Strength in numbers: Carbon pricing can change our climate one action at a time
Evidence from around the world—including here in Canada—shows that carbon pricing works. Yet many people question its efficacy: how can paying higher gas prices, for example, possibly save us from climate change? How can my actions affect something so vast and complex as our climate?
It might seem like a big leap, but carbon pricing can change the climate for the better. Individual actions can make a difference. Here’s how.
Paint me a picture
My brother runs his own painting company in Metro Vancouver and spends a lot of time driving to and from job sites. He puts over 35,000 kilometres on his truck, which doubles as his office, each year.
Gasoline prices in Metro Vancouver, consistently among the highest in Canada, recently hit record highs ($1.62 per litre). And while the province’s carbon tax represents a small chunk of the total pump price (7.8 cents per litre), my brother’s response to higher gasoline prices is telling.
Filling up his gas tank now costs over $150, which he does about twice a week. This eats directly into his margins (and my birthday gifts) but is a necessary evil. No driving means no business.
My brother’s automatic response is to find savings where it doesn’t compromise business opportunities. Sometimes he has no choice but to drive from one end of the region to the other. Other times, he finds efficiencies in his daily trips, like scheduling his site visits by geography and actively avoiding the region’s crippling traffic.
No matter what, he thinks a little harder about the fuel costs on each trip. These small changes help offset the amount of fuel he burns and, in turn, how much he pays (and saves).
Over time, gas prices have also influenced what truck he drives. When his old truck died last year, he opted for a truck with a slightly smaller engine but with much better fuel-efficiency. And because fuel efficiency standards have improved dramatically over the past ten years, it didn’t cost him extra.
Taking it personally
My brother’s circumstances are anecdotal. But there are a few things to take away from his situation.
First, my brother is not a hardcore environmentalist. As a business owner, his actions were motivated by saving money, not the planet. Yet by making small changes in his day-to-day operations, he inadvertently helped do both.
Second, driving is essential to his work, just like the millions of Canadians that depend on their cars—and fossil fuels—for convenience and speed. Many people have greener options like public transit, electric vehicles, or biking, but those simply aren’t an option for my brother. Yet when it came time to replace his vehicle, high fuel prices encouraged him to buy one with much better fuel efficiency.
Finally, higher gasoline prices are not putting my brother out of business. Yes, higher carbon prices will mean paying more at the pump (same for his competitors). But he continues to find creative ways to offset increases in fuel prices. I don’t think his situation is unique. When the price of something goes up, we look for ways to pay less.
A painting with a billion strokes
Has my brother saved the world from climate change? Most certainly not. But that misses the point.
Addressing climate change will come from billions of people making small tweaks in their daily lives. In the short run, these impacts seem imperceptible. But as people find ways to reduce their emissions and bring down costs, it collectively contributes to global efforts against climate change. Carbon pricing simply pushes households and companies in the right direction.
Addressing climate change starts with policy, and carbon pricing is the cheapest way of doing it. But no matter what, solving the problem comes from the actions of individuals. Actions from you and me, together, add up to something bigger than ourselves.
Think local, go global
But wait, even if carbon pricing can drive change here at home, it still doesn’t answer the question of why Canada should do anything in the first place. Our population is small, and Canada represents 1.6% of global emissions.
This is a great question and my colleague, Brendan Frank, will tackle it in next week’s blog. However, the exact same logic applies. The actions from people like my brother add up across provinces and the country. Eventually, with the right policies, they can drive similar actions around the world. That’s how carbon pricing will change our climate for the better, one kilogram of CO2 at a time.
Of course there has always been a price on carbon: the price of the fuel itself. Q. Should ctax fluctuate inversely with fuel price -higher when fuel prices are too low- or as now consistently represent the current social cost of carbon?
Hi Doug. Thanks for your comment. Fuel prices reflect the costs of producing and distributing a carbon-based fuel (plus other fuel taxes), but is not the same thing as a price on carbon emissions. These are two different types of costs. As such, from an efficiency point of view, the carbon price on fuel should consistently reflect the cost of carbon emissions (e.g., based on the social cost of carbon, as you point out) and not be inversely related to gas prices.
In your brothers case he is in competition with other local companies. In the case of multinationals higher costs results in them closing shop and moving to countries that have lesser or no standards for health, safety or the environment. If our elected officials really want to make a difference then any trade with polluting countries would come at a cost that encourages manufacturers to stay in Canada. Instead of taxing us and driving our cost of living up and standard of living down tax the foreign polluters that want to trade with us first.
Thanks for your comment. You’re right: my brother’s business is local and is not trade-exposed. If his costs go up because of carbon pricing (or any other type of climate policy for that matter), he and his competitors can pass these costs onto consumers through higher prices.
Larger firms that are emissions-intensive and trade-exposed (EITE) face different challenges, as you rightly point out. They face global (or regional) prices when they sell their goods, which means they’re unable to pass on their costs through increasing prices. To address this concern, several governments in Canada have implemented a special type of carbon pricing for these EITE firms. See this blog for more details: https://ecofiscal.ca/2017/05/24/explaining-output-based-allocations-obas/
We’ve also written on border carbon adjustments, which would tax imports based on their carbon content: https://ecofiscal.ca/2016/06/16/q-a-on-border-carbon-adjustments/