As part of the new tax plan, carbon-based fuels — including gasoline, diesel, natural gas, propane, coal and home heating fuel — will be taxed at $10/tonne of greenhouse gases generated, starting July 1, 2008.
That will translate into a new 2.4¢/litre tax on gasoline at the pump and 2.8¢/litre for home heating fuel.
The carbon tax rate will rise by $5 a year for the next four years, until it hits $30/tonne of greenhouse gas generated in 2012, said Taylor.
The budget followed the throne speech, in which Premier Gordon Campbell and his government urged us to take personal responsibility for reducing climate change.
The budget also includes $1 billion over four years for energy efficiency initiatives, including funding for home energy audits and retrofits, sales tax exemptions for energy efficient appliances and vehicles, and clean fuel technologies.
Taylor said that, just as Canadians learned from British Columbians about aerobics, whole grain breads and healthy lifestyles 20 years ago, so will people in the province teach the rest of the country what it means to tackle global warming.
But what else will our provincial government be teaching the rest of Canada?
As the housing bubble deflates across North America, economists are looking for the next bubble to replace it, and it appears as though the new bubble is being primed here in British Columbia as we test how a Carbon Tax actually works within our economy and how tax revenues will be spent.
A Financial Bubble is a market aberration manufactured by government, finance, and industry, has a shared hallucination, and then a crash, followed by a depression after which another bubble comes into play.
The bubble cycles one after another. In recent times the High Tech Bubble cycled and was then replaced by the Housing Bubble.
An interesting report by Eric Janszen in Harper’s Magazine this month describes the bubble cycle. Janszen is an entrepreneur-in-residence for Trident Capital and a former founder of iTulip. He outlines how bubbles are planned and formed well in advance of the present bubble so that economic and investment architecture can be applied.
In his report, “The Next Bubble – Priming the markets for tomorrows big crash” he explains that for a bubble to occur within an industry there must be the potential to support hundreds of thousands of firms not by billions but trillions of dollars of new securities that Wall Street will create and sell.
“Like housing, in the late 1990’s, this sector of the economy must already be formed and growing even as the previous bubble deflates. For those investing in that sector, legislation guaranteeing favourable tax treatment, along with other protections and advantages for investors, should already be in place or under review. Finally the industry must be popular, its name on the lips of government policymakers and journalists. It should be familiar to those who watch television news and read newspapers”.
Based on that description, just about anyone could guess what the next bubble might be, but in fact there are some leading candidates. Both healthcare delivering needs to ageing baby boomers and the pharmaceutical industry are both strong contenders, and even a reoccurring tech bubble under Web 2.0 based on improvements to existing technology rather than new discoveries also has potential.
But there is only one industry that fits the bill and is ready to role: Alternative Energy.
The development of a greener economy with more energy efficient products and less dependency on oil will prime this new bubble. Wind, solar, geothermal power, liquefied hydrogen from water, biofuels and even nuclear will become the next brand ready for investors to dig into.
So with our province introducing a carbon tax we are paving the way for other governments to do the same. This new tax will grow and with provide an anchor investment into companies contributing to this new bubble.
Don’t think that this is about climate change, even though this bubble may be very good for the planet, it’s really about creating and selling securities. In fact Janszen explains the other important factor that moves into play when a bubble is created, and why, when the bubble bursts there’s chaos.
First the bubble needs to be large enough to recover the losses from the housing bubble collapse. So the gross market value to develop all these new enterprises in this alterative energy bubble needs to be between $2 trillion and $4 trillion.
Such an investment would be enough to prime the pump, things like hydro electric power, wind farms, fuel cell technology, solar power all making their way into the mainstream marketplace.
With that investment then another $8 trillion of fictitious value occurs along with hyperinflation which places a speculative wealth on this bubble of $20 trillion, money that inevitably will be employed to increase share prices rather than to deliver “energy security”.
So needless to say, when the bubble bursts we will be left to pick up the pieces of a devastated industry, which might mean huge public takeovers of private utilities just to keep the lights turned on.
At the end of the day, this might not be a bad thing, however it does make one feel as though they’re a minor pawn in a global chess game.
Janszen describes bubbles as being designed by a new economy driven not by the traditional goods producing industries like automotive makers, but by finance, insurance and real estate – FIRE.
FIRE brought us the high tech dot com bubble and then the housing bubble, now it’s energy and there will be oceans of finance, insurance and real estate involved.
In fact, in the 2008 US election cycle thus far, FIRE has contributed $146 million in political donations, and since 1990 $1.9 billion, nearly double of what lawyers and lobbyists have donated and triple the donations from organized labour.
So here in Canada, we can expect that the province of BC will work out the bugs of a carbon tax under the guidance of the FIRE sector. We will see significant investment into the energy sector that is able to export energy and related products into the United States.
And as the investment formulas become more predictable the province will encourage local carbon tax formulas for municipalities that gets them on board with retrofitting local infrastructure.
All of this priming the pump for a developing securities market.
Our federal government will continue to streamline the energy supply into the US. This week Hillary Clinton questioned NAFTA suggesting that Canada’s environmental policy lacked proper standards and that the US was losing jobs to Canada as a result.
So we can expect a new move to create standardized environmental and energy policies between Canada and the US so that those new alternative energy products can flow freely back and forth across the border.
It will be interesting to see how this all plays out, and whether the planet will benefit from all of this.
We know for sure, some people will.