Matthew Lau: for all the talk about a carbon tax, a massive increase in funding and transfer payments should get more attention.
On the climate change file, the federal government’s plan is completely incoherent.
On the one hand, when trying to convince Canadians of the virtues of the carbon tax, Catherine McKenna (the Minister of Environment and Climate Change) and her Liberal colleagues insist the tax is the most efficient way to reduce emissions. But they have also significantly increased the use of other policies, such as subsidies and regulations, to reduce emissions.
These policies are unnecessarily costly since, as the government has said, the same carbon emission reductions could be achieved more cheaply through the carbon tax.
If McKenna believes that government spending is a relatively inefficient way to reduce emissions, it’s worth asking why she has spent the last four years turning her portfolio into a hub of taxpayer handouts.
This fiscal year, spending on climate change, clean growth, and clean air at Environment and Climate Change Canada is projected to have grown by a factor of six since the Liberals took office four years ago.
The bulk of this spending increase is due to a massive increase in transfer payments made by the federal government for which there are no goods, services, or assets received in exchange. In other words, the government is just giving the cash away – and in many cases, the giveaways aren’t even taking place in Canada.
In 2016-17 and 2017-18, even before Environment and Climate Change Canada really blew open the climate change spending taps, $15 million in transfer payments went to the United Nations Environment Programme in Kenya, and another $850,000 went to UN programs in Germany and Morocco. Meanwhile, the International Bank for Reconstruction and Development in Washington, DC received $8 million from Canadian taxpayers.
The World Meteorological Organization, the International Emissions Trading Association, and the Intergovernmental Panel on Climate Change – all located in Switzerland – received a combined $4.3 million. Hundreds of thousands of taxpayer dollars were also given away, for some reason, to a research institute in Uruguay and the Women’s Environment and Development Organization in New York.
Much of the increased transfer payment costs in 2018-19 and 2019-20 are related to the federal government’s $2 billion Low Carbon Economy Fund, from which came the infamous $12 million handout to Loblaws to buy new refrigerators. This kind of spending is particularly harmful because it encourages companies to divert significant resources away from producing useful goods and services and towards grasping for federal funds.
A large portion of the $2 billion fund will be distributed to provincial governments – which means taxpayers are paying not only for $2 billion in government programs, but also for provincial government bureaucrats who fill out grant applications, and for the federal bureaucracy that administers them.
All this when, by the Liberal government’s own admission, the greenhouse gas emission reductions could come much cheaper by just having the carbon tax.
They can’t have it both ways. If a carbon tax is the most efficient way to cut emissions, let the tax do its work and get rid of the relatively inefficient program spending and regulations.
Alternatively, if massive increases in climate change spending are a good idea, then Canadians should question claims that a carbon tax is the most efficient way to reduce emissions.
Matthew Lau is an economics writer. His columns have appeared in newspapers and online publications across Canada.