A tax too far

It is a historic first: a government is being punished for doing too much for the environment. French President Emmanuel Macron recently increased taxes on gasoline and diesel fuel, in order to help finance a transition to renewable energy. Public reaction was swift and often violent, including the largest demonstrations in France since the riots of 1968. Many complained the tax was hurting low income people who had to drive. The demonstrators, wearing yellow safety vests that are found in every car, also complained about the cost of living and income inequality. The protests were so widespread that the French government has suspended the tax. For a good analysis of fuel taxes please see an article by the International Institute for Sustainable Development.

President Macron was trying to meet France’s commitments to the Paris Accord to fight climate change by making fuel more expensive thus encouraging people to switch to electric cars. But, it appears he failed to heed a core premise of sustainable development – the need to integrate environmental, economic and social needs. This is the biggest challenge facing political leaders. How do you make a transition to a renewable fuel economy without harming people whose livelihoods depend on the production or use of fossil fuels? What happened in France is a powerful signal to leaders around the world. They face increasing pressure to cut greenhouse gas emissions but to do it in a way that does not cause too much pain for their citizens. Are there other ways of doing it?

In 2008, British Columbia imposed North America’s first broad-based carbon tax on fossil fuels for transportation, home heating and electricity generation. But, the government also reduced personal income taxes and corporate taxes by a roughly equal amount. As a result, there has been relatively little opposition. The province has been gradually increasing the carbon tax and by now has raised the price of diesel fuel by close to 9 cents per litre. The French tax raised diesel by 24 Euro cents per litre and came rapidly.

In Canada a number of provinces now have carbon fees, but in 2019 the federal government will impose a carbon tax on any province that does not. The federal government says it will give back most of what it collects in household rebates so people will not suffer financially. The goal is to encourage people to shift to lower carbon fuels thus reducing costs while still collecting rebates. So far there has been strong criticism from opposition politicians but no signs of a popular resistance to the pollution fee.