Dear Editor,
There’s something about the carbon tax that I still don’t understand. As most of you know the tax started in Ontario in April at about 4.4 cents per litre and the plan is for it to go to 11 cents by 2022. The idea is that as gasoline goes up in price, we will buy less of it and thereby reduce our CO2 emissions. We have been reminded of it quite frequently by our environment minister and many others. The head of Canada’s Ecofiscal Commission compares it to buying grapes. If the price goes up, we buy fewer of them.
In economics it’s known as Elastic Pricing and it works because there are easy substitutes. If the price of grapes goes up you can substitute strawberries, melons or something else. You might recall some significant price increases in celery, tomatoes and cauliflower over the last few years and most people either cut back, or bought something else until the price came back down.
There is however, also something in economics called Inelastic Pricing and it means that the substitutes are limited. When it comes to gasoline unless you live near public transit that works for you, or you can fit an electric car into your life, then you pretty well have to pay the asking price of gas. And in fact, if you check the definition of Inelastic Pricing, most dictionaries use gasoline as the main example.
If we look at gasoline purchases by Canadians over the last 10 years, we see some clear evidence. The average gas prices can be found at gasbuddy.com and the motor vehicle fuel consumption numbers can be found at StatsCan. Between September 2009 and May 2011, the average Canadian price went up about $.37/litre, and our gas consumption stayed the same or was slightly higher. Between March 2016 and May 2018, the price went up about $.51/litre, and our gas consumption stayed the same or was slightly higher.
If Canadians didn’t reduce their gas consumption (and emissions) for a 51 cent increase, why would we reduce it for an 11 cent carbon tax? Historically, the price of gas and the volume consumed are not closely related so it’s very unlikely that any tax added to reduce emissions will be effective. What I don’t understand are the number of people who think it will.
— Dave Bishop from Haley Station
