Terence Corcoran: The Price Of Keystone May Be A Carbon Tax
Hello Canada! Are you ready — ready for a new national tax on carbon that will ding pocketbooks across the country? My bet is that a new carbon tax is coming, made almost inevitable by Prime Minister Stephen Harper’s full-bore push to secure Washington’s approval of the Keystone XL pipeline.
For early clues on the carbon tax/Keystone trade-off, tune in Tuesday night to President Barack Obama’s State of the Union address. As the president speaks, he will be alert to the chorus of Hollywood stars, environmental activists, editorial writers and industry leaders who are pushing for him to make the biggest climate-change decision he can possibly make: Impose a carbon tax.
It is time Canadians became aware of the giant trap being set in Washington over Keystone. The short version is this: The president approves Keystone, greatly expanding the flow of Canadian oil sands production into the United States. In return, however, Canada has no choice but to accept a carbon tax at home as part of a grand bargain.
I first mentioned the likely Obama pipelines-for-taxes strategy in comments at the annual Financial Post forecast luncheon at the New Year. “I see new taxes coming in the United States, including an energy or carbon tax, to try to cover the deficits. The new energy tax would serve as partial cover for President Obama’s approval of the Keystone XL pipeline.”
That Mr. Obama might offer some kind of carbon tax as a carrot to environmentalists and climate activists opposed to Keystone has since emerged as more than plausible.Wall Street Journal columnist Kimberley Strassel recently outlined how the president might demand a carbon tax in return for approval of energy projects, including Keystone. Getting a carbon tax through Congress looks tricky. But Ms. Strassel reported that California Senator Barbara Boxer outlined how a carbon tax could be imposed administratively through the Environmental Protection Agency.
The Keystone-carbon tax trade off was also suggested in a recent editorial in Nature, the science journal. The editorial was big news in Canada, thanks to its endorsement of Keystone and Canada’s oil sands. “Regarding the Keystone pipeline,” said Nature, “the administration should face down critics of the project, ensure environmental standards are met and then approve it.” The science writers at Nature also benevolently said Canada’s oil sands are “not as dirty as many believe.”
Wow. Prestige science mag says tar sands OK! What Nature was really proposing, however, was that Mr. Obama use Keystone as cover for a range of other policies. “By approving Keystone, Obama can bolster his credibility within industry and among conservatives.” While conservatives are lulled, Nature proposed new regulations, crackdown on the coal industry, and a carbon tax.
The Washington Post is on the same two-track policy theme. Last month the Post urged the president to “ignore the activists who have bizarrely chosen to make Keystone XL a line-in-the-sand issue.” Last week, in a climate-change editorial, the Post presented the other half of the bargain with a ringing endorsement of a carbon tax. Putting a “slowly rising, significant price on carbon emissions” would encourage people to burn less fossil fuel. As an added fiscal bonus, since Washington needs new revenues to meet its fiscal crisis, “a carbon tax would be an ideal source” of revenue.
So the stage is set for Mr. Obama to magically saw the climate-change issue down the middle and come out a winner: approve Keystone to placate one side and impose a carbon tax and other regulations to keep the other side happy.
Keeping peace with the activist left will not be easy. A two-bit chorus of B-grade Hollywood stars — Alec Baldwin, Ed Norton, Yoko Ono — are backing the Sierra Club’s call for a march on Washington next weekend, “the largest climate rally in U.S. history.” Under the “Forward on Climate” banner, the target is clear in the Sierra Club’s marching call: “The first step to putting our country on the path to addressing the climate crisis is for President Obama to reject the Keystone XL tar sands pipeline.”
Under the Sierra Club vision, however, nothing short of total elimination of fossil fuels will satisfy. Since Mr. Obama cannot and does not want to fulfill that particular extreme fantasy, he can afford to disappoint activists on some issues — including Keystone — if he can deliver something that looks like a carbon tax.
If the United States does shuffle toward a carbon tax, Canada will have little choice. A carbon tax, as proposed by many, would impose a levy on carbon entering the United States, including oil from Canada. The bargain offered Canada would be this: We accept your oil and gas, but if you don’t put a carbon tax on it we will. In other words, a North American carbon tax would unite Canada and the United States.
Ottawa and Alberta seem ready for anything to get Keystone approved. The level of appeasement if not desperation in the language of Canadian politicians rises by the day. Natural Resources Minister Joe Oliver — heading to Washington to plead for Keystone’s approval — says Canada is moving in “lockstep” with Washington on environmental issues. Trade Minister John Baird said Ottawa is “like-minded” on environmental objectives. Mr. Obama and Mr. Harper, he said, have both set a 17% reduction in greenhouse gas emissions.