Course:ECON371/UBCO2009WT1/GROUP1
Group 1
Article 1: The Environmental Impact of BC’s HST
http://www.radecgroup.com/blog/?p=79
Article 2: B.C.'s 12-Per-Cent Harmonized Sales Tax Will Hit Some Consumers Hard http://www.vancouversun.com/business/technology/cent+harmonized+sales+will+some+consumers+hard/1820717/story.html
Article 3: HST, Trucking Safety and the Environment
Article 4: Carbon Tax Will Increase the Gap Between Rich and Poor
http://www.cbc.ca/canada/british-columbia/story/2008/10/30/bc-carbon-tax-unfair-ccpa.html
Article 5: Harvey and its HOV lane
http://www.bclocalnews.com/okanagan_similkameen/kelownacapitalnews/news/59281922.html
Article 6: Should we be taxed for eating animals?
Article 7: Tax grab undermines electronics recycling efforts in B.C.
Article 8: B.C. carbon tax to jump on Canada Day
http://cnews.canoe.ca/CNEWS/Environment/2009/06/30/9989126-cp.html
Summary
B.C.'s transition from a two department, provincial and federal, taxation system into a singular "harmonized" taxation system may not be as harmonious as its title suggests. This incumbent tax legislation is the signal for the termination of some highly successful economic and environmental incentives. Livesmart is one BC program that is set to end before the HST gets its debut. Also, there are many HST exemptions that resemble an economic stimulus that mask some obvious ecological faux-pas; like HST exemption for residential energy use, which the author discusses in one paragraph.
Analysis
The HST is somewhat of a lump of bronze at the moment since its eventual sculpture is neither widely understood nor close to finalization. For the most part, British Columbians are unsure of what the HST is or at least what it will bring to the province come July 2010. While the termination of LiveSmart is not a directly consequence of the HST, it was an essential precursor for the widespread energy-use rebates sanctioned by this HST. A full analysis of LiveSmart and its components would not be so easy nor would it be of much use as the program itself is set to be canned. Tracking its changes using a graph and MAC/MD curves would simply be the movement from point 'a' to point 'b' with a net social loss of c.
This net social loss is more easily described in words as to the components of the LiveSmart program. Since the entire program is scheduled to halt come March 2010, listing all its eco-friendly incentives would effectively add up the net social loss incurred by the B.C. taxpayers.
There are also ecological issues that are more closely linked to the HST itself, or lack thereof. By this the author means Tax exemptions. With a large part of the B.C. government's ecological incentives being canceled, resources are now being funneled into ecological disincentives. For example, residential energy consumption will be HST - free. This means lower energy costs per consumer and effectively raising the potential to consume more energy. This trend is not only shifting ecological responsibilities to each energy user, but is granting them the tools for which to abuse this responsibility.
Conclusion
The author of this article is nonchalant in pointing out that the "looming introduction of a Harmonized Sales Tax is creating controversy." In fact, the author goes on to jovially attack the HST and its presumed impact on the environment, eluding to the termination of the proven eco-friendly LiveSmart program and the commencement of natural resource rebates. This Article was written September 9th, 2009, almost a full year before the legislation is to take effect. This means that much of the article is based on written facts but is still, however, speculation and as the author points out, "there’s still almost a year to hammer out the fine details of the HST."
Prof's Comments
The loss of the Livesmart BC program is along the lines of what you describe. A somewhat better way to think of it is as downward shift of the MAC curve, as the government picks up part of the cost. With the cheaper cost of abatement, more people abate. If the program is optimal, then the downward shifted - rebate adjusted - MAC will cross the horizontal axis below the intersection of the MAC and MD curves. The introduction of a HST exemption for home heating fuel does reduce the incentive to conserve.
Summary 2
The harmonized sales tax strategy is being introduced to B.C. in the interest of protecting the provincial economy in the long term: Campbell proposes the fact that B.C. will become stronger, due to the fact more corporations will invest in B.C. Although future aspirations of the government are important, present environmental concerns seem to be pushed aside. When the HST is officially implemented in summer 2010, previously provincial-tax exempt products, such as energy efficient hardware and vehicles, and bicycles will be subject to a 7% tax increase. In other words, previously incentive products that are pro-environmental will experience a lower demand in relation to price increase. Instead of purchasing a hybrid car that is a little more expensive, but receives tax breaks and rebates, consumers will be more inclined to purchase an affordable car that is not necessarily green. Low cost substitutes to automobiles, such as bicycles, will also experience this tax increase; again, lowering the incentive to purchase the product. In the long run, the HST will improve and strengthen B.C.'s economy, but in the mean time the environment will take the hit.
Analysis 2
The introduction of B.C ‘s Harmonized Sales Tax on July 1,2010 increase the burden on consumers and lessens it for businesses, although some sectors face a higher tax burden. Some activity, notably homebuilding, is brought forward in the first half of 2010 to avoid the HST, which comes at the expense of future activity. This action will increase the temporary demand of the new homes and will stimulate the economy. But after that the equilibrium price and demand quantity will be higher with the coming HST. The housing market will suffer from the tax policy change. Therefore B.C has maintained the ability to exempt some but not all products that are currently PST-exempt through a point-of-sale rebate. In this case, the buyers of new houses will receive a partial rebate up to a maximum of $20,000.
There is another example of the negative effect of the introduction of the HST. The most fuel-efficiency vehicles such as the Toyota Prius or Honda Insight, they usually have a higher price than the other similar size vehicles because of the new technology inside. But in order to improve the environment, the government gives considerable rebate or discount when you purchase those vehicles, which is very much the same as the PST-exempt items. But after the adoption of the HST, 12 percent tax will be charged. Therefore more people would go for a cheap subcompact car with natural gas engine. So this will mostly shift the demand curve of the non-hybrid vehicles right, and will likely make more damage to the environment. The MAC of the vehicle manufactures will be increasing and they need to pay more to get a better environmental quality. Probably HST policy would lower the cost the doing business and affect the final price passed on the consumers indirectly, but we can never know what is actually going to happen.
Conclusion 2
As Mark von Schellwitz says in this article, “History has shown that a seven-per-cent price increase translates into a seven-per-cent loss in sales.” From this we can only hypothesize that those goods and services which are to acquire an increase in tax are subject to a decline in consumption. These goods and services include, but are not restricted to, many energy conservation products. With extra taxes on things such as insulation and solar power equipment, it is not too difficult to assume that many consumers of such products, like apartment and other dwelling developers, will use less. These environmental problems are more likely to increase as developers attempt to compensate for this sudden increase to the cost of living. Also this decline in general purchases from consumers will force a move to cheaper products. Consumers will look for cheaper products to compensate for this tax increase and those cheaper products are not likely to come from the province that generally maintains a high hourly wage. These product are more likely to come from countries that provide cheap labor and more often than not higher environmental negligence.
Prof's Comments
Some elements of the HST impact on the environment do look negative. A 7% increase in the price of bicycles will likely reduce demand for bicycles, and other items that fit the bill will too. Are there any cases where it will help? Will it help the environment when environmental service companies are able to get a rebate on PST expenses?
Summary 3
The introduction of harmonized sales tax will have some negative impact on the environment, but it will also help in boosting environment and enhancing the economic future. This article is basically explained how the HST will benefit the trucking industry with its improvements in safety and lowered the emissions. As Paul Landry says, "Simply put the availability of input tax credits associated with the HST will reduce the effective tax on new investments in BC by 40%.” This, in turn, will encourage trucking companies to invest -- in trucks, trailers, safety and energy efficient technologies." This increase in capital expenditure is almost too obvious. With the current recession and the government's mentality to spend their way out of it, money will surely flow within many B.C. businesses. With these increased incentives provided directly to businesses, or at least by yearend tax rebates, the recessionary expenditure cutbacks made in the recent years will move to spending. With more money spent on investments, safety technologies and more energy efficiency engines are not limited to the new purchases and it will help us to be safer and greener.
Analysis 3
With the tax credit system that will be levied on trucking companies, what the government is essentially doing is subsidizing certain sectors which will be end users of products; sectors which will have to invest in capital purchases in order to take advantage of these incentives, thus stimulating the provincial economy. A great inference can be drawn from the article in its inclusion of safety equipment. Though not as major a purchase as a brand new rig, the required safety materials required to sustain a socially and legally acceptable level of fleet safety are an economy in and of itself. Take, for example, the lowly fire extinguisher, that is legally required to be in every semi-trailer. The current economic conditions do not allow trucking companies to upgrade expired or purchase as many fire extinguishers as is socially valued. The tax credits on such products act as a subsidy, pushing the demand curve on extinguishers to a higher level, thus increasing the quantity of units purchased - win /win/win for the trucking companies, who are better off with newer and more safety equipment, the extinguisher companies are all too happy to sell more units, and society is appeased with the new equilibrium reached at the socially accepted equilibrium.
Conclusion 3
Compared with the decreasing demand for fuel-efficiency vehicles as mentioned above, HST itself is neither wholly positive nor totally negative to the environment; it may be either of them depending on the viewpoints in terms of the consumers or companies.
Prof's Comments
While the ability of companies to have their PST paid on inputs reduced will reduce the cost of safety and environmental investments, it will also reduce the cost of all other investments. An important point therefore is whether the increase in trucking and other such activities that takes place will have a greater negative impact on the environment than the improvements which take place because the trucks are a bit cleaner.
Summary 4
British Columbia's carbon tax was implemented to reduce the carbon footprint not only from the big polluters, but from everyone. The general idea behind the tax was that if people reduce their use of fossil fuels, or adapt to a new green lifestyle, the tax will affect them less: at the same time the government will be able to collect revenue-neutral funds that are fully used for tax-breaks, business tax-breaks, and tax-credit for low income families. However, one problem presents itself within the overall carbon tax plan and it addresses the fairness in which the tax distributed. The article argues that high-income families are receiving all of the benefits and a positive return on tax, while low-income families will have a net-loss by the end of the three year project. This problem arises because it is generally high-income families who leave a larger footprint (be it travel, households, or motor-vehicles), and high-income families already pay more in tax on income and business; yet, all of the public is responsible for the cost of reducing harmful waste. One simple solution, also presented in, the article is a better allocation of the revenue collected, so that a higher distribution will be presented as tax-credits for low-income families, with less rebates and tax breaks for those high-income families already receiving so many financial benefits. If a solution is not found, low-income families will be less motivated to support additional green taxes. Less motivation means less of a chance this generation can move forward in environmentalism: something everyone needs a little bit more of in their lives.
Analysis 4
There is a significant, unequal distribution of the benefits made available by the revenue-neutral policy of the carbon tax. Statistics provided by the Canadian Centre for Policy Alternatives (CCPA) depict a situation where larger-income families, who leave larger carbon footprints because of their higher standard of living, receive benefits with net gains and lower-income families receive less benefits, leading to net losses overall. For example, as shown in a benefit-cost analysis diagram, the flatter curve being higher-income families and the steeper curve being lower-income families, with the cost consistent in both curves. Cost one, or C1, will be the initial implementation of the carbon tax (C2 and C3 will be the increases in cost for total expenditure on the carbon tax) which is $10 per tonne of carbon emissions; the eventual tax rate at the end of the 3 year project will be $30. Because the policy is revenue-neutral, all money coming in is redistributed in the form of tax breaks and credits. If the general direction of the 3-year plan is to fine polluters over time in order to discourage pollution, then this is where the problem presents itself. During the first year, both high and low-income families will have net gains of $62 and $38 per family respectively. This trend continues for high-income families as C1 adjusts to C2 and C3, eventually generating $311 per family in net gains. However, the progressive movement for low-income families in the first year will be regressive by 2010/11, with net losses of $47 per family. This is an inequality that could prevent continuation of co-operation from the public to support green government policy.
Conclusion 4
The implementation of the carbon tax is definitely a positive thing in British Columbia, it is the foundation and means our society can achieve a sustainable way of life. However, the approach that is being utilized right now may off-set a lot of people, particularly those on the lower end of the income spectrum. The provincial government will have to think of a way to re-distribute the neutral revenue. Perhaps a revenue-neutral policy is not the best way to go; the government could adopt a new policy where money from the tax revenue is put into green government programs, while a larger portion is distributed to tax credits as opposed to breaks. In either case, something needs to be done before the lower 40% of the population lose incentive to stay green.
Prof's Comments
The report from the CCPA is very accessible. The distribution of gains from environmental policies is an important issue. Recycling of the revenue was probably necessary to get it passed politically. Whether transferring more of the burden on the poor will compromise that is an open question. What are the distributional impacts of the suggestion of putting some of the funds into transit and other pollution reduction activities, rather than refunding it?
Summary 5
The introduction of HOV lane is to “efficiently and effectively move more people in fewer vehicles to help reduce congestion and improve in the existing urban corridor. The government uses this policy of putting some funds into transit services rather than refunding it to the individual.
Analysis 5
In the eyes of Kelowna transit city officials, expenditures in excess of $16 million for the eight month construction of a HOV designated lane running through its city far outweighed the benefits of redistributing these funds into other traditionally accepted-and voter accepted- avenues. The initial effects of this new HOV lane have greatly backed up the reasons for spending the $16 million as Harvey road users now have an additional lane for much of the commute through Kelowna. Also in the near future, it is expected that the actual number of cars on this road will drop from 47,000 vehicles as more commuters will turn to carpooling as this lane currently moves more freely during peak hours. With an estimated 75% of Harvey road users currently not falling under the HOV qualifications and available road space for them now restricted to 66% of the road, it is expected that non-carpoolers will observe the potential benefits in carpooling and slowly move toward an equilibrated distribution of road use. From the simplified book example of number of cars and time to commute on page 76, we can see that by having an alternate route(HOV) right beside the common route the social benefits along with the personal benefits of carpooling will be observed. Also, with the introduction of another lane and the incentive to drive with a buddy will change the saturation times of Harvey Ave. This means that peak hours will be condensed or even split into many shorter peak minutes. By removing polluters in both numbers and duration of polluting, the effects on the environment will show great reductions. This is essentially a rise in supply capabilities when viewing the social benefits of providing this service. The upward shift in supply by providing this new HOV lane will create more demand for its use and thus increase the social benefit of the services mentioned above. (although this is a new service and not exactly a shift upwards in supply, the service itself shares the same road as the one already in place and can therefore be seen as simply an improvement and not a simply a new entity)
Conclusion 5
It has taken eight months and cost $16.1 million to construct the additional lane to reduce the traffic problem but the new lane is not suppose to be public good because there is some limitation of using it. Only the vehicles with certain number of people (two or more) are free to use it. Obviously this policy will encourage more drivers to carry more passengers heading the same directions and helps to reduce the emissions to the environment by reducing the consumption of the gasoline. It will necessarily reduce the demand of the gasoline and bring down the emission level. Instead of refunding the carbon credits for low income families, spending money on the transit systems will benefit to the environment for a long-run purpose.
Prof's Comments
I think you have to be careful to examine what has happened here. The HOV lane is an extra lane. The total road space has increased. This lane does have restricted access. It provides a place for vehicles with more than one person, together with buses, to get out of the way of vehicles with only one person. A consequence of the HOV lane is that travel times for people in the non-HOV lanes will increase. It will probably not increase quite as much as for people in the HOV lanes. However, given that we are talking about a distance of a few kilometers, HOV lane users will probably only save a minute or two. Is this enough to get someone to coordinate a pickup and drop off for an extra passenger, something that will probably take more time?
Graphically, there are now two products being supplied, space on an HOV lane, and space on the two non-HOV lanes. The travel time for users of the HOV lanes is less. However, the cost of accessing the HOV lanes may be higher, if it involves arrangements to accommodate a passenger. For some people, the HOV lane is a substitute for the regular lane, so opening the HOV lane will shift in the demand for non-HOV lanes. However, this is probably mostly for people who already carpool.
Summary 6
PETA beliefes one pound of meat is equivalent to driving about 40 miles in a big SUV, and a 10-cent tax on each pound of meat could curb the massive expansion predicted in world meat and dairy production during the next few decades - a trend that would have considerable benefit to the global environment and its protection. According to the U.N.'s 2006 report, meat industry is one of the most significant contributors to the most serious environmental problems, at every scale from local to global, and that eating meat contributes to problems of land degradation, climate change and air pollution, water shortage and water pollution, and loss of biodiversity.United Nations Food and Agriculture Organization reported that in 2006 livestock production generates 18 percent of greenhouse gases worldwide — more than the entire transportation sector of cars, trucks, planes, and ships combined. Cows constantly belch methane from their four stomachs, and lagoons of pig effluent release the gas into the air. Much of the world's beef comes from deforested areas (70 percent of former Amazon rainforest is now used for cattle grazing), a one-two punch from the loss of carbon dioxide-absorbing trees and the addition of more animals. Chicken is less of a global warming culprit than beef, which produces eight pounds of CO2 per pound of flesh, but meat tax advocates favour a flat charge across all varieties, citing heightened health risks (and subsequent costs) from consuming any factory-raised animals.
Analysis 6
This is an example of a Tax regulation in order to reduce environmental damage from meat consumption, due to the fact that one pound of meat is equivalent to driving 40 miles in a SUV, livestock production generates 18 percent of greenhouse gases worldwide, and meat industry is one of the most significant contributors to the most serious environmental problems (the U.N. report 2006). Thus, the PETA advocates an idea to reduce the CO2 and methane emissions by implementing a 10 cent tax on each pound of meat.
Contrary to the PETA who believes a Tax implementation will change people’s consumption behavior, a farm contends that a tax may not have any impact upon people’s incentive to buy less meat because, a farm says, gas prices have doubled recently, but its price increase had little effect on driving habits.
Whether there should be tax regulation for meat consumption or not is complicated issue because meat consumption relates to people’s healthy (as the S.C. Department of Agriculture spokesman says, "Meat is a very important part of a healthy diet, and we encourage people to eat healthy") and profits from the agricultural export. If a regulator implemented a tax regulation upon the meat consumption, there are people who may not afford to buy meats for keeping their health. As a result of a tax regulation it may contribute to people’s bad health. Even though a tax regulation may be effective due to the fact that each individual may automatically adjust their own consumption along with the tax, the regulator must care about low income people’s health when it implements the tax regulation.
Prof's Comments
It sounds like a sensible idea. Notice that taxing beef is not an emissions tax, which would be the most efficient. Taxing beef is a second best solution. Notice also that some of the emissions attributed to beef and pork come from the other sectors - transportation of the animals or meat, the food produced to feed them, etc. If subsidies are removed or appropriate taxes imposed at this level, then the price of beef will increase.
The idea that a tax will not work, as stated by one person interviewed, is probably wrong. Meat consumption is increasing faster than population growth right now because as incomes increase, people want to consume more meat.
Summary 7
The idea behind an environmental tax on electronic products is not very new; however, the list of products that fall under this taxable category is growing. This may seem like a benefit to the environment, considering the name given to the tax, but after reviewing its earlier effects the results are not in favour of the environment. Even with the basic idea of reducing overall quantities produced and consumed with the introduction of a tax, we will show that implementing this tax has a far greater effect on the environment.
Analysis 7
The current recycling tax on certain electronic products is set to spread to more electronic products, namely: computer scanners, audio and video recording and playback systems, vehicle audio and video systems, and all types of telephones. This tax will most likely affect the consumers and the suppliers’ in a predictable behaviour. The price will be higher due to the introduction of the tax and since it is no longer efficient, less people will buy these products and the supplier will reduce supply to reflect the new price increase in order to move to efficiency. The overall effect is less quantity produced and consumed. This is seemingly ideal for the environment as there is less consumer waste to manage; however, it actually produces a consumer/producer imbalance which we will explain shortly.
Firstly, with the tax on this new group of electronics being at point of sale, there is no incentive to recycle. This tax is not a deposit type system where the consumer can reclaim some, if not all, of the tax upon return to a recycling depot. This means that people will never get the refund no matter what decision they make, either to recycle or to litter. By comparing the cost and the benefit, most people will throw the e-garbage in the bin – or in someone else’s – since the fee is mandatory when purchasing and there is no benefit in recycling. Therefore, the government’s recycling model creates no incentive to recycle. This does not mean lower net effect on the environment even with less quantity produced.
Secondly, the tax does not discriminate between new, old, recycled or refurbished goods. Every item falling under the taxable category will be taxed at point-of-sale, regardless of its previous taxation. This is because each subsequent user of the product will have the opportunity to tax the environment in the eyes of government; this will likely lead to consumer preferences in virgin products as opposed to a feeling of indifference. Now, with consumers preferring new non-recycled goods with no incentive to recycle, the sector will face a producer/ consumer imbalance for recycled goods.
Thirdly, an imbalance within industry most likely results in the abuse of a certain type of product. With consumers left with no incentive to recycle coupled with the feeling that they have already paid the government if they choose to simply throw out their e-trash, producers will find that the availability of more eco-friendly recycled parts will decrease and therefore raise their price. Now, recycled products presented to consumers will have to carry a higher price tag without any extra warranty or money back guarantees that before. The cycle between consumers recycling and producers purchasing the recycled parts for repair or reuse will no longer be connected and will result in a downward spiral for the use of recycled goods.
Lastly, the dead weight loss incurred from the tax by both consumers and producers will be quite large. The article points out that government profits from similar tax policies have accrued large sums of reserve-funds. While this effect is not directly related to the environment, it is easy to see that with the environment suffering from the non-recycling effect explained above; this accumulation of funds does not merit its title as an environmental tax. If the government wanted to tax consumers in an effort to slow their effect on the environment, this fund would not be growing but would be spent on the environment.
Prof's Comments
The e-tax is the first half of a deposit-refund system. You are right that by itself it does not create an incentive to recycle. The issue then becomes how to create that incentive, using the money collected by the tax. One method would be to allow people to throw their old electronics in their blue box, and then use part of the tax revenue to pay for the cost of sorting the electronics out of the blue box stream. This would make it convenient. Another way would be to pay the manufacturers or retailers a share of the tax, based on the amount of previously used electronics that they collect. This would create an incentive for retailers to compete against each other to collect waste. Another alternative is to directly pay a refund to final consumers.
Summary 8
In order to changed people’s driving habits and made them more environmentally aware, there was a carbon tax introduced on last Canada Day. This tax will increase 50 per cent on the national holiday, adding a little over a penny to the price of a liter of gas. The increase brings the tax to $15 per tonne of carbon dioxide emissions. B.C. Finance Minister Colin Hansen said they still convinced this carbon tax is the right approach, because all of the dollars they receive on carbon tax, they have ensured that there are reductions in personal income tax, small business tax rates and other corporate tax rates to equal and actually exceed the amount of money they collect on carbon tax. The tax will rise again on next Canada Day, puts a price on carbon emissions in an attempt to force British Columbians to change their ways to fight climate change.
Analysis 8
The BC policy maker uses an incentive approach to change polluter’s behavior. Due to the overused level of pollution from the car CO2 emission, the emission tax policy attacks the pollution problem at its source by putting price on the overused pollution source.
Because the BC policy maker set a tax on gasoline (an extra 3.5 cents per litre), the car drivers will adjust their own emissions rate. Thus, in this case, the equimarginal principle is automatically satisfied due to individual’s self adjustment. Also, at the same time, the implementation of tax on fuels for cars creates an incentive to find cheaper ways of emission tax. That is, someone might begin to use public transportation or someone may walk to go to downtown instead of using a car (as stated by Robertson in the article).
Also, in realm of cost effectiveness for the policy maker, this economic incentive regulation should be effective since it is less centralized method (i.e. less transaction cost to acquire necessary information and less monitoring cost) to achieve a social efficiency.
The method by which the B.C. government has chosen to deploy this tax and to recycle its revenue has proven to be less of an environmental crutch than expected. This year, the carbon tax moved from progressive to strictly regressive for the lower 2 quintile income earners. This year, the 50% tax increase has outweighed the 5% tax rebate earned by these groups in B.C.. What doesn't make environmental sense is the confusion behind recycling this carbon tax. As this Carbon tax is revenue neutral, the government has come up with certain policies to redistribute these assets. This fact is quite puzzling because the incentive to burn less fossil fuels is attempted to be offset with money-back rewards for increased burning of these fuels. As we can see from the data on the right, the tax is set up to exaggerate an affect to the lower income earners, which also happens to be the majority of B.C. taxpayers. This attempt to confuse taxpayers with a revenue neutral policy on carbon tax is not set up to improve the environmental status quo. In fact, the tax is being payed even through its 50% increase increments and this tax revenue could easily be designated to more effective pro-environmental sectors rather than redivide the dead-weight loss unevenly among the B.C. populace.
Prof's Comments
The recycling of revenue from the carbon tax likely reduces deadweight losses more than it increases them. The tax itself increases efficiency because it acts to reduce activities that generate a negative externality. That it has move to a regressive tax as the progressive offsetting elements of the income tax system are reducing their impact is an issue.