The carbon-tax plan would start at $10 a tonne, rising to $50 a tonne in 2022. That corresponds to gasoline and diesel price increases of two cents per litre, rising to 11 cents. But federal, provincial and municipal taxes already make up 44 cents of the Canadian average pump price of $1.34 per litre. The reality is that the typical Canadian driver already pays the equivalent of a carbon tax of $200 a tonne, costing more than $28 for a 64-litre fillup and generating government revenues of $24 billion in 2018.
Both carbon-tax proponents and opponents agree that carbon taxes would have to rise by much more than $50 a tonne to make a perceptible difference in demand. A leaked federal-government briefing document obtained by the Canadian Taxpayers’ Association states that another $300 per tonne, equivalent to 68 cents per litre, would have to be added to reach Canada’s greenhouse-gas-emission targets.
Inverse elasticity of price and demand is a fundamental economic premise. So why doesn’t it apply for fossil fuels? Because we can’t do without them, so raising the price just forces people to allocate a larger portion of their income to getting it.
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