The fake choice
Rising prices are of serious concern to working families, especially those in low-paid jobs. Inflation was running at 5.1% year over year, double the increase in average weekly wages over the same period.
Populist right-wingers Pierre Poilievre and Jason Kenney are seeking to turn the issue of rising prices to their political advantage. They want an expansion of oil and gas production and new pipelines to counter rising prices and calling for the suspension of the federal HYPERLINK "https://saskatoon.ctvnews.ca/pierre-poilievre-promises-to-scrap-carbon-tax-at-saskatoon-campaign-stop-1.5804727" n _blankcarbon tax, clean fuel standards, and other clean energy regulations.
Right-wingers claim that environmental measures to deal with the climate crisis are a major cause of inflation. But we do not face a choice between saving the planet and lower living standards.
Policy to reconcile our economic and environmental goals must work to rapidly reduce demand for fossil fuels rather than increase supply through new energy mega-projects which will only accelerate planetary collapse.
Moreover, it would take years for new fossil fuel projects and infrastructure to have an impact upon global supply and to lower prices.
An alternative response must be to dramatically reduce our national and global economy's reliance on carbon-emitting fuels through massive investments in energy conservation and renewables. This transition can create many new jobs.
Further, high oil and gas prices are boosting the profits of the oil and gas industry. These can be drawn upon to fund non-polluting technologies and to meet mandated reductions in emissions which companies have hitherto claimed are not affordable without subsidies.
Soaring corporate profits can be taxed to fund public investments in energy transition and to cushion the impacts of higher prices on lower-income families through tax credits like the GST credit, the child credit and the Canada workers benefit. Just as the proceeds of carbon taxes are recycled to households in most provinces, so should excessive corporate profits.
Many right-wingers claim that we cannot afford major new public investments or larger tax credits since interest rates have to rise to combat inflation. This will increase the cost of government deficits and public debt. The Liberals, too, are saying the cupboard is bare.
But the Bank of Canada recognizes that rising prices are not so much the product of excess demand in the economy as of specific sectoral impacts of the pandemic which will fade over time. They are unlikely to increase interest rates too far, too fast.
The federal government can ensure that financing costs for energy transition as well as affordable housing are cushioned from higher interest rates. We should expand public investment banks like the Export Development Corporation to extend low-cost credit and/or equity to desired investments.
Effectively there would be two interest rates - a general one, and a preferred one. Only the former would be manipulated to maintain a reasonably low inflation rate, while essential investments would be protected. Alternatively, commercial, private and investment bank lending could be more closely regulated by limiting mortgage credit for market housing or by setting different reserve requirements for different kinds of financial assets.
Inflation and rising energy prices are clearly a problem, but they should not be allowed to derail the transition away from fossil fuels.
Andrew Jackson, the Broadbent Institute.Ottawa