By James Noble
November 13, 2014
A new commission made up of former lawmakers and thought leaders have joined forces to study the economic effects of the way policy makers tax environmental costs—with the hope of engineering a change in Canada’s fiscal policies to help the environment and the economy.
The idea of the Ecofiscal Commission is to meet over a five or six year period and deliver a series of reports on issues such as carbon, municipal waste, traffic congestion, and water quality. The central task of the commission is to identify policy tools that can be utilized to meet the twin goals of economic and environmental prosperity.
One policy option cited is that of collecting taxes to reduce fossil fuel consumption and traffic congestion. The money collected could then be recycled back into the economy to create a tax system that allows governments to reduce taxes on employment, income and profits.
In some respects, the new commission’s work will replicate the work done by the National Round Table on the Environment and Economy (NRTEE), begun in 1988 by the Mulroney government but axed in 2012 by the Harper government.
Funded by five family foundations and two corporate sponsors, the Ecofiscal Commission will remain entirely independent of government. It is hoped that political and financial independence will insulate the commission from the same fate as the NRTEE.
The commission has not been hailed in all corners of the country, however. Detractors say that such fiscal reform and economic tinkering amounts to central planning by the government and could lead to perverse and unwanted consequences, such as imposing higher taxes on new cars.
For an example of ecofiscal policy in practice, Canadians need to look no further than British Columbia to find effective reform. Implemented in 2008, B.C.’s revenue-neutral carbon tax has cut $760-million in income and other taxes.
The result is that B.C. now has the lowest personal income tax rate in Canada and one of the lowest corporate rates in North America. At the same time, fuel use in B.C. has dropped 16 per cent while it has risen 3 per cent in the rest of Canada.
While some had predicted that the tax shift would hurt the province’s economy, B.C.’s GDP has slightly outperformed the rest of Canada’s since 2008. The province’s shift to a low-carbon economy provides evidence that the Ecofiscal Commission may find success in shifting fiscal policies as a tool to grow economic and environmental prosperity.