion about the tax and contributed to the Conservatives’ mendacious anti-tax campaign.

The PBO’s fiscal analysis supported the government’s claim that because of rebates 80 per cent of Canadians covered by the federal carbon tax would get back as much or more in rebates than they paid through higher taxes. At the same time, the dampening effect of the tax on the economy would equate to between $1,316 and $2,773 per household by the time the tax reaches $170 per tonne in 2030. 

The tax-axing Conservatives have chosen to ignore the rebates and focus on the PBO’s economic impact numbers. That approach has been criticized – not least because it fails to take into account the economic consequences of doing nothing to mitigate climate change or the cost of a different approach based on subsidies or regulation. And now the validity of the numbers – the ones the Conservatives are using to support their distortions – is eroding.

The nibbling away began after the PBO quietly posted on its website an admission that its estimates of the fiscal and economic impacts of the carbon tax erroneously included not only the hotly-disputed consumer carbon tax – or fuel charge – but the industrial carbon tax as well. Also known as output-based pricing, the industrial carbon tax has been in effect for several years, with eight provinces designing their own systems. (The Conservatives haven’t said whether their axe would apply to the industrial tax). 

Giroux has promised to correct the modelling error with an updated report by the Fall. He has said he does not expect the do-over to produce significantly lower estimates of the negative economic impact of the fuel charge, but that remains to be seen. Meanwhile, in a plot twist the controversy over the PBO’s error led the government to release its own estimates, calculations that showed carbon pricing having less of an impact on economic activity than that projected by the PBO. And the way in which the release of those estimates came about left the Conservatives looking foolish.    

Claim fizzled

In an appearance before a House of Commons committee, Giroux disclosed that the government had provided the PBO with its own economic analysis but told him not to disclose it. That prompted the Conservatives to allege that the government had a “secret carbon tax report” and had imposed a “gag order” on Giroux to keep it under wraps. The Conservative finance critic confidently predicted that if released, the report would “completely put to shame the claims of the carbon tax scam.”

Not quite. After several days of question period flak the Liberals released the report but it did not live up to Conservatives fevered expectations. In fact, it weakened the Conservative case. 

Environment and Climate Change Canada estimates that without carbon pricing the inflation-adjusted GDP in 2030 would be $2,688 billion. With a carbon tax, that number drops to $2,663 billion, a difference of $25 billion. That $25 billion amounts to a 0.92 percent reduction in real GDP in 2030, a reduction that is 30 percent lower than the PBO’s estimation of a 1.30 percent reduction.

Undeterred by this, the Conservatives made up their own numbers to keep their anti-tax campaign rolling. They patted themselves on the back for forcing the Liberals to release the secret report and claimed it showed that “the carbon tax costs every Canadian family nearly $2,000.” 

How they arrived at that number is a mystery. Canada Mortgage and Housing estimates there will be about 17.5 million households in Canada in 2030. A $25 billion economic hit works out to an average of about $1,430 per household, well short of $2,000. And even the $2,000-per-household supposedly revealed in the “secret carbon tax report” is less than the impact number the Conservatives frequently cite, the $2,773 per Alberta household estimated in past PBO reports.   

It is also important to note that carbon taxes are progressive, with high income households paying more. Indeed, as the PBO’s earlier estimates have shown, the lowest 20 percent of households are actually better off, with rebates more than offsetting both the direct fiscal and imputed economic impacts of carbon pricing. In Alberta, for example, while the average cost per household is estimated at $2,773 in 2030, the lowest 20 percent are better off by $592 a year.

So in addition to ignoring the positive (rebates), the Conservatives have been exaggerating the negative (impact on the economy). Economists have rejected the other Conservative staple – that carbon pricing has contributed significantly to inflation. And the PBO has shown that the rebates provide protection from carbon pricing to low income households. If the rebates were to be axed along with the tax, the Conservatives could be accused of abandoning the poor. 

With their economic arguments becoming weaker, and their climate policies non-existent, having the “carbon tax election” that Poilievre covets may not be such a bad idea. It would draw attention to one of the more egregious traits of the Poilievre party, its deviousness. And since there can’t be a debate about the carbon tax that doesn’t also address climate change, it would bring to the fore the issue that should be the focus of the next election campaign.