I’ve been really confused by the Yukon Party’s opposition to the carbon tax. It seems they don’t understand the Yukon’s economy. It needs to be said that in fact a carbon tax will be GOOD for the Yukon’s economy. This is for two reasons:
1. The productive part of the Yukon’s economy actually has a very low carbon intensity. We have a highly educated workforce and most of our economy is not resource intensive. Mining, oil & gas are only about 13% of Yukon’s GDP (see Yukon Bureau of Statistics’ Gross Domestic Product (GDP) by Industry 2014). Because mining produces a product (metal), that actually overstates the value of the resource industry when it comes to jobs and salaries paid. Therefore the bulk of our economy is low-carbon intensity. With a carbon tax, the Yukon’s economy is more competitive relative to carbon-intense economies. In other words, the Yukon will perform better relative to other provinces when carbon taxes come into play. This is a basic of economics: do what you are good at and the Yukon is good at having a low-carbon intensity economy.
The Yukon also has excellent opportunity to further de-carbonize our economy by increasingly switching to renewable energy (primarily hydropower, but also biomass and to a lesser extent wind and solar). Other jurisdictions do no have the natural resources to produce renewable energy that the Yukon does. As such, the Yukon can readily further reduce its exposure to carbon taxes and become even more competitive.
2. Use of fossil fuels represents a significant economic leakage for the Yukon. In 2013 the Yukon consumed about 226 million litres of gas, diesel (inc. heating fuel and jet fuel) and propane (see Yukon Greenhouse Gas Emissions: the Transportation Sector, 2015). If we assume this is about $1/L, that is $226,000,000 that left the Yukon with just about no economic benefit to the Yukon (we essentially burned that money). Any reduction in fuel usage will result in more money staying in the Yukon’s economy and can be put to more production use. For example, the money could be used by Yukoners for arts, entertainment, culture, health care, education or just about anything will be more useful that burning the money. This will also help build the local economy since more resources will be used and consumed locally. Even a 10% reduction in fuel usage will be $22 million dollars that would be repatriated to the Yukon’s economy. That is almost exactly at 1% increase in our GDP which would have wiped out the GPD decline the Yukon experienced in 2013 and 2014.
Another thing that makes me mad is the rhetoric does not reflect the realities of math. The carbon tax will have almost no measurable impact on the price of goods (and zero impact of the cost of services) because the amount of fuel used to transport goods to the Yukon is very very small relative to the value of the goods. Where you will see the difference is at the gas pump and on heating fuel. But it is not much of a difference: the $10/tonne tax will be about $0.02 /L at the pump. Yup, that is it: less than the price difference between gas stations and less than the difference between regular and premium. If you drive the speed limit and drive conservatively, you will increase your fuel economy by 10% which more than offsets the fuel price increase of 1.7%. Any driver can fully mitigate the any fuel price increase.