I found Mary Anastasia O’Grady’s Wall Street Journal column on changes in Canadian economic policy interesting:
Canada’s ability to attract capital suffered a setback when oil prices fell hard in 2015. Under Mr. Trudeau, who took office in November of that year, it hasn’t caught up. In an April 13 blog post, Jason Clemens and Niels Veldhuis of the Vancouver-based Fraser Institute noted that Canadian foreign direct investment amounted to C$31.5 billion in 2017, down 56% from C$71.5 billion in 2013. The authors added: “Since peaking in the fourth quarter of 2014, total business investment adjusted for inflation—excluding residential housing—is down almost 17.0 percent. Private-sector investment in factories and other structures is down 23.3 percent. And investment in intellectual property is down 13.3 percent.â€
The causes of this capital strike seem to be taxes and regulation, as more than one business leader has noted. Suncor Energy CEO Steve Williams said in February that his company is “having to look at Canada quite hard. The cumulative impact of regulation and higher taxation than other jurisdictions is making Canada a more difficult jurisdiction to allocate capital in.â€
For prospective investors, the business climate in Canada is naturally compared with that of the U.S. Recent U.S. tax cuts, including accelerated depreciation, and President Trump’s deregulation push, are increasing the pressure on Canada to step up. In an April interview with the Canadian Press, Royal Bank of Canada president and CEO Dave McKay described the competitiveness problem behind what he called “significant†capital flight and called on the government to address it. “If we don’t keep the capital here, we can’t keep the people here—and these changes are important to bring human capital and financial capital together in one place,†he said.
The new carbon tax is only one of the green policies hurting Canada’s competitiveness. Ontario has long been the nation’s manufacturing hub. But in 2005 the province began phasing out the use of coal for electricity generation, and in 2009 it passed the Green Energy Act, designed to force industry and consumers into renewable energy. The net effect has been skyrocketing electricity prices in the province and declining manufacturing output.
The reaction by the Ottawa government has been to retrench on their environmental policies a bit by restraining the carbon tax. I’m sure they’ll have more flexibility to return to the prior policies after the election.
I’m skeptical about carbon taxes. Can anyone give me an example where they’ve actually worked? Other than as a means of producing revenue, I mean. The basic problem I see is that they’re regressive while carbon emissions are not distributed evenly through the population but increase geometrically with income. In other words the rich can just pay the tax.
Don’t cite European countries as an example. Most of their reductions in emissions over the last 30 years have been realized by exporting heavy industry to China. Not only is that not a solution, it exacerbates the problem.
I’m generally skeptical of any proposition to bolt a solution onto an unchanged system which created the problem needing to be solved. Carbon taxes and pollution markets are examples of such thinking, and capital has done exactly what it does best by evading the restrictions.
It’s depressing that people continue to think our economic system can be tamed by government action when we have two hundred years of evidence that system doesn’t acknowledge boundaries.
I have become skeptical of pigouvian taxes in general, just because I think that a democratic government is unlikely to set such a tax at a level to achieve its results.
One way to look at a coal tax might be in the context of Jevon’s Paradox. One of the reasons coal prices have dropped is that coal-fired plants have become more efficient. Environmental regulations recently encouraged the smallest, most outdated plants to shut, and those that stayed open expanded and modernized. (Natural gas alternatives have also played a role in forcing coal to be more efficient)
Jevons dealt with the concern of coal scarcity and the paradox dismisses the view that more efficient use of coal will conserve coal for future use. One of the clearest ways to accomplish that would be to employ a consumption tax that would discourage the consumer from using more coal in response to greater efficiency. I don’t know if that’s a pigovian concept, but the issue seems similar. We get more fuel efficient cars, gas gets cheaper, and some portion of the efficiency is lost and people don’t want higher fuel taxes.
Somewhat OT: Interesting discussion of Taiwan’s cultural affinities with China versus Japan at the Scholar’s Stage:
http://scholars-stage.blogspot.com/2018/08/taiwans-past-means-little-next-to.html
I have only skimmed it and have zero knowledge of the issue, but know it’s come up recently here.
How I wish that T. Greer posted more frequently!
The post may not be relevant to this post but it ties in nicely with my speculation about whether the mainland Chinese think of the Taiwanese as really Chinese or not. Apparently, the Taiwanese no longer think of themselves as really Chinese.
Much if not most of Europe’s decline in emissions were due to the shutdown of dirty coal-burning facilities in the former Soviet-bloc countries after the Iron Curtain fell. That’s why the EU was so supportive of the Kyoto Treaty, because they knew they could meet the targets better by doing just that (for purposes of emission-counting the old IC countries were lumped in with the Western European nations) whereas the US had long before cleaned up their coal emissions using scrubbers and other gear. Natural gas from Russia has also contributed, helping to balance out the ‘eco-friendly’ burning of ‘renewable’ wood pellets imported from the southern US.