Economist Recommends Canadian Carbon Tax on American Coal in Escalating Trade War
Reflecting on the escalating United States trade war with Canada in the days leading up to Ottawa’s July 1 release of retaliatory tariffs, Canadian economist and author Jeff Rubin recommended the Trudeau government really make Donald Trump “feel the burn” by slapping a carbon tax on the millions of tonnes of American thermal coal shipped annually through Vancouver’s Westshore Terminals.
“Once the source of more than 50% of distributed power in the United States, last year coal’s share fell to a record low of 30%, marking the first time coal took a back seat to natural gas in power generation,” Rubin writes. Faced with such a precipitous decline in its domestic market, America’s beleaguered coal industry is betting the mine on shipping its product to Asia, where demand is high and prices are rising.
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Trouble is, Rubin observes in a post for the Centre for International Governance Innovation, “America’s largest thermal coal reserve, the massive Powder River Basin in Montana and Wyoming, [is] 1,300 kilometres away from tidewater.” With “no coastal export terminals in Washington or Oregon to ship from, and the last eight proposed terminal projects having been withdrawn due to fierce local opposition,” the U.S. depends hugely on Westshore, “the largest west coast thermal port in North America”, which last year shipped 11.5 million tons to Asia.
“Over the past four years, shipments from the terminals have averaged between 27 and 37% of total US thermal coal exports,” Rubin reports, providing “an essential life buoy to the United States’ coal industry” as it fights for survival against cleaner, less expensive electricity sources.
Rubin recalls former B.C. premier Christy Clark shining a light on the tactical value of targeting American coal when she threatened the U.S. with a 70% carbon tax Westshore exports, in retaliation for skyrocketing duties on softwood lumber. Now, he says a 2018 carbon tax on those shipments, “even [at] the federal government’s scheduled $10-per-tonne carbon tax, let alone British Columbia’s recently-raised $35 a tonne rate, would stop [them] dead in their tracks,” striking what could be the coup de grâce for Trump’s defence of his country’s failing coal industry.
Given his overarching concern with looking good to his political “base”, Rubin says Trump might find his way back to the negotiating table rather than suffering an embarrassing defeat.